UPRS Judgment III U 208/2018-12

The Court:	Administrative Court
Division:	Administrative Division
ECLI:	ECLI:SI:UPRS:2020:III.U.208.2018.12
Registration number:	UP00044520
Date of decision:	24.09.2020
Chamber, Single Judge:	Lea Chiabai (Presiding), Andrej Orel (Rapporteur), Valentina Rustja
Scope:	CARINE
Institute:	customs - claim for repayment of import duties - related parties - repayment of customs duty overpaid - customs value - subsequent adjustment of the transaction price - transfer pricing - CJEU judgment

Core

What the applicant seeks to achieve in the present case is an attempt to adjust (reduce) the transaction price retrospectively by reference to a new transfer price, and not to claim repayment of the customs duty overpaid as a result of an incorrect customs value in the customs declarations upon release for free circulation. The customs declarations at issue were lodged as regular declarations and customs duties were levied on the value of the goods determined therein. It is not, therefore, the case that the value indicated in the declarations was arbitrary or fictitious or that the price at the time of sale of the goods could not be determined. Nor is there any basis in the facts for the applicant's allegation that the goods were released for free circulation on the basis of the provisional value of the goods.

Operative part of the judgment

I. Dismisses the action

II. Orders each party to bear its own costs.

Reasons

By the contested decision, the Financial Administration of the Republic of Slovenia ('FURS') rejected as unfounded the applicant's claim for repayment of part of the import duties on goods released for free circulation under the customs declarations referred to in the operative part of the decision, issued between 19 March 2005 and 31 December 2005. It noted that the costs of the proceedings had not been notified (paragraph 2 of the operative part of the operative part of the judgment) and stated that the appeal did not suspend the operation of the decision (paragraph 3 of the operative part of the judgment).

It is apparent from the grounds of the contested decision that the applicant, as the agent of the importer, A. d.d., addressed several requests to the Koper Finance Office for partial reimbursement of the customs duty levied on the release for free circulation of passenger cars. According to the declarations on which the applicant's claims are based and which are set out in the operative part of the present decision, the passenger cars were imported under procedure 4200, all of which relate to the period of the first quarter of 2009 (Q1/2009). The applicant submitted that the declarations in question declared the provisional knowledge of the goods, determined on the basis of the transfer prices of the cars, which were established in accordance with the Transfer Pricing Agreement and the Value Declaration No 1/2008, all of which were deposited by the importer with the Port of Koper before the release of the cars for free circulation.

3. FURS explains that, in the course of the proceedings, it examined all the documentation and also invited the applicant to supplement its claim and to clarify the facts and circumstances of the case brought to its attention. It is apparent from the documentation that the buyer, A. d.d. ('A. d.d.'), and the seller, B. d.d. ('B. d.d.'), are related companies and have concluded the Transfer Pricing Agreement to which the applicant refers in its application. It also attached to its application a Distribution Agreement, which shows that A.d.d. will primarily sell vehicles to unrelated local residents in the territory of the EU Member States, thus performing two functions, namely that of a wholesale distributor of vehicles to dealers and that of a warehousing aggregator for other wholesale distributors in the region. On the date on which the customs debt was incurred under the customs declarations in question, B.d.d. and A.d.d. had concluded a Transfer Pricing Agreement with two addenda, which set out the basic principles of their contractual relationship. Point 3.2 of this contract states that B. d.d. must not incur any loss by selling products to A. d.d., and that this was in order to secure the entire line on that company's market. If B.d.d. suffers any loss on the products sold to A.d.d., the parties agree to temporarily reduce A.d.d.'s profits until B.d.d. has regained an appropriate break-even point, while also ensuring that A.d.d. is able to operate profitably. The Appendix to the Transfer Pricing Agreement sets a target operating profit ('TOP') of 2 % on a base of net sales of A. d.d., with the proviso that B. d.d. must not incur a variable loss on the sale of products to A. d.d... If B. d.d. were to incur such a loss, the profitability of A. d.d. would be reduced, but only to the extent that it would be guaranteed a break-even point in its profit or loss. The transfer pricing policy therefore ensures that A. d.d. at least reaches breakeven. Appendix No 1 to the Transfer Pricing Agreement also sets out the transfer pricing methodology. The total cost of the vehicles from Korea is decided at the level of net sales revenue and reduced by wholesale distribution costs and a target profit of 2 % of net sales revenue. The initial transfer price is determined on the basis of assumptions about projected volumes and prices, but is only provisional and will be subsequently adjusted in the following quarter when the actual transfer price is known on the basis of sales data. The subsequent adjustment of the transfer price is made at the end of each quarter when A. d.d. calculates the actual net sales and the actual net profit. The addendum to the Transfer Pricing Agreement stipulates that B.d.d. aims to achieve at least break-even profitability in its operating result, or to operate at a profit, and A.d.d. aims to have a profit in the range of 1 % to 3 %, provided that B.d.d. does not suffer variable operating losses. The two companies agreed that, in order to settle the subsequent adjustment of the transfer prices, B.d.d. would issue a credit note to A.d.d., both when A.d.d. incurred an operating loss and in the event that it made a profit in the range of 0 % to 1 % of net sales, to the extent that B.d.d. still made a variable profit. The Transfer Pricing Agreement provides that if B d.d.d. has a variable profit of less than 0 % and A d.d.d. also suffers an operating loss, a retroactive adjustment will be made until A d.d.d. reaches an operating profit of 0 %.

4. In the following, the FURS summarises the content of all the requests by which it requested the applicant to submit various documents and informed it of its findings and conclusions and gave it the opportunity to comment on them. It also summarises the content of the applicant's replies to those requests. It points out that the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (GATT), which forms an integral part of the Marrakesh Agreement establishing the World Trade Organisation ('the General Agreement'), as well as Article 29 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code ('the CCC'), clarify that the fact that a trader and a buyer are related is not a reason for their transactions not to be accepted. Therefore, in order to reject any suspicion that the relationship between the buyer and the seller influenced the price, the customs authority must carry out an examination of the circumstances which influenced the sale. The FURS points out that the tax authorities comply with the transfer pricing rules in accordance with the OECD Guidelines, while the customs authorities must, in addition to national legislation, comply with the reasonably identical rules laid down in the General Agreement. For this reason, there are therefore differences in the customs valuation of associated companies between tax and customs authorities.

5. FURS states that it has examined all aspects of the transactions in question, including the way in which the buyer and seller organised their commercial relationship and the way in which they fixed the price. On that basis, it assessed whether the relationship had an impact on the price formation. It explains that such a test must show that the related buyer and seller are buying from each other as if they were not. To this end, the FURS first carried out a test as to whether the proposed transaction prices were in accordance with the customs legislation and the General Agreement and whether they were made according to the arm's length principle. It notes that a good tool for such a determination is a transfer pricing study and that the applicant based its claim on a study carried out by C.d.d..

6. The transfer pricing study (hereinafter also referred to as the study or the C.d.d. study) was carried out by C.d.d. in 2004 and updated in 2010. As the time of sale of the goods is relevant for customs valuation, FURS considered the 2010 Study to be more reliable, as it uses data from 2006 to 2008 and the vehicles subject to the claim were released for free circulation in 2009. FURS points out that the aim of such studies is to compare the performance of related companies with that of independent companies operating in the same business. If it is found that unrelated companies apply the same principles in their business as related companies, this means that their relatedness does not affect the formation of the transaction value of the goods.

