Customs value: which costs count on import

Key Takeaways

The customs value is the amount customs uses to calculate import duties, and forms the basis for import VAT as well.
In the vast majority of cases the transaction value, the price actually paid or payable, is the starting point.
Costs to be added include commissions, packing costs, royalties, and freight and insurance costs up to the EU external border.
Freight costs incurred after the external border, such as from Rotterdam to your own warehouse, do not count toward the customs value.
The Incoterm agreed does not determine the customs value itself, but does determine how much calculation is needed to reach it.

The customs value is the amount customs uses to calculate your import duties, and in the vast majority of cases that is the price you pay your supplier, topped up with a number of costs that legally belong with it. Not the invoice value as it appears on paper, but the value of the goods at the moment they reach the external border of the EU.

That difference sounds small and it is not. Freight costs up to Rotterdam belong in it, freight costs from Rotterdam to your warehouse do not. A royalty you pay the brand owner belongs in it, the interest on your payment arrangement does not. Get the sum wrong and you either overpay for years or receive a retroactive assessment.

The customs value is also not only the basis for your import duties. It is the basis for import VAT as well, which makes an error in the value an error in two charges at once.

In this article we explain how to determine the customs value, which costs you must add and which you may deduct, what to do when there is no sale price, and which transaction to use when goods are resold through several parties.

What exactly is the customs value?

The customs value is the value goods have at the moment they enter the customs territory of the Union. It is the amount on which import duties are levied, and together with those import duties it forms the basis for import VAT.

Article 70 of the Union Customs Code is brief about it: the customs value of imported goods is the transaction value of those goods. The transaction value is the price actually paid or payable for the goods when sold for export to the customs territory of the Union.

In practice, an estimated 95 percent of all declarations are established this way. There is a sale, there is an invoice, and that invoice is the starting point. The remaining cases are the difficult ones: samples, consignment shipments, goods between related companies, or shipments where no sale took place at all.

Which costs must you add to the invoice price?

Article 71 of the Union Customs Code lists the costs you must add to the price paid when they are not already included. This is where most mistakes are made, because the amounts often sit on invoices other than the goods invoice.

Commissions and brokerage, with the exception of buying commission
The cost of packaging materials and of the packing itself
Goods and services you supplied to your supplier free of charge or at a reduced price, such as moulds, tools, designs or components
Royalties and licence fees you must pay as a condition of the sale
The proceeds of resale that end up back with the seller
Transport, loading and insurance costs up to the place of entry into the customs territory of the Union

That last one is the hardest in practice. On a shipment from Shanghai on FOB terms, the sea freight sits on a separate invoice from your forwarder, and only the portion up to the external border of the EU belongs in the customs value. On a shipment that continues from Rotterdam to Venlo, that domestic leg does not belong in it at all.

The incoterm you agreed therefore does not determine the customs value, but it does determine how much arithmetic comes first. Under FOB you have to add freight and insurance yourself. Under CIF they are already included, but up to the port of destination, which is something else than up to the external border.

Which costs may you deduct?

Article 72 lists the items you may take off the price, provided they are shown separately and can be substantiated. This is the side importers consistently leave on the table, and it is money paid in import duties for nothing.

Transport costs within the customs territory of the Union, so after the place of entry
Costs of assembly, installation or maintenance after importation
Interest you pay under a financing arrangement with the seller
Charges for the right to reproduce the goods in the Union
Buying commission
The import duties and other taxes payable on importation

The condition is always the same: the amount must be recorded separately from the price of the goods. If it is not shown separately on the invoice or in the contract, you cannot deduct it, however genuine the cost. That is not a formality, it is the heart of the rule.

What do you do when there is no sale price?

If there is no sale for export to the Union, or the transaction value cannot be used, Article 74 prescribes a fixed order. You are not free to pick the method that suits you best.

The transaction value of identical goods imported at around the same time
The transaction value of similar goods
The deductive method, working back from the sale price in the Union
The computed value, built up from production costs, profit and general expenses
The fall-back method, based on data available in the Union

Only the third and fourth methods may be swapped at the request of the declarant. The rest is fixed, and customs expects you to be able to explain why an earlier method could not be applied.

In practice this mostly comes up with samples of no commercial value, goods received on consignment, return shipments after repair, and deliveries between related companies where the transfer price is not at arm’s length.

Which transaction applies in a chain sale?

When goods have been sold several times before arriving in the EU, for example from manufacturer to trading house to you, the question is which of those sales determines the customs value. Since the introduction of the Union Customs Code that is the last sale before the goods enter the customs territory.

That is often unfavourable for importers, because the last price in the chain is usually the highest. The earlier practice under which the first sale could be used lapsed with Article 128 of the Implementing Regulation.

If you work with a trading house or an agent, it is therefore important to record who holds which role. A buying agent acting in your name and on your account generates buying commission, and that you may deduct. A trading house that buys and resells on its own account creates a new transaction, and then its sale price is the basis.

Why the customs value also affects your VAT return

Import VAT is not calculated on your purchase invoice but on the customs value, increased by the import duties and any excise duties. That means a customs value that is too low hits you twice, and one that is too high does the same.

If you work with a fiscal representative or an Article 23 licence, you shift the import VAT to your own VAT return. The amount you report there comes from the customs assessment, not from your supplier’s invoice. Anyone who confuses those two structurally reports the wrong figure.

That is also exactly what the tax authorities look at during an audit: not whether you paid VAT, but whether the amount reported reconciles with the customs documents.

Expert support in determining the customs value

A customs value is built from documents that rarely sit together: the goods invoice, the freight invoice, the insurance policy, the contract with the brand owner and the arrangements with your agent. The arithmetic is not difficult, the collecting is.

An error also has a long tail. Customs can issue retroactive assessments going back three years, and a structurally misapplied addition or deduction then affects not one shipment but every shipment in that period.

The Customs Company is an AEO-certified customs service provider in the Netherlands with direct connections to Dutch Customs and Portbase.

We test your value build-up against Articles 70 to 74 of the Union Customs Code, record which costs do and do not belong in the value, and make sure the declared value reconciles with your invoices and your VAT return.

Frequently asked questions

Q: Can I use my supplier’s invoice value as the customs value?

Ans: As a starting point yes, as a final amount usually not. The invoice price is the basis, but you must add the costs under Article 71 that are not already included, such as freight and insurance up to the external border of the EU, packaging, royalties and materials supplied free of charge. Only after that sum do you have the customs value.

Q: Do freight costs belong in the customs value?

Ans: Only the part up to the place of entry into the customs territory of the Union. The leg after that, for example from Rotterdam to your warehouse in Germany, does not belong in it and may be deducted if it is shown separately on the invoice. If it is not shown separately, you may not deduct it.

Q: Must I add royalties to the customs value?

Ans: Yes, when you have to pay the royalty or licence fee as a condition of the sale of the goods. If you pay a licence that stands apart from the purchase and that the seller does not impose as a condition, it does not belong in it. The distinction lies in the contract, not in the size of the amount.

Q: Which transaction applies when goods have been resold several times?

Ans: The last sale before the goods enter the customs territory of the Union. This is laid down in Article 128 of the Implementing Regulation. The old practice under which the first sale in the chain could be used no longer applies under the Union Customs Code.

Q: What happens if customs corrects my customs value?

Ans: You receive an assessment for the difference in import duties and import VAT. Because customs can issue retroactive assessments going back three years, a structural error rarely concerns a single shipment. You can object, but the burden of proof for the build-up of the value lies with you.