ECJ Clarifies Customs Valuation Using Third-Country Export Prices

When a routine import of a damaged vehicle into the EU omits a critical piece of evidence regarding the value of imported goods, it may lead to issues between importers and Customs Authorities. The dispute between the Director of the Regional Customs Office in Burgas and Lidikar, who acted as an importer’s representative, serves as a reminder of how far such disputes may go. The matter of whether the declared value could be rejected and how alternative valuation methods should be applied was ultimately referred to the Court of Justice of the European Union (ECJ) for clarification.

Background of the Case 

In January 2021, Lidikar, acting on behalf of an importer, declared a damaged vehicle for release into the EU market through the port of Burgas in Bulgaria. The vehicle's value was determined based on the transaction price of CAD 3,310 (approximately EUR 2,100), which aligned with the standard rule that the customs value is normally based on the actual price paid. 

However, during the audit, Bulgarian Customs Authorities received, under the international cooperation agreements, information from Canadian Customs that the same vehicle had been declared for export from Canada at a much higher value of CAD 15,889 (around EUR 10,100). This data raised concerns that the value declared in Bulgaria might be incorrect or understated.

As a result of these findings, Bulgarian Customs requested that Lidikar provide proof supporting the lower declared value. After the company submitted several documents, including invoices and transport records, the Customs still had doubts about the accuracy of the declared price. The main reason for the doubts was the company's inability to provide key supporting evidence, such as the original commercial file, payment records, or prior correspondence related to the transaction.

Consequently, the Customs concluded that the company did not convincingly prove that the declared price of the vehicle was accurate. Moreover, the Customs determined that the provided invoice was insufficiently supported by evidence, and that the bank statement did not clearly show that full payment had been made. Under those circumstances, and considering the discrepancy with the higher value reported by Canadian Customs, they rejected the declared transaction value as a basis for customs valuation.

After examining whether alternative valuation methods could be applied, such as comparing the vehicle with similar imported goods, and given that it was impossible to compare it reliably with other vehicles of the same type due to the accident damage, the Bulgarian Customs concluded that the standard secondary methods could not be used. Instead, the Customs applied the fallback method, using information obtained from Canadian Customs to determine the vehicle’s value.

That approach significantly increased the vehicle's customs value, leading to recalculated import duties and VAT and a much higher amount payable. The company challenged this decision before the Administrative Court, which annulled the Customs decision. The Administrative Court concluded that the Customs had not adequately justified their “reasonable doubts” about the declared value, adding that information received from Canadian Customs did not constitute binding or sufficiently reliable evidence to support the higher valuation.

However, the Customs appealed to the Supreme Administrative Court of Bulgaria, arguing that since the declared transaction value could not be reliably verified and the standard comparison methods were unsuitable, it was appropriate to determine the customs value using “reasonable means” under Article 74(3) of the Union Customs Code.

The Supreme Administrative Court stayed the proceedings and referred two questions to the ECJ for a preliminary ruling on the interpretation of the law before making a final decision.

Main Questions from Request For Ruling

The Supreme Administrative Court asked the ECJ to clarify whether the value declared when goods are exported from a non-EU country, such as the higher price reported by Canadian customs, can be treated as available data within the EU for the purpose of determining customs value under Article 74(3) of the Union Customs Code.

Additionally, the Court asked whether relying on that export value could be considered a valid and reasonable method for establishing the customs value when the standard methods cannot be applied.

Applicable EU Law

In this case, the ECJ did not interpret VAT rules and regulations. Instead, the focus was on the key provision from the Union Customs Code and the Implementing Regulation (EU) 2015/2447. Regarding the Union Customs Code, Articles 70, which establishes that the primary method is based on the transaction value, and 74, which defines when and how alternative methods can be applied, were the most relevant for this case. On the other hand, Articles 140 and 144 of the Implementing Regulation were singled out as the most important.