7. FURS notes that C.d.d. used the Modified Resale Price Method in its study, whereas the applicant states that the transfer prices were calculated on the basis of the Resale Price Minus Method. According to the applicant, neither of these two methods is one of the methods prescribed in the OECD Manual or Guide, but they are similar to the Net Profit Margin Method ('TNNM') described in the Manual. The 2010 update of the C.d.d. study also refers to an operating margin, or net profit margin, which it notes ranges from 0,8 % to 1,7 %, with a median of 1 %, and which is calculated according to this method. The resale minus method, which, according to the applicant, was used to calculate the transfer prices, is also not among the methods laid down in the Transfer Pricing Regulations, nor is it mentioned in the OECD Guidelines, in particular No 348, to which the applicant refers, but it is the TNNM method which is described under that number.

8. The FURS further notes that the C.d.d. study compares companies which do not operate in the same business as the seller and the buyer in the present case, but in the sale of textiles, mobile telephones, fuels, cosmetics and detergents, dog food, etc. The FURS also notes that the C.d.d. study compares companies which do not operate in the same business as the seller and the buyer in the present case. The study refers to the fact that the companies considered for comparison were those engaged in businesses that were comparable in terms of functions performed, risks assumed, resources committed and market conditions, i.e. distribution companies selling large quantities of goods with a relatively small number of employees were sought. Passenger car distributors are excluded on the grounds that they are a small number of independent companies of this type. Even if there are only three such companies, no information is given on their operating margin. FURS therefore considers that the study of C.d.d. is not sufficient for customs purposes as it does not include companies engaged in the same or similar activities and selling the same or similar goods, i.e. passenger cars, and therefore does not allow comparisons for the related company A.d.d.. After being informed of these findings by the FURS, the applicant argued that B.d.d. does not sell cars to other independent companies, even though the 2010 study indicates that, in addition to A.d.d., there are also external wholesale distributors operating in eight European countries. This implies that there are internal comparables, since these unrelated companies are also supplied with the same type of goods as A.d.d. The study lists a number of functions of the unrelated companies which are identical to those of A.d.d. All this suggests that the comparable free price method (CUP method) could be used, which as a method is also preferred over other methods under the Transfer Pricing Regulation. This method is also comparable to the method under Article 30.2(a) of the C.C.P., which takes into account, for the purpose of comparison, the transaction values of identical goods sold at approximately the same time as the goods to be valued.

9. The 2010 C.d.d. study relies on the databases of the companies used for the comparison. While the OECD Guidelines see the use of databases as a practical and cost-effective way to identify external comparables, they also note that these databases have a number of limitations, as the information publicly available is limited, the types of companies operating in different countries are different, the formats of the information are different, the data are generally not detailed enough to determine transfer prices, and usually only the results of companies can be compared, not the results of transactions. Because of these weaknesses, the OECD Guidelines stipulate that the use of database data is not necessary if information from other sources, such as internal comparables, is available, since the key to determining whether the activity under consideration in a related party transaction is arm's length is to compare it with the same factor in similar transactions between unrelated parties. However, the 2010 C.d.d. study excluded a comparison of the external distributors with A.d.d. because the risk profile of the A.d.d. units and the external distributors would be significantly different. The FURS states that the study shows that A.d.d. is charged flexible prices with the aim of achieving a certain operating margin and that, therefore, the sales prices vary according to the sales performance, which is done by means of a retroactive adjustment, whereas the prices charged to the external distributors are fixed. This means that B d.d.d. gives A d.d.d. conditions that it does not offer to other distributors, which leads to the conclusion that the relationship between the two companies is not in line with the arm's length principle and has an impact on pricing. The applicant should therefore have provided the independent distributors with contracts and an analysis of the functions and risks they perform, thereby demonstrating that they are not appropriate comparators for A d.d., which it has not done, despite repeated requests from the FURS to do so.

10. FURS further notes that the applicant has not demonstrated that the criteria laid down in Article 29 of the C.C.P.C., i.e. the simultaneity of transactions, have been met, nor has it provided evidence of individual transactions, but refers only to a study by C.d.d., which was prepared for tax purposes and not for customs purposes and which does not contain information on individual transactions. The study also does not provide any information on whether the buyer and the seller set a price which is in line with the pricing practices in the industry, since it focuses on companies other than vehicle distributors, while showing that the pricing between the two related companies is different from the pricing for other buyers in the Community. Finally, the study does not provide information that the price is reasonable and that it ensures cost recovery plus a profit which reflects the total profit of the company made over a representative period on the sale of goods or services of the same type, but only refers to the average range of margins of companies in other industries and is therefore deficient for customs purposes.

11. FURS explains that, in the preliminary proceedings, the applicant and the importer submitted the profit and loss account for A.d.d., the calculation of the subsequent transfer price adjustments and the profit and loss account for A.d.d., but that the data are not reconciled. Two calculations of the sum of the price of vehicles sold are shown, but there is a perceptible difference between them. This means that it is not possible to verify whether the subsequent price adjustment is appropriate, whether the credit is justified and whether this is the reason why the applicant's claim cannot be upheld, even if the other conditions for price adjustment laid down by law were met. The transfer pricing agreement relied on by the applicant is not in accordance with the arm's length principle. The applicant did not even give a clear answer to the FURS' request for clarification as to whether the retroactive price adjustment was in accordance with that contract, but merely stated that it was in accordance with the principle applied by global firms in the automotive industry when setting up distribution operations. The FURS points out that the OECD Guidelines state that related companies may enter into special types of arrangements that are rarely or never found between unrelated parties. Such arrangements may be modified, suspended, extended or terminated in accordance with the general strategies of the multinational enterprise and even with retroactive effect. It is therefore for the customs authorities, applying the arm's length principle, to establish the actual basis for such a contractual arrangement, which can only be done by examining all the facts and circumstances of the transactions. The key point is that independent undertakings in comparable circumstances would not have entered into an arrangement such as the one entered into by the related undertakings. In determining whether the arm's length principle has been observed, the members of an international group of undertakings are treated as separate legal entities and not as inseparable parts of a single undertaking. Although the C.d.d. study states that transactions between related parties are carried out on the same terms and at the same prices as if they were carried out between unrelated parties, at the same time the applicant submits that, under the terms of the Transfer Pricing Agreement, the car dealer is always guaranteed a profit by supplier B. In the present case, although B.d.d. had a negative profit and loss account, it nevertheless granted a credit of EUR 21,9 million to its subsidiary A.d.d. under the aforementioned contract, thereby guaranteeing it both an operating profit and a net profit. This means that the companies did not behave in their transactions with each other as they would have done if they had been unrelated companies, since an independent company would not have guaranteed profits to another company in such a way.

12. Since the FURS did not accept the C.d.d. study as evidence that the proposed transfer pricing adjustment was in conformity with the legislation, it carried out a further test under Article 29 of the C.C.C., which, as regards the determination of the customs value of imported goods, is identical in substance to the provision in paragraph 1 of the General Agreement. According to this provision, the customs value of imported goods is their transaction value, i.e. the price actually paid for the goods when they were sold for export to the customs territory of the Community (provided that the price was not affected by the nexus) and which is payable, after adjustment, if necessary, in accordance with Articles 32 and 33 of the CCC. The transaction value determined by related parties shall meet this definition if the declarant demonstrates that this value is very close to either the transaction value for sales of identical or similar goods for export to the Community between unrelated sellers or the customs value of the identical or similar goods determined by applying Article 30(2)(c) of the CCC or the customs value of the identical or similar goods determined by applying Article 30(2)(d) of the CCC. The burden of proof shall lie with the applicant or the buyer, as the case may be, and the test shall be based on the actual valuation of the goods previously imported. Annex 23 to the Implementing Regulation of the Customs Code sets out explanatory notes on the customs value of goods and provides for the means by which the declarant may prove that the relationship between the parties did not affect the pricing. However, the applicant has not provided such information in the present case and, therefore, its request for adjustment of the customs value is not justified.

