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Intercompany Transactions and Customs Value

When a company imports, import duties and other levies often are to be paid to Customs. Also in the case of ‘intercompany transactions’, which basically means the stock movement of goods (not to be confused with stock movements of E-commerce companies), a payment of duties is required. In such a situation, many companies do not know what needs to be done exactly to ensure that customs-related matters are taken care off.

Usually, the customs value is determined by assessing the invoice as the starting point. When stock is moved between affiliated companies, more than often this transaction or invoice is omitted in the relevant documentation and a customs value will thus have to be determined in a different way. In practice this is not always easy. Customs valuation is often based on the transaction value. This is one of the 6 available methods of customs valuation*, but how does it work with stock movements?

The customs value

In the case of intercompany transactions, the customs value must be a 'fair' reflection of the transaction value, such as in a transfer of ownership. For this, a calculation will have to be made using one of the 6 methods. These methods are used in a compelling order (methods 4 and 5 may be used interchangeable). For intercompany transactions, we use method 4; the deductive value method or method 5; the computed value method.

In this type of transaction, we see in reality that the value is marked at a relatively low level due to the relationship of the parties involved. This may seem beneficial in the short term. However, if the customs authorities conduct an investigation and make a recalculation, this can have enormous fiscal consequences. It is therefore important to pay sufficient attention to this subject, given the possible consequences.

Responsibility

Many companies delegate the responsibility for the correctness of the customs value to the forwarders or 3rd parties who take care of the customs declarations for them. It is important to realize that the importing party (importer of record) always remains ultimately responsible for the customs value. The consequences of this are therefore also borne by the importer. Unfortunately, we see that this realization does not sink in with higher management of various companies, at least not until the moment that financial repercussions are actually a fact.

Do you feel that this process is not (sufficiently) guaranteed within your organization? Do not wait any longer and take action, because it is of the utmost importance to properly invest in this issue internally and to allocate time and resources to ensure this.

Could you use some help?

Know that our customs specialists with years of practical experience are ready to help you. They will update you on the latest developments in this area and help you to set up this process properly. This prevents unnecessary financial risks and safeguards that your internal processes are well organized.

Fill in the contact form below and we will get in touch with you soon!

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* The 6 methods of customs valuation

  1. The transaction value method;
  2. The transaction value of identical goods;
  3. The transaction value of similar goods;
  4. Deductive value method;
  5. Computed value method, and;
  6. Fallback method.

Only when the method specified earlier in the sequence cannot be applied, can recourse be taken to the next method in the sequence. The primary basis for valuing imported goods is the transaction value method which has to be applied to the greatest extent possible.

Source: WCOOMD

28 Jul 2022 at 9:34 am
2 min
Published by:
Steven Sewberath Misser
Customs Specialist
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