International Law

For this case, the ECJ had to analyze and interpret relevant provisions from several international agreements, including the General Agreement on Tariffs and Trade (GATT) 1994, the Agreement on Implementation of Article VII of the [GATT] 1994, the Canada-EU Customs Cooperation Agreement, and the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU.

Bulgaria National VAT Rules

The ECJ did not interpret any national VAT or customs rules or regulations, as the main point of dispute concerned the application of EU-wide and international customs rules.

Importance of the Case for Taxable Persons

The dispute between the Bulgarian Customs Office and Lidikar raises an important question: how do EU Customs Authorities determine the value of imported goods when standard methods do not apply? 

Considering that the case involves not only EU-wide customs rules but also touches on the international rules, the ruling provides taxable persons, particularly EU importers, with a clearer insight into the types of data EU Customs Authorities may consider, the evidentiary standards expected when declaring transaction values, and how cross-border information exchanged between authorities can play a role in customs valuation procedures.

Analysis of the Court Findings

Firstly, the ECJ clarified the role of the fallback method under Article 74(3) of the Union Customs Code. The ECJ noted that this method should be used as a last resort, only when the importer has not provided reliable or complete information to determine the value using the primary method, that is, transaction value, or the standard alternative methods.

Furthemore, the ECJ explained that the concept of “data available in the customs territory of the Union” should be understood broadly. From that perspective, instead of requiring that the data originate within the EU, it is enough that the information is factually available to EU Customs Authorities and can be used by them to assess the value of the goods.

In other words, such data is not limited to information collected within the EU, and data from a third country can be used as long as EU Customs Authorities have access to it. In this particular case, the relevant data, such as declared export prices, was shared under formal international customs cooperation agreements, such as the Canada-EU Customs Cooperation Agreement or CETA. 

On the issue of whether using the export price declared in a third country, such as the value reported by Canadian Customs, can be considered a reasonable means for determining customs value under the fallback method, the ECJ stated that  Article 74(3) of the Customs Code and Article 144(1) of the Implementing regulations must be read together. These provisions stated that when standard methods cannot be used, authorities are given a margin of discretion to determine the value, provided they follow core legal principles.

Notably, any method used must comply with the international customs valuation rules set under the WTO framework. The ECJ underlined that there is a key limitation to this rule. Customs value cannot be based on export prices to countries outside the EU. Nevertheless, such a limitation does not apply in this case. Under established case law, a price set in an earlier transaction involving the same goods may serve as a reference when applying the fallback method. 

Moreover, such an approach does not violate the rule prohibiting Customs Authorities from choosing the higher of two possible values, as the prohibition only applies when the authorities arbitrarily select between competing values. In cases where the export price is the only reliable figure available, it is permissible to use it for customs valuation under the fallback method, since it is neither arbitrary nor fictitious. 

Courts Final Decision

The ECJ, more precisely the General Court, ruled that the price declared in a third country for goods exported to the EU, when shared with EU Customs Authorities through an international cooperation agreement, can be treated as “data available in the customs territory of the Union.” Essentially, the EU Customs Authorities may use this data when determining the customs value of imported goods.

Secondly, the General Court confirmed that using this export price can also qualify as a reasonable means under the fallback method. Thus, when standard valuation methods cannot be applied, EU Customs Authorities may rely on this data to determine the goods' true value.

Conclusion

The case highlights the intricate interplay between EU customs law, international cooperation, and the practical challenges faced by importers, their representatives, and national Customs Authorities. Importantly, the ECJ interpretation and final decision underscore the importance of reliable documentation, transparency, and the careful evaluation of all available data when determining the value of imported goods. 

If there is one note that taxable persons should take from this case, it is that every declared value must be fully supported and verifiable, as Customs Authorities have the discretion to scrutinize, challenge, and rely on a wide range of domestic and international data when assessing the true value of imported goods.

Source: Case T‑296/25 - Director of the Regional Customs Office, Burgas v Lidikar OOD, General Agreement on Tariffs and Trade (GATT) 1994, Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, Canada-EU Customs Cooperation Agreement, Union Customs Code, Implementing Regulation (EU) 2015/2447