13. FURS notes that the applicant has further suggested that, in so far as it would not have applied the provision of Article 29 of the Customs Code for the assessment of the customs value, it should have carried out an assessment of the alternative customs values referred to in Articles 30 and 31 of the Customs Code. It points out that in the present case the calculation of the value in question is based on the deductive method, which, however, is only the third method in the hierarchical scale for the determination of the customs value. Again, the burden of proof is on the applicant and it is not for the customs authority itself to determine the customs value of the goods in that way. The applicant's request for such a determination of the customs value of the goods is therefore unfounded.

14. The applicant's argument that the price reductions agreed between the parties depend on the final sales prices of the vehicles to unrelated customers and that the importer has no influence on the fact that the business results were not as expected is also unfounded. An incorrect assessment of the business environment does not mean that the declared value of the goods accepted at the time of declaration was inappropriate to their actual value.

15. The FURS also commented on the applicant's allegations that applications identical to the applicant's present application had been accepted by other European customs administrations and also commented on the applicant's allegations concerning the minutes drawn up at the German Federal Ministry of Finance between 11 November 2005 and 11 December 2005. The latter record supports the conclusions of the FURS, whereas the decisions of the other European customs authorities relied on by the applicant concern different customs procedures, which are explained separately in the reasoning that follows.

16. FURS further observes that the applicant's claim cannot be upheld also on the ground that it is not in accordance with the customs legislation. The incurrence of a customs debt is governed by Articles 201 to 216 of the CCC. A customs debt on importation is incurred at the moment of acceptance of the customs declaration in question and the amount of import or export duties is also determined according to that acceptance. However, it is apparent from the documents submitted by the applicant that it bases its claim on the vehicles sold in the fourth quarter of 2008 and that it covers vehicles imported or released for free circulation in the Community in the years 2005 to 2008. The sales figures are also the basis for the credit note issued by B.d.d. and therefore irrespective of the time at which the vehicles were released for free circulation. Determining the customs value in such a way, which provides for a reduction of the price for all vehicles by the same percentage, irrespective of when the customs debt was incurred, is contrary to Articles 201 and 214 of the CCC.

17. The applicant's contention that the defendant did not assess the claim on the basis of Article 236 of the CCC is not correct. Under that provision, import and export duties are reimbursed to the extent that it is established that at the time of payment the amount of those duties was not legally due or that it was entered in the accounts in contravention of Article 220(2) of the CCC. It is clear from the entire file that the applicant lodged all the declarations under procedure 4000, entering in box 44 not the code for the provisional invoice value but the code for the regular customs value. This means, however, that the applicant did not lodge an incomplete declaration but a customs declaration with a definitive value. The applicant did, however, enter in box 44 the code 3F20, which is a declaration of value, attaching Declaration No 1/2008, in which the importer states that he wishes to use the provisional value for the price and that he will provide definitive value information within 6 months of the customs procedure.

18. Finally, FURS also commented on document TAXUD/800/202-EN(SI), which refers to discounts and on which the applicant also based its claim. It notes that, for valuation cases, it is possible to distinguish three cases of discounts, namely: that the discount is offered to the customer and payment is made at the decisive moment; that the discount is offered to the customer but payment is not made at the decisive moment; and that the discount is not offered or is not available at the decisive moment. The FURS explains that it did not follow these arguments, since the provision of Article 29 of the CCC and the Customs Valuation Digest, to which the applicant refers, only recognise two types of discount as a form of reduction of the selling price: a quantity discount based on the quantity of the goods and a discount for early payment. It also points out that the declarations in question were lodged by the applicant as regular declarations, with all the necessary and definitive particulars. That means that the applicant did not indicate a provisional value in the declarations, but a definitive customs value. In such cases, the adjustment of prices under the conditions laid down in Article 145 of the Implementing Regulation is permissible only for a period of 12 months from the date of acceptance of the declaration and provided that the declarant proves that the goods were defective. The applicant's claim cannot therefore be upheld on that ground too, since the adjustment did not take place within a period of 12 months from the date of acceptance of the declarations for release for free circulation and the goods were not defective.

19. On the applicant's appeal, the decision of the FURS was upheld by the Ministry of Finance ('the Ministry of Finance') as the second-instance authority and, in the statement of reasons for its determination, the Ministry of Finance endorsed all the arguments put forward by the first-instance authority. It summarised, by way of introduction, the course of the proceedings and the conclusions of the first-instance authority, as well as the applicant's grounds of appeal. It points out that, in applying the arm's length principle, the assessment is whether the transfer price accepted by the related undertakings is consistent with the price accepted by unrelated parties in a comparable arm's length transaction. The essential point is therefore the comparison with comparable taxable persons, not in terms of the level of profit but in terms of the basis on which the profit is determined. FURS has explained its position as to why it considers that in the present case the transfer price was not determined on an arm's length basis, and it endorses and therefore does not repeat, or merely summarises in substance, the views expressed by the MF. It points out that the applicant, which bears the burden of proof, has not provided evidence that the price was agreed in accordance with normal pricing practice in the sector concerned, or that the evidence it has provided does not support this.

20. The applicant disagrees with the defendant's decision and challenges it by means of an application on the grounds set out in Article 27(1), (2) and (3) of the Administrative Disputes Act ('the ACL-1'). The applicant claims that the Court should set aside the contested decision and rule on the matter itself, granting the declarant's - applicant's - claim for reimbursement of part of the amount of the duty on Chevrolet vehicles and, in the alternative, setting aside the contested decision and referring the case back to the first-instance authority for a fresh decision. The applicant also claims that the defendant should pay the costs of the proceedings.

21. In the preamble to the application, the applicant summarises the procedural history of the proceedings to date and explains that it lodged the claims for partial repayment of customs duties on behalf of its client, A. d.d., LCC. All the vehicles were manufactured outside Europe and imported into Europe, inter alia, via the Port of Koper. The claims for repayment of customs duties were based on several customs declarations, which relate to a contract concluded between the abovementioned Hungarian company and B.d.d. The applicant's claim for repayment of customs duties was based on the fact that, according to the abovementioned customs declarations, the goods were released for free circulation on the basis of the provisional value of those goods, whereas, on the basis of the definitive values, the customs base, and therefore the customs duties, had been changed and, consequently, the customs duties had been lowered. The customs debt was therefore paid at a higher amount than that actually owed. The provisional customs value of the cars was determined on the basis of the transfer prices of the cars under the Transfer Pricing Agreement (2004) and the Declaration of Value No 1/2008. Both documents were deposited by the importer with the customs authority prior to the release for free circulation of the goods concerned. The seller B.d. and A.d. are related parties and have a contract for the distribution of the vehicles. They have agreed that OSS will primarily sell vehicles to unrelated local residents in the territory of the EU Member States and therefore has two functions, namely the role of a wholesale distributor of vehicles to dealers and the role of a warehousing depot for other wholesale distributors in the region. On the date on which the customs debt was incurred, B.d.d. and A.d.d. had a Transfer Pricing Agreement with two addenda, which set out the basic principles of their contractual relationship. It was stipulated that B.d.d. should not incur losses on the sale of Chevrolet products in order to provide the entire product line and that, therefore, in the event of losses, the parties would agree to temporarily reduce A.d.d.'s profits until B.d.d. reached an appropriate break-even point. At the same time, this contract also guarantees A. d.d. a viable business and the parties undertook to take all measures to avoid variable losses for the vehicle manufacturer. The addendum to the Transfer Pricing Agreement set a target operating profit of 2 % on a base equal to the net sales of A. d.d. It was also stipulated that B. d.d. should not incur variable losses on the sale of products to A. d.d. and that, in such a case, A. d.d.'s profit would be reduced, but only to an extent that still ensured that the break-even point was reached in the profit and loss account. A transfer pricing methodology was also agreed in order to determine the exact transfer price, namely that the total cost of the vehicles from Korea is set at the net sales revenue less wholesale distribution costs and a target profit of 2 % of the net sales profit. The initial transfer price is decided in advance for each calendar quarter on the basis of forecasts of sales volumes and prices achieved. The price so fixed is provisional and is subsequently adjusted in the following quarter, or when the actual transfer price is known. For the purpose of the subsequent adjustment of the transfer price, B.d.d. issues a credit to A.d.d. whenever A.d.d. suffers an operating loss or has a profit in the range of 0 % to 1 %, with B.d.d. still making a variable profit.

