MC Parts BV mported motorcycle spare parts and accessories from its parent company. It had made an additional payment of €20,091,000 to its parent company based on transfer pricing adjustment to align with the arm’s length principle.
The customs authority treated this payment as an increase in the customs value of imported goods and issued an assessment of additional customs duties amounting to €711,221.
In an appeal MC Parts BV requested reimbursement of the customs duties, arguing that, as a transfer pricing adjustment, the payment should not be included in the customs value under the transaction value method. It relied on the Hamamatsu judgment of the Court of Justice of the EU, which dealt with lump-sum profit adjustments.
Judgment
The Court of Appeal examined that precedent but concluded the situations were different. In Hamamatsu, the adjustment was a lump sum not directly tied to goods, while in this case the payment was based on sales and linked to the imported goods with a fixed profit margin.
The court emphasized that under Article 29(1) of the Community Customs Code, subsequent payments related to transfer pricing adjustments may be included in the transaction value if they are linked to the imported goods. Since MC Parts BV had itself agreed to the arm’s length correction, received an invoice from its parent, and included a provision for additional import duties, the customs authority was justified in treating the payment as part of the customs value. The company failed to provide sufficient evidence or concrete allocation data to show that the payment was unrelated to the imported goods.
The court held that the burden of proof was on MC Parts BV to demonstrate that the revised customs values were too high. The company did not meet this burden.
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