The customs value declared by “Import GmbH” of the goods imported from related parties X, Y and Z was in dispute.
In the course of a customs audit, the customs office (Hauptzollamt, HZA) found that Y had invoiced “Import GmbH” for subsequent debit amounts of EUR (…) for 2015, EUR (…) for 2016 and EUR (…) for 2017. These were based on a Distribution Agreement of (…) concluded between “Import GmbH” and Y, according to which “Import GmbH” undertook to purchase products from the latter and to sell them in the defined distribution area. With the 1st Supplementary Agreement of (…), supplies from affiliated companies of the group company were also included in this agreement and thus, inter alia, also the supplies from Z. With the second supplementary agreement of the same date, it was stipulated that “Import GmbH” should receive an “agreed margin” which was described as customary for third parties.
According to the agreement, the margin resulted from the rolling three-year average of the arm’s length ranges, which were determined on the basis of database analyses for returns on sales of comparable companies. For the period at issue here, the database analysis determined an arm’s length range for returns on sales and Y determined a margin of 1.93% from this range, which was within the arm’s length range for returns on sales of comparable companies. In fact, “Import GmbH” achieved returns on sales of 23.24% (2014/2015), 26.24% (2015/2016) and 28.49% (2016/2017) by reselling the products in the (…) business unit. During the year, “Import GmbH” received invoices for the delivered goods, which had already been reduced in advance by a calculated deduction from the list price, namely the so-called “agreed margin”. “Import GmbH” declared these transfer prices paid during the year as the basis for determining the customs value in the customs declarations. Since the double-digit returns on sales actually achieved in the business years 2015 to 2017 were considerably higher than the agreed margin and thus, in the opinion of the customs office, not at arm’s length, “Import GmbH” was charged subsequent debit amounts of EUR (…) to EUR (…) (…).
According to the customs office, the unusually high profits were only possible because the transfer prices during the year had been calculated too low. The returns on sales achieved had been adjusted within the group to the margin of 1.93%, so that the aforementioned subsequent debit amounts had been determined on this basis and charged to “Import GmbH” with debit notes or paid by the latter. On the basis of the facts established, the customs office came to the conclusion that the customs values originally declared during the year had to be increased by correction factors (1.34 for the years 2014 and 2015 and 1.44 for the years 2016 and 2017) in order to determine the correct customs value for the import goods. It therefore subsequently assessed a higher duty of EUR (…) (based on a correction factor of 3.88) for the goods imported in November and December 2014 by import duty notice of 26 October 2017, which it reduced to EUR (…) (based on a correction factor of 1.34) in the opposition decision of 4 February 2020 following “Import GmbH”‘s objection.
An appeal was filed by “Import GmbH”.
Judgement of the Finanzgericht
The Court upheld the appeal of “Import GmbH”.
“52 If the customs value is determined using the closing method, as the HZA assumes on the basis of the connection and the existing price influence, the time of importation must in principle also be taken into account with regard to the other appropriate methods to be used, according to the opinion of the BFH in the above-mentioned ruling of 17 May 2022 (marginal no. 45).
53. It follows from this, according to the BFH in its judgment of 17 May 2022 (marginal no. 49), that the dictum of the BFH of 17 May 2022 is not applicable. 49), that the dictum of the ECJ, according to which the CC does not permit the customs value to be based on an agreed transaction value that is composed partly of an amount initially invoiced and declared and partly of a lump-sum adjustment after the end of the accounting period, without it being possible to say whether this adjustment will be upward or downward at the end of the accounting period, is also decisive for the determination of the customs value according to the final method pursuant to Article 31 CC.
54. If it was not clear at the time of the customs declaration whether an adjustment would have to be made at all at the end of the accounting period and whether, if this was the case, it would have to be made upwards or downwards, then the value of the goods determined in this way – or actually still to be determined after the end of the accounting period – at the time of the customs declaration was not relevant within the meaning of Article 8(3) of the Convention on the Implementation of Article VII of the General Agreement on Tariffs and Trade. VII of the General Agreement on Tariffs and Trade of 1994.
55. The burden of proof in the case of subsequent recovery lies with the HZA. The latter must explain and, if necessary, prove that or to what extent duties have been assessed too low. If this proof cannot be provided, a subsequent levy is excluded.
56. On the basis of these legal principles, the conditions for the subsequent levy based on Article 101 or Article 105 (2) and (3) of the CCC are not met in the present case. The HZA did not prove that the customs debt paid by the applicant had to be assessed higher at the time of the acceptance of the respective customs declaration.
57. The parties initially determined the customs value on the basis of the prices invoiced to the applicant during the year in accordance with Article 29 CC/CCC using the transaction value method. At the time of the acceptance of the customs declarations, which were not submitted as incomplete, there were no indications that these prices did not reflect the actual economic value of the imported goods and did not take into account all elements of these goods that had an economic value or that there was price influence due to relatedness.
58. Thus, at the time of acceptance of the customs declaration, there were neither conditions within the meaning of Article 29(1)(b) CCC which would have precluded a determination of the customs value according to the transaction value method, nor was the relationship between the applicant and Y under Article 29(1)(d) in conjunction with Article 29(2)(a), first sentence, apparent. (2)(a), first sentence, was a reason to consider the transaction value as unacceptable.
59. Finally, the applicant’s agreement with Y was also not suitable to justify a subsequent adjustment of the transfer prices according to the closing method (Article 31 CC/Article 74 UCC). At the time of the respective customs declarations, it was not clear whether the declared values of the goods would be corrected on the basis of the transfer prices that had yet to be determined after the end of the accounting period and, if this were to be the case, whether a correction would be made by means of surcharges upwards or by deductions downwards. It was also unclear how much the corrections would have to be. This meant, however, that the surcharges or deductions – which could only possibly result anyway – could not be quantified at the time of the customs declaration.
60. In its judgment of 20 December 2017 (Hamamatsu) on transfer pricing at customs value (paras. 24-33), the ECJ also merely stated apodictically that Art. 28 to 31 CC are to be interpreted as not permitting the customs value to be based on an agreed transaction value which is composed partly of an amount initially invoiced and declared and partly of a lump-sum adjustment after the end of the accounting period, without it being possible to say whether at the end of the accounting period this adjustment will be upward or downward (para. 34).
61. Accordingly, the transfer price declared by the applicant during the year forms the customs value and subsequent adjustments in the form of subsequent charges to the transfer price declared during the year are not taken into account, even if the HZA believes that the case is to be distinguished from the dispute decided by the ECJ because here it is to be assumed that affiliated companies influence prices, which is recognisable on the basis of the transfer prices that were obviously paid too low during the year. However, due to the lack of quantifiability of the value of the goods at the relevant time, this is not relevant.
62. The result, according to which transfer prices declared during the year cannot be subsequently corrected, is, in the opinion of the Senate, necessarily derived from the more recent case law of the ECJ and the BFH, even if, according to the established case law of the ECJ, it must in principle be prevented that an arbitrary or fictitious value is used as a basis for the determination of the customs value (see judgment of 12 December 2013, Christodoulou et al, C-116/12, ECLI: ECLI:EU:C:2013:825, para 39; judgment of 16 June 2016, Euro 2004 Hungary, C-291/15, ECLI:ECLI:EU:C:2016:455, judgment of 20. December 2017, C-529/16, EU: ECLI:C:2017:984, ZfZ 2018, 68), because the customs value must reflect the real economic value of an imported good and take into account all elements of that good that have an economic value (ECJ judgment of 15 July 2010, Gaston Schul, C- 354/09, ECLI: ECLI:EU:C:2010:439, para. 29).”