22. The applicant relied on the transfer pricing study of C.d.d. to prove the arm's length principle and, at the request of the FURS, provided other relevant evidence and detailed reasoning in the repetition procedure, so that the FURS should have upheld its claim. Despite all the explanations, FURS issued the contested decision, against which the applicant lodged an appeal, but which was rejected by the MF. The reason for such an unfounded decision is that neither the first-instance nor the second-instance authority understood the link between the concept of transfer price as a tax law concept and the concept of transaction price as a customs law concept, which is of fundamental importance in the case. In particular, in the proceedings, the administrative authority did not base its doubts as to the transaction price on any circumstance other than the direct relationship between the parties, which is expressly prohibited by the relevant provision, i.e. the CCC.

23. The applicant points out that the legal basis for the claim is Article 236 of the CCC. The claim is lodged with the customs office on the basis of that provision before the expiry of the period of three years from the date on which the notification of those duties was sent to the debtor. The applicant had already argued in the proceedings at first instance that the FURS had decided the case without examining all the evidence that the duties paid had no legal basis, which is a condition for the reimbursement of import duties under Article 236 of the CCC. The same applies to the procedure conducted by the MoF. It points out that the claim is not based on the assumption that customs duties were entered in contravention of Article 220(2) of the CCC, but on the assumption that the total amount paid was not due. Under Article 201, in conjunction with Article 214(1) of the CCC, the amount of import duties is determined on the basis of the basis for calculating the duties applicable to the goods at the time when the customs debt is incurred. This means that the customs value of the individual vehicles must be determined together with other relevant factors. The FURS failed to take into account that the third sentence of Article 236(2) of the Customs Code also provides that the customs authorities shall reimburse or remit the duties ex officio if they themselves establish within the time-limit that one of the cases referred to in the first subparagraph of Article 236(1) and (2) of that provision is present. This means that if all the facts show that the customs duties have been incorrectly determined, the customs authorities must rectify that error, but the FURS rejects this argument on the ground that it is the applicant's sole responsibility to prove those allegations, which is not the case. Both the FURS and the MF are therefore misinterpreting the provision of Article 236 of the CCT. The retroactive adjustment of transfer prices cannot in itself be assessed individually, since it always has an impact on the value of the goods paid. Thus, the answer to the question whether the transfer prices agreed between B.d.d. and A.d.d. are acceptable within the meaning of Article 29 of the CCC does not affect the answer to the question whether the claim for repayment is justified. If the transfer prices are not acceptable under that provision of the law, it is for the customs authorities to determine the true value.

24. The applicant submits that in the present case there is a disagreement between the parties to the proceedings as to how transfer prices affect the transaction price for customs purposes. Therefore, it first presents transfer pricing as a tax and international concept which has certain implications also in the customs field. It explains when such prices are necessary, what is the concept of related parties as defined in Articles 16 and 17 of the Corporate Income Tax Act (CITA-2), where are the limitations in dealing with transfer prices, and presents the different methods of determining such prices (comparable free prices method, resale prices method, cost allowance method, profit sharing method, net profit margin method). It also sets out the documentation that the taxpayer must provide on related parties, the scope and nature of the business with them and the determination of comparable arm's length prices, and concludes that the Slovenian legislation follows the generally accepted OECD principles. The applicant then goes on to describe the legal basis of transaction prices as a concept in customs law, explains the definition of the customs value of goods under Article 29(1)(b)(i) of the Customs Code, and sets out the legal basis for the application of the principle of transfer pricing in customs law. Article 29 of the CCC and the possibilities of adjusting that value pursuant to Articles 32 and 33 of the CCC, the manner and proof of the customs value of goods in the case of sales between related parties, the cases where the customs value of goods cannot be determined by applying Article 29 of the CCC and, in those cases, the application of Articles 30 and 31 of that Code. It also refers to points 2 and 3 of Annex 23 to the Implementing Regulation and concludes that, in the proceedings, it has demonstrated, by means of the transfer pricing documentation and a number of additional items of information provided to the first-instance authority, that, although the supplier and the distributor are related companies, the price of the vehicles has not been affected by that fact. It maintains, as it did in the appeal proceedings, that the defendant should have addressed those allegations, namely that the FURS should have examined the relevant aspects of the transaction in order to determine whether the relationship between B.d.d. and A.d.d. had an impact on the price, which it did not do.

Article 29 of the Customs Code provides for the use of transaction value as the basis for determining the customs value. If it cannot be used, Article 30 of the CCC may be applied and, if this also does not lead to results, Article 31 of the same Code may be applied. This shows that the CCC provides for a preference for the use of transaction value, even in the case of related parties. In the case of related parties, it is permissible to use a method of determining the customs value other than the transaction price only where the price is not what it would have been if the transaction had been between unrelated parties, which the defendant has not proved, but has rather referred to the relatedness of the buyer and seller in a general way.

26. The applicant submits that the main issue in the present case is the admissibility of a subsequent price adjustment. The price reduction granted to the importer or, as the case may be, to the purchaser of the vehicles on account of the poor sales of the vehicles is nothing other than a price adjustment under the transfer pricing rules, which in the present case is necessary in order to maintain the importer's target profit margin. It is not disputed between the parties that the seller and the driver are related parties, but this does not in itself mean that their relationship has affected the prices between them in a way that would be relevant for the determination of the transaction price. It follows from the nature of things that the notion of price influence must be understood as an influence which represents a departure from the actual market price agreed between an unrelated seller and an importer in the same circumstances. It is only in such a case that it is reasonable to establish a different transaction price from that agreed between the parties to a particular transaction. In the present case, the relationship between the seller and the importer undoubtedly has an objective influence on the way in which the transaction value of the transaction is determined, which is not disputed. If they were not related, they would not have transfer pricing documentation, which is precisely intended to establish and document the market price, and this in order to eliminate the influence of the relatedness of the parties. The transfer price set out in this documentation is the market price that would have been used by unrelated parties in otherwise identical conditions and, as such, is also the same as the ideal transaction price provided for by customs legislation as the customs basis. The defendant therefore erred in inferring the qualitative character of that price solely from the way in which it was formulated, and therefore erred in assessing on that basis that the relationship had an impact on the price, overlooking the fact that a properly determined transfer price is in itself, or by definition, a comparable market price. The applicant therefore submits that the defendant acted contrary to Article 29/2(a) of the C.C.P.C. The defendant should have based its doubts as to the application of the transaction value on circumstances other than the relationship between the parties, since, as a financial authority, it has at its disposal all the information on the customs values declared by other declarants for the importation of similar goods into the Union. The applicant further submits that Article 29 of the Customs Code does not specifically mention transfer pricing only because the legislature did not envisage that, if that legislation were correctly applied, a party might find itself in a situation such as that of the applicant. That provision of the Code refers to instruments for determining customs value which are based on external, objective circumstances and not merely on the relationship between two entities. Had the defendant correctly applied that provision of the law, it would probably have found that the declared prices did not differ significantly from the declared values of similar goods and would therefore have accepted the price adjustment proposed by the applicant. However, the situation in the present case was quite different, since the defendant had shifted the burden of proof to the applicant, even though the C.C.C. expressly prohibits that.

