Guessing Games: How to Determine Customs Value
The larger valuation of the
imported goods, the larger the sum of customs duties to be paid. The simple
equation which generates ‘never-ending’
story of a game of chance between the importers and customs officials. The
former are trying to prove that the goods are not so expensive as they seem;
the latter are arguing that such lower prices are possible only in fairytales.
It is not a Ukrainian specifics to participate in this kind of tug-of-war game.
The similar problems occur in almost every country in the world. In the
European Union, for example, there are detailed guidelines on how to determine
the customs value and the practical approaches to valuation are highly
developed. Ukraine is also trying to reach an adequate level of predictability
and transparency with respect to the customs procedures. However, this road is
long and full of turns. And the customs valuation is a good example of today’s
The customs officers are inclined instantly jump over to the reserve method of customs valuation. This method is the last of six established by the current Customs Code. Why this reserve method is so luring for them? That is because this method makes it possible not to waste the ‘precious’ time of the officers on investigating the specifics of this particular transaction, scrutinizing the documents and trying to get a sufficient information to decide. They just pick up the most suitable value of the similar goods imported earlier. Looks like pulling the rabbit from the hat. And the ‘hat’ is the Unified Automatic Informational System, a comprehensive data base of various customs information run by the Customs Office. How it may work. Let us take one kind of goods which was imported into Ukraine ten times last year. In nine instances of ten, its value was 50 euro, and the tenth import was valued at 100 euro. The customs officers may select the highest valuation. And you may not expect to get the good reasons for this value determination: no analysis of the market where seasonable fluctuations and market conditions changes occur, no discount policies exist etc. The implied answer for your ‘why-question’ seems to be, “because one of the valuation from our closed data base looked ‘prettier’ than others”.
Now, the importers are guarded by the Supreme Court of Ukraine which judgments hold back the eager customs officers. The highest court instance found that the discretionary powers of the customs officers are subject to the legal constraints in cases when the customs value seems disputable. The constraints include, inter alia, need for consultations between the customs officers and importers to determine the reasonable way of customs valuation. The methods of the customs valuation are to be applied one by one, from the first to the second and so on; and the reserve method is the last in this row.
Some figures to show the effectiveness of the customs officers while collecting duties. In 2012, the revenues from the international trade related duties and taxes (it is the customs officers’ area of responsibility) were planned at the level of 13.092 billion hryvnia and in fact they were 13.186 billion hryvnia (approximately 1.268 billion euro) which is higher than the planned amount by 0.7 percent. To compare with the general tax revenues for 2012 – the tax revenues were planned at 311.154 billion hryvnia and were in fact 274.715 billion hryvnia (approximately 26.415 billion euro), i.e. were underperformed by 11.7 percent. But the most surprising thing is that the increase of the revenues from the international trade related duties and taxes was higher that the increase in goods imports. The customs tariffs rates in 2012 were stable. In 2012, the amount of paid customs duties and taxes increased about two times higher than goods import. Increase of goods import constituted 5.4 percent, and increase of the amount of international trade related duties and taxes was 12 percent (from 11.774 billion hryvnia to 13.186 billion hryvnia) in 2012 compared to 2011.