Customs value of goods: what to specify when importing goods to Ukraine?
Customs value of goods is one of the most important aspects of customs clearance of imported goods to Ukraine. It is on the basis of the customs value that customs payments to the budget will be determined. All the key aspects to which customs clearance pays attention are aimed at the correct determination of the customs value.
It is a misconception of many businessmen that the customs value is the value of the imported goods, because the customs value includes all the payments that were made to import goods into Ukraine and were paid to the customs border of Ukraine.
Such payments depending on the terms of delivery may include: delivery, insurance, packaging, other surcharges and additional payments, as well as the value of the goods.
How to determine the customs value for imported goods?
According to the Customs Code of Ukraine there are 6 methods for determining the customs value of goods. However, in most cases the customs value is determined by the first method (when the businessman has enough documents to determine the customs value by himself), each subsequent method is used when the previous method of customs value cannot be applied.
Methods of determining the customs value of goods imported into the customs territory of Ukraine in accordance with the customs import regime:
- a basic method - based on the price of the agreement (contract) on the imported goods (transaction value);
- on the basis of the contract price for identical goods;
- on the basis of the contract price of similar (similar) goods;
- on the basis of deduction of value;
- on the basis of value addition (calculated value);
- a reserve method.
The methods based on deduction and addition of value (estimated value) may be applied in any sequence at the request of the declarant or his/her authorized person.
If the Client has sufficient documents and has sufficient information to file the declaration, he/she shall file the customs value determined by the first method. If he/she does not have the documents, he/she shall use the second method. If the second method does not work, then the third method. And so in turn. Each successive method will allow customs to increase the customs value.
It is difficult to give an example of calculating the customs value, because each case has many nuances that need to be taken into account. For example, we import goods for 1,000 Euro with zero duty and delivery conditions to the destination. Then we just multiply 1,000 Euro by the NBU rate and 20% VAT.
But this variant is possible only for a legal entity, because the goods worth up to 10 thousand euro are customs cleared at 30% for an individual.
What affects the calculation of the customs value?
One of the most important factors affecting the calculation of the customs value is the terms of delivery of the goods.
Depending on the conditions of delivery by land, sea or air, the cost of the goods may include delivery or may be paid separately. Depending on the terms of delivery, the necessary documents for calculating the customs value are determined.
The terms of delivery shall be stipulated in the agreement, additional transactions, and in the invoice for the goods. In addition, the terms of delivery can be seen in the export customs declaration, provided by the exporter. In all the documents the terms of delivery shall correspond to reality and be the same.
For example, if the goods were purchased on an ex-works basis, the customs declaration shall include the following documents, in addition to the main documents:
- a shipping contract;
- an invoice for transportation with a breakdown for before/after the border;
- other documents confirming the cost of delivering the goods to the customs border of Ukraine.
If the goods have been ordered on CIF (sea) or CIP (land) terms, such terms of delivery provide for mandatory cargo insurance, and the insurance policy is a mandatory document for customs clearance and confirmation of customs value.
If under CIP terms the cargo insurance shall be issued for the invoice amount, then under CIF terms the insurance shall be for the invoice amount +10%. If the amounts of invoices and insurance policies do not coincide, this will be the basis for adjustment of the customs value of the goods.
Confusion in the documents concerning the terms of delivery and determination of the customs value will lead at least to overpayments at customs, or to confiscation of goods and perhaps litigation.
What is a customs value adjustment?
If the customs office has made a decision to adjust the customs value, the entrepreneur has two options for customs clearance:
- the first – to accept the value determined by the customs authority;
- the second – to reject the determined value.
In the latter option, the entrepreneur pays the amount of customs clearance based on its customs value and the difference that the customs wants. However, the agreed amount is written off to the budget, while the positive difference, which is considered by the customs, is paid by the entrepreneur, but is not written off to the budget, but it is “freezed” until the final resolution of the issue.
That is, the entrepreneur will still pay the amount determined by the customs, but will be able to return the overpaid amount over time. To do this, one must file a complaint with the customs with additional documents or appeal the customs decision in court.
In practice the appeal to the court is, of course, a more effective and more time-consuming procedure, because customs rarely overturn their own decisions.
Please note! Even the value of the goods may be revised by the customs office in case of its non-compliance with the market prices, which will be the basis for the adjustment of the customs value of the goods.
At what stage shall the customs value be formed and indicated?
The customs value is calculated directly when preparing the declaration for customs clearance. A customs value declaration is additionally submitted for goods worth more than 5 thousand Euro. The customs value must be specified in the declaration, which is submitted for customs clearance. It is filed electronically.
There are two cases when the customs value can be wrong:
- make it too high, and overpay;
- or too low – in this case you can get a fine of 300% of the amount of underpaid customs duties.
Based on the above, we do not recommend doing any fraud actions with the customs value of goods, since the mechanism of payment of customs duties is built in such a way that the customs authority will independently determine the value of the goods, and the entrepreneur will still pay certain amounts to the state. However, if mistakes or fraud are made, you may face problems with courts, complaints, and refunds of your own money.
Each division of customs has a customs payment tariff department, and if customs doubts the value, the inspector sends a tariff request. In this case, the cargo can stay on the request for up to 10 days for customs to establish the real customs value – which in any case results in a loss of money and time.
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