27. In the proceedings, the applicant submitted an analysis of the concept of the OECD Guidelines and also argued and demonstrated that the concept of transfer pricing as agreed between B.d.d. and A.d.d. was in conformity with the customs valuation rules, but the defendant nevertheless erroneously maintained that transfer pricing could not be used for that purpose. The defendant also misunderstood the applicant's explanation that B.d.d. and A.d.d. used only arm's length prices in their transactions with each other and that, by applying the appropriate transfer pricing method, they arrived at the level of profit that A.d.d. should have achieved in its transactions with the related company B.d.d. To the extent that the applicant had been followed, they would have concluded that transfer prices are never comparable to arm's length prices in the case of related parties. In that connection, the defendant referred to document TAXUD/800/2002-EN/SI, in which the European Commission explained that price adjustments could also be taken into account for customs valuation purposes provided that they were agreed between the parties before the customs authorities accepted the import declaration. Price adjustments may therefore be subject to multiannual bases, depending on the agreement.

28. The applicant further submits that it is not apparent from the administrative file that the FURS informed the applicant of the allegation that the relationship had an impact on the price and gave it a sufficient opportunity to reply, even though the MF MF stated otherwise in the second-instance decision. The defendant overlooked the fact that the purpose of the provisions of the Customs Code is to apply the actual (transaction) value or the value which is most appropriate to a transaction of value between two unrelated persons. Customs procedure is therefore not an adversarial procedure, but a procedure which follows the principle of the search for the material truth (Article 8 of the General Administrative Procedure Act, GAPA), which is a key principle in administrative and tax procedure and requires that the decision be based on the true factual situation. Article 5 of the Tax Procedure Act (TPA-2), as a special provision in the field of taxation, stipulates that the tax authority is obliged to ascertain all the facts which are relevant to the adoption of a lawful and correct decision. The reversal of the burden of proof, i.e. when the taxpayer has to prove the alleged facts in full, applies only when the law so provides, which is only in exceptional cases. Even in such cases, the burden of proof is not left to the exclusive and arbitrary discretion of the administrative authority. It is apparent from the proceedings before the appellate authority that both the appellate authority at first instance and the appellate authority at second instance took the view that the applicant, as declarant, was required to prove the validity of the claim in the present case, which is incorrect. The Customs Code nowhere states that the procedure under Article 29 of the Customs Code is to be governed by the rules of reversal of the burden of proof. The defendant, as the customs and tax authority which regularly decides on cases which are reasonably similar or even identical, must assess the evidence submitted and the declarant's submissions and, in the light of those submissions, require the taxable person to produce specific evidence. Instead, the FURS rejected all the essential allegations made by the applicant, that is to say, the declarant, as unproven, without giving reasons for that evidential assessment.

29. The applicant expressly points out that the rules governing transfer pricing are of a mandatory nature and are also roughly the same in all OECD Member States. The need for proof arises precisely from the fact that, where two persons are related and the documentation demonstrating that the transactions between them are carried out in accordance with the arm's length principle is not accepted by the tax authority, it is for the tax authority to give a detailed explanation of its position and also to propose a method which, in the circumstances, it considers to be more appropriate. The basis for such an opinion is set out in Annex 23 of the Implementing Regulation, as it sets out what should be considered as evidence that the relationship did not affect the price. Indeed, the transfer pricing documentation is intended to provide just such evidence. However, the FURS did not comment on the general transfer pricing documentation submitted, but based its decision solely on the assertion that the applicant, as declarant, had failed to prove that the relationship between the buyer and the seller in the particular case had not affected prices, even though the documentation submitted, and in particular the study by C.d.d., demonstrated that the prices in the related transactions were in accordance with the arm's length principle. The defendant's conclusions as to the content of the documentation submitted on transfer pricing are therefore purely ad hoc and unverifiable and, consequently, unsubstantiated, whereas the general documentation on transfer pricing submitted by the applicant is extensive and was prepared by C.d.d., one of the world's leading firms in the field of auditing, tax consultancy and related services.

30. The Customs Authority did not question in the proceedings the appropriateness of the transaction price declared as the provisional customs value, even though it was based on transfer pricing and transfer pricing documentation, which are now being raised as problematic by the Second Appellate Authority. The only change in the present case with respect to the provisional declared values is that, because of the lower sales of the vehicles to the final customers, the manufacturer granted a discount to the importer, on the basis of which the importer was also able to grant a discount to the customers, or a reduction in the retail price, since otherwise it would not have been able to do so and would have made a loss, which, in view of the accepted method of determining transfer prices, it is not allowed to do. The provisional values declared were the best approximation of the final prices at the time of customs clearance. The defendant, rejecting all the applicant's explanations on that point, seeks to place the burden of proof entirely on the applicant, without taking into account that, owing to the specific nature of the customs procedure, it cannot simply reject the price proposed by the applicant without itself assessing the customs basis. In doing so, the defendant failed to take account of the fact that a change in price could also go the other way and lead to a request for additional duties. The importer's target profit margin, as set out in the transfer pricing documentation, is, objectively speaking, quite low, and that is precisely because of the agreement between the parties, which provides the importer with a lower target profit margin, while bearing a lower risk than if no such margin had been agreed. An unrelated importer would normally ask for a significantly higher discount as it would target a higher profit which it would be objectively entitled to in view of the higher risks. In the present case, however, A. d.d., as the importer, accepted the terms of the sale (the price), knowing that the final price it would pay would be lower even if the vehicles did not sell well, or, in the theoretical case that the vehicles were not sold at all, it could return them to the manufacturer and receive a price reduction of 100 % of the value of the vehicles, to the extent that they would have to be destroyed. An independent importer, who does not have a guaranteed profit agreement with the seller, would never accept such sales conditions and would demand a lower sales price, which would mean a significantly lower transaction value and therefore customs value than the value in the present case.

31. As regards the alleged substantive breaches of the procedural rules, the applicant submits that the appellant, as declarant, was not required by the first-instance authority to prove, in accordance with Article 29(2)(a) of the Customs Code, that the transfer price as established between the seller and the purchaser of the cars, in respect of which it seeks repayment of the customs debt, complied with Article 29 of the Customs Code, or, rather, that it did not specify the evidence to be provided. The summons or request was therefore a lump sum. The same applies to the reasoning of the decision at first instance, which constitutes an absolute infringement of an essential procedural requirement. The same absolute infringement of an essential procedural requirement was also committed by the second-instance authority, since it also failed to explain what evidence the applicant would have had to provide to show that the transfer price complied with the conditions laid down in Article 29 of the CCC. The first-instance authority also failed to explain why the transfer prices agreed between B.d.d. and A.d.d. were, The reasoning of the Second Appellate Body is equally deficient in this respect. Nor does it appear from the administrative file that the defendant, apart from inviting the applicant, carried out any checks with other persons, but contented itself with stating that the burden of proof was entirely on the applicant.

32. At the conclusion of the application, the applicant asks the Court, since there is a dispute between the parties as to the application of a question of substantive law which belongs to the EU legal order and there may be a legal vacuum, to make an order referring the preliminary question to the Court of Justice of the European Communities ('the CJEU') for a preliminary ruling. The fact that there is an important question of law as to the interpretation of EU law has already been established by a judicial authority of another Member State, namely the German Finance Court in Munich. The applicant then goes on to cite the questions referred to the CJEU by the Court of First Instance and to point out that the facts of the present case are very similar. The main difference is that in the present case a different method of determining transfer pricing was used, and the second difference is that the present case concerns a claim for repayment of customs duties and there are also some pending claims for additional duties, all of which do not affect the comparability of the cases. However, the case of the German Financial Court of Munich has already been decided by the Court of Justice of the European Union ("CJEU") in its judgment C-529/16, which is reproduced below.

33. In its reply to the application, the defendant disputes the applicant's pleas in law, maintains the pleas in law set out in the grounds of the administrative decisions and asks the Court to dismiss the applicant's action as unfounded. It explains that the proceedings before the first-instance authorities were initiated before the judgment of the CJEU, on which the applicant relies in the application, was delivered. The Appellate Body therefore required the applicant to prove that the transfer price fixed between the supplier of the vehicle and the importer complied with Article 29 of the CTMR and to prove that the transaction value was not affected by the relationship between the consignee and the consignor. In that judgment, the CJEU stated that the customs value should be determined on a priority basis in accordance with Article 29 of the CCC on the basis of the so-called 'transaction value method'. The alternative methods set out in Articles 30 and 31 of the CCC are to be applied only if the price actually paid or payable for the goods at the time of sale for export cannot be determined. The CFI also stated that the transaction value cannot be based on transfer prices which are subject to subsequent adjustments. It also pointed out that a valuation based on an agreed transaction value, consisting partly of the amount originally invoiced and declared and partly of a flat-rate adjustment after the end of the accounting period, without any way of knowing whether the adjustment would be made upwards or downwards, could not be used in determining customs knowledge at importation under the provisions of Articles 28 to 31 of the CCC.

34. The applicant responded to the defendant's reply in a preparatory submission. It points out that the CJEU did indeed clarify in its judgment in Case C-529/16 the rules applicable in cases identical to the present case, but that the procedural steps taken by the tax authority in the proceedings at first instance are contrary to its content. The content of that judgment came as a considerable surprise to legal theorists and practitioners in the European Union, and thus also to the applicant. It was clear to the FURS at the latest when the customs declaration was accepted that the applicant had declared at the time of importation a transaction value which it intended to adjust or correct after the final transfer price had been established, since the applicant had declared in the same way all consignments of passenger cars imported into the customs territory of the EU in Slovenia, and had deposited before importation all the documents which are a condition for the subsequent adjustment of the transaction value. In so far as we accept the defendant's argument that, if the definitive value was not known to the applicant, it could have lodged a declaration with a provisional value and then lodged a supplementary declaration, an incorrect amount of public duty would have been levied. The CJEU pointed out that the objective of Union law on customs valuation is to establish a fair, uniform and neutral system which excludes the use of arbitrary or fictitious customs values. The customs value must reflect the true economic value of the imported goods and must therefore take account of all the elements of those goods which constitute economic value. To accept the defendant's argument that the responsibility for the situation lies with the declarant, who acted improperly by not lodging provisional declarations, would be to allow a situation in which customs valuation would be based on a fictitious value which does not reflect the market value. The content of the CJEU judgment is understood by the foreign trade community in the same way as it is explained in the application, as can be seen from several technical articles which are summarised by the applicant in the following part of the preparatory submission. All these articles refer to the dilemma created by the CJEU's decision and do not support the defendant's position.

On point I of the operative part of the judgment:

35. The action is not well-founded.

36. In the Court's view, the defendant's decision is correct and lawful, is based on the information in the administrative file and is supported by the substantive rules to which it refers. In the statement of reasons for the contested decision, the FURS explained all the reasons for its decision, which were further substantiated by the MF and also addressed all the applicant's complaints. It is apparent from the administrative file that, on several occasions during the proceedings, FURS informed the applicant of the facts and circumstances established and relevant to the decision and gave him the opportunity to make representations and to submit relevant evidence in support of his claim. All this is set out at length in the contested decision and the applicant's complaint of a fundamental breach of the procedural rules in this respect is therefore unfounded. The Court also finds that the defendant fully investigated the facts of the case, based its decision on the relevant substantive rules and provided adequate reasons for all that, and therefore also rejects the alleged infringement of an error of substantive law and an incomplete finding of fact. In so far as it does not otherwise follow from the present reasoning, the Court follows and refers to the grounds set out in the contested decision in their entirety (Article 71(2) of the Administrative Disputes Act, hereinafter referred to as 'the CLA-1'). It adds, in relation to the applicant's pleas in law:

37. The release for free circulation of goods confers on non-Community goods the customs status of Community goods (Article 79(1) of the CCC). The release for free circulation involves the adoption of trade policy measures, the completion of other formalities required for the importation of goods and the application of the duties due under the law (Article 79(2) of the CCC). Any goods which are to be placed under a customs procedure are subject to the lodging of a declaration for that procedure (Article 59(1) of the CCC). The customs authorities may, in order to verify the accuracy of the entries in the customs declaration, examine it even after the release of the goods for free circulation has been authorised (Article 78 of the CCC). The aim of such an examination, which may be carried out at the request of a party or ex officio, is to satisfy the customs authorities of the accuracy of the declarations and, in so far as they find that the provisions of the customs procedure in question have been applied on the basis of inaccurate or incomplete information, to take the necessary measures to regularise the situation in accordance with the new information. In so far as it transpires that the amount of duties paid by the declarant exceeds the amount which would have been legally due at the time of payment, the remedy shall be repayment of the amount of duties overpaid. The CST regulates the cases and procedure for the repayment and remission of a customs debt already settled or already entered in the accounts in Chapter 5, entitled 'Repayment and remission of duties'. Pursuant to Article 236 of the CCC, import or export duties shall be repaid to the extent that it is established that the amount of such duties was not legally due at the time of payment, and remitted to the extent that it is established that the amount of duties was not due at the time of entry in the accounts. Duties shall also be repaid or remitted in so far as it is established that the amounts of such duties were entered in the accounts in contravention of Article 220(2) of the CCC. Repayment or remission of import or export duties shall be granted on the basis of an application lodged with the competent customs office before the expiry of the period of three years from the date on which the notification of such duties was communicated to the debtor (second paragraph of Article 236(2) of the CCC). Article 2(2) of the Customs Code) and provided that the changed information justifying the repayment or remission of the duties is not the result of fraudulent conduct on the part of the declarant. The procedure may also be carried out by the customs authorities ex officio if, within that period, they themselves establish that one of the abovementioned cases justifying repayment or remission of the duties is present. In the present case, the procedure was initiated at the request of the applicant, who applied for repayment of import duties already paid. The applicant, as in the present action, based its application on the assertion that those duties were not legally owed.

38. In determining the value of the imported goods, which is the basis for assessing whether duties have been paid or, as the case may be, entered in the accounts, it is necessary to have regard to Article 29 of the CCC. That provision defines, in its first paragraph, the customs value of imported goods as their transaction value, that is to say, the price actually paid or payable for the goods when they are sold for export to the customs territory of the Community, after adjustment, where appropriate, in accordance with Articles 32 and 33 of the CCC. Article 32 of the CCC, provided that: (a) there are no restrictions on the release or use of the goods to the buyer other than those imposed or required by law or by public authorities in the Community; limit the geographical area in which the goods may be resold; or do not materially affect the value of the goods; (b) the sale or price is not subject to conditions or services the value of which cannot be determined in relation to the goods being valued; (c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer accrues directly or indirectly to the seller, except to the extent that, in accordance with Article 32(1)(b), the seller may be entitled to any part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer. Article 32 of the CCA; and (d) the buyer and the seller are not related or, if they are related, the transaction is of a value acceptable for customs purposes in accordance with the second paragraph. The fact that the buyer and the seller are related does not in itself constitute sufficient reason to consider the transaction value unacceptable (Article 29(2)(a) of the Customs Code). To the extent that there is such a relationship between the buyer and the seller, the circumstances surrounding the sale may, if necessary, be verified and, on the basis of the verification so carried out, the transaction value may be accepted if it is found that the relationship did not affect the price. Where the customs authorities, on the basis of information provided by the declarant or obtained from other sources, have reason to believe that the price has been affected by the relationship, they shall inform the declarant of their reasons and give him a reasonable opportunity to reply. Point (b) of the second paragraph of Article 29(2) shall be replaced by the following Article 29(2) of the CTM Article 29(29) of the CTM provides, in particular, for sales of goods between related parties, that the transaction value shall be accepted (i.e. considered as the price of the goods for the purpose of calculating customs duties) if the declarant demonstrates that this value is very close to one of the following existing values at the same or nearly the same time: (i) the transaction value for sales of identical or similar goods for export to the Community between buyers and sellers who are not related in any particular way; (ii) the customs value of the identical or similar goods, as determined by the implementation of Article 29(2) of CTM Article 29(2). Article 3030 of the CCC; (iii) the customs value of the identical or similar goods as determined by applying the preceding provision.

39. The Court observes that, under the quoted provision of Article 29(2)(b) of the CCC, the burden of proving that, in the case of a sale of goods, the transaction price was not affected by the relationship between the persons concerned rests solely with the declarant and not with the customs authority, as the applicant submits in its application. This is also supported by the provision of Article 29(2)(c) of the CCC, according to which the abovementioned criteria are to be applied at the initiative of the declarant and for the sole purpose of comparison, it being pointed out in particular that, in applying the criteria, careful account is to be taken of the differences shown in terms of the levels of trade, the quantities, the elements referred to in Article 29(2)(c) of the CCC and the elements referred to in Article 29(2)(c) of the CCC. The C.C.C. therefore clearly refers the declarant to the criteria to be demonstrated when claiming that the relatedness of the persons did not affect the transaction value, in provisions 30 to 30 of the C.C.C. and 30 to 30 of the C.C.C. The Court would also point out that the second paragraph of Article 30(2) of the Customs Code provides for the elements to be taken into account in determining the customs value of the goods in so far as that value cannot be determined under Article 29 of the Customs Code. The valuation is carried out by comparison with the transaction value of identical goods sold for export to the Community at approximately the same time as the goods to be valued (point (a) of the second paragraph of Article 30(2) of the CCC). Article 30(2) of the CPR); followed by a comparison with the value of similar goods sold for export to the Community at approximately the same time as the goods to be valued (point (b) of Article 30(2) of the CPR); followed by a comparison with the value of the unit price at which the goods are sold in the Community in the largest aggregate quantity to persons unrelated to the sellers (point (c) of Article 30(2) of the CPR); followed by a comparison with the value of the price at which the goods in the largest aggregate quantity are sold in the Community to persons not related to the sellers (point (d) of Article 30(2) of the CPR). Article 30(30)(c) of the CCC); and finally, the calculated value, which is equal to the sum of the cost or value of the materials and of the manufacturing or other operations incurred in the production of the imported goods, the amount of profit and overheads corresponding to the amount normally fixed by the producers of the country of exportation, when exporting to the Community, on the sale of goods of the same kind or nature as the goods to be valued, and the cost or value of the items referred to in Article 32(1)(e). Further legal provisions provide for the ways in which the customs value cannot be determined even in the above-mentioned ways, and for the costs to be taken into account (deducted) when determining this value. The Court finds that it follows from all the provisions described that, in the case of a sale between two related companies, the transaction value determined by that transaction may be accepted as the customs value only in so far as it can be established, by the valuation methods provided for above, that the transaction value is not affected by the relationship between the companies, that is to say, that it is approximately equal to the value of the unit price at which the goods are sold to unrelated persons, all of which is for the declarant to prove.

40. The Court finds that it is not disputed between the applicant and the defendant that the supplier, B.d.d., and the importer, A.d.d., are related parties. Nor is it disputed that the claim for repayment of import duties was lodged by the applicant as declarant and relates to the Chevloret vehicles released for free circulation under the customs declarations lodged by it with the Port of Koper in the period from 19.3.2009 to 20.4.2009, as set out in the operative part of the decision. It is also not disputed between the parties that the applicant based its claim for partial repayment of import duties on the price adjustment necessary to reflect the actual external selling price of the vehicles as adjusted for the third quarter of 2008, as evidenced by a credit note from the supplier of the vehicles. The applicant attached to its application a Transfer Pricing Agreement between the supplier and the importer governing the transfer price adjustment and a Statement of Value No 1/2008. It is not disputed between the parties that the Transfer Pricing Agreement provides that the transfer price is to be established on the basis of deductions from the external selling price of the products, that is to say, after deduction of the wholesale distribution costs and the target operating profit, the external price being the price at which the distributor sells the product to unrelated customers and the target profit being set at 2 % of the net profit on sales. The transfer pricing agreement therefore provides for price adjustment only after the vehicle released for free circulation has already been sold to an unrelated party. The applicant submits that the (transfer) price thus established, which was determined in the light of the sales success and with a view to achieving the agreed target profit, constitutes a permissible adjustment of the price of cars which had previously been released for free circulation under customs declarations and thus a change in their customs value, giving rise to a claim for partial repayment of customs duties.

41. The Court observes, first of all, that the administrative procedure raised, inter alia, the question of the compatibility of the transfer pricing with the provisions of the CCC, which, however, is not legally decisive in the present case. This follows from the positions taken by the Supreme Court of the Republic of Slovenia in similar cases in several judgments (for example, in judgments No X Ips 277/2017, X Ips 309/2017, X Ips 323/2017, and others), which are also relevant to the present case. In accordance with these positions, the Court emphasises that, pursuant to Article 236 of the CCC, customs duties are reimbursed if it is established that, at the time of payment, the amount of duties was not legally due or that it was booked in contravention of Article 220(2) of the CCC. The amount of import duties, on the other hand, pursuant to Article 214 of the CCC, is to be determined on the basis of the calculation of the duties applicable to the goods at the time when the customs debt is incurred in respect of them. Thus, the customs value of the vehicles to which the present application relates was also determined at the time of importation, that is to say, at the time of release for free circulation at the time of acceptance of the individual customs declaration, when the customs debt was incurred pursuant to Article 201 of the CCC. The customs value is determined in accordance with the rules laid down in Article 29 of the Customs Code, which, although it also contains provisions relating to the transaction value of goods in the case of sales between related parties ('transfer pricing'), the present case does not concern the question whether a price adjustment made on the basis of a credit (for the purpose of achieving a target profit) may be taken into account as a basis for the valuation of the transaction value between related parties. The answer to that question would only be relevant if a price adjustment were even possible in a case such as the present one. The fact that this is not the case has already been concluded by the first-instance authority, which, in the grounds of the contested decision, citing the provisions of the CCC and Article 145(2) of the Implementing Regulation, set out the reasons for not taking into account the new customs value of the imported vehicles.

42. It is apparent from the administrative file that the declarations were lodged as regular declarations. In fact, in view of the way in which they were completed (as stated in the two decisions), it is not apparent from them that the declared value was fixed as a provisional value, as alleged by the applicant, but that the declarations contained definitive information, the transaction was described as a sale of goods, and they were accompanied by invoices, in accordance with which the customs value of the goods was determined. The customs value of the goods, and therefore the basis for calculating the import duties, was therefore the transaction value of the goods as established by the invoices at the time of sale for export to the customs territory of the Community. The Court endorses the view that, after the goods have been released for free circulation, the adjustment of the price actually paid or payable by the seller of the goods in favour of the buyer may be taken into account for the determination of the customs value pursuant to Article 29 of the Customs Code only under the conditions laid down in Article 145 of the Implementing Regulation, which are not satisfied in the present case, as explained by the two administrative authorities. They also explained why the applicant could not successfully rely on document TAXUD/800/2002-EN(SI). Although that document provides that, in the case of discounts, they relate to the subsequent adjustment of the value of the goods, which is realised only after the goods have been released for free circulation, that adjusted value is based on the conditions of purchase and sale of the goods at the time when the customs debt was incurred, that is to say, at the time when the customs declaration was accepted, as provided for in the second paragraph of Article 201(2) of Regulation (EC) No 2913/92. The Court considers that this cannot be equated with the present case, in which the transaction prices were established on the basis of the success of the sale of the vehicles, which was realised retrospectively (possibly several years after the release of the vehicles for free circulation), and are therefore not based on the conditions of purchase and sale of the goods at the time of acceptance of the customs declarations. The applicant's argument that the vehicles did not go on sale as anticipated and that the supplier therefore granted a discount to the distributor by way of a credit note, which allowed a reduction in retail prices, cannot be regarded as a discount within the meaning of the abovementioned document. As already stated, the declarations were lodged as regular declarations, the value of the goods determined therefrom was subject to customs duties, whereas the assessment of the business environment and, therefore, the assessment of future business results is not the basis for the levying of customs duties. The applicant has failed to demonstrate that the value of the goods is allowed to be adjusted retrospectively in that way by other customs authorities. The submitted opinion of the German Federal Tax Authority is identical in substance to the defendant's position, and the decisions of the customs authorities of certain other EU Member States, to which the applicant also refers, refer to different customs procedures, as already explained in the grounds of the contested decision.

43. In the present case, therefore, it is not the case that the value indicated in the customs declarations in question was arbitrary or fictitious or that the price at the time of sale of the goods could not be determined. Nor, in the light of the foregoing, is there any basis in the established facts for the applicant's assertion that the goods were released for free circulation on the basis of the provisional value of the goods. What the applicant seeks to achieve is a subsequent adjustment (reduction) of the transaction value indicated in the customs declarations because the supplier issued a credit note to the buyer-importer, which the defendant understood as the creation of a transfer price which would satisfy the conditions laid down in Article 29(2) of the CCC and thus justify the claim for repayment of that part of the customs duties relating to the difference in the lower value of the vehicles.

44. Although the applicant is right in pointing out that the question is one of application or interpretation of EU law, the Court of First Instance did not follow its request to refer the transitional question to the CJEU for a preliminary ruling or to request it to give a preliminary ruling. The CJEU has already adopted judgments giving its views on the interpretation of the provisions of the CPR and the Implementing Regulation, which are also the basis for the decision in the present case. By judgment of 20.12.2017, the CJEU has also already ruled in Case C-529/16 (Hamamatsu Photonics Deutschland GmbH v Hauptzollamt München), which is expressly referred to by the applicant, stating that the present case is factually identical.

45. In its judgment C-529/16, the CJEU summarised the views expressed in its settled case-law. It stated that the objective of Union law on customs valuation is to establish a fair, uniform and neutral system which excludes the use of arbitrary or fictitious customs values. The customs value must reflect the true economic value of the imported goods (recitals 24 and 28 of the grounds of the judgment). Pursuant to Article 29 of the CCC, the customs value of imported goods is their transaction value, that is to say, the price actually paid or payable for the goods when they were sold for export to the customs territory of the European Union, after adjustment, if necessary, in accordance with Articles 32 and 33. The CJEU also clarified that the price actually paid or payable normally forms the basis for the calculation of the customs value, but that this price is subject to adjustment where necessary to avoid the determination of an arbitrary or notional customs value (recital 27 of the reasoning). It thus referred to Article 78(1)(b) of the EC Treaty. Article 78 78 of the CCC, which allows the customs authorities to re-examine declarations ex officio or at the request of the declarant (paragraph 29 of the reasoning), while pointing out that the cases in which the CJEU has allowed the transaction value to be adjusted after the event are limited to specific situations relating, in particular, to the poor quality of the product or to defects detected after it has been released for free circulation (paragraphs 30 to 32 of the reasoning). The CST does not lay down any obligation on importing undertakings to request an adjustment of the transaction value when it is subsequently adjusted upwards and, on the other hand, it does not contain any provision allowing the customs authorities to protect themselves against the risk that undertakings will only request downward adjustments (recital 33). For the reasons set out above, the CJEU held that Articles 28 to 31 of the CCC must be interpreted as precluding the application as customs value of an agreed transaction value consisting partly of the amount originally invoiced and declared and partly of a flat-rate adjustment at the end of the accounting period, without it being possible to know whether that adjustment will be made upwards or downwards at the end of the accounting period.

46. In this respect, the Supreme Court explained in its judgment in Case X Ips 277/2017 that the price adjustment is governed by Article 145(2) of the Implementing Regulation, to which the judgment in Case C-256/07 of 19.3.2007 also refers (referred to, inter alia, by the CJEU in its reasoning in Case C-529/16). According to that provision of the Implementing Regulation, after the release of goods for free circulation, the adjustment of the price actually paid or payable by the seller of the goods in favour of the buyer may be taken into account for the purpose of determining the customs value in accordance with Article 145(2) of the Implementing Regulation, as amended by Article 145(2) of the Implementing Regulation. (a) the goods were defective at the time provided for in Article 67 of the CCC, (b) the seller corrected the price in order to implement the warranty obligations under the sales contract concluded before the release for free circulation of the goods, and (c) the defective nature of the goods had not yet been taken into account in the relevant sales contract. As concluded by the Supreme Court in its judgment X Ips 277/2017, it follows from the above-mentioned views of the CJEU that the question is not whether the new price claimed is in conformity with the rules of Article 29 of the CCC, but whether the conditions justifying, in exceptional cases, the adjustment of the customs value indicated in the declaration are fulfilled. The question is therefore not one of interpretation of the provisions on the valuation of goods by reference to the transaction value in the case of sales between related parties, but of the (in)permissibility of the subsequent adjustment of the transaction value.

47. The present case is therefore also a question of the admissibility of the subsequent adjustment of the transaction price by reference to the new transfer price, and not a question of the recovery of overpaid customs duties on account of an incorrect customs value in the customs declarations on release for free circulation. Since it is clear from the views of the CJEU that the subsequent adjustment of the transaction value cannot be justified solely on the basis of a different (lower) value of the goods, even if that value would be acceptable as a transfer price in the light of the provisions of Articles 28 to 31 of the CCC, it was not (necessary) for the Supreme Court in Case X Ips 277/2017, and likewise for this Court in the case at hand, to address the submissions on the impact of transfer prices on transaction prices in the determination of the customs value.

48. In the case at hand in the present administrative dispute, the applicant does not even argue that there was a price adjustment in a situation comparable to the situations in which the CJEU has allowed a subsequent adjustment of the transaction value (e.g. in Judgment C-256/07). Last but not least, the CJEU in its Judgment C-529/16 (34. paragraph 34 of the reasoning) held, on the same legal basis, that the CJEU does not allow for the consideration of a subsequent adjustment of the transaction value in a case which, according to the applicant, is practically identical to the present case (or in which, according to the applicant, the factual situation is so similar to the factual situation in the present case that the legal positions of the CJEU are directly applicable). For that reason, the applicant's reliance on the views expressed in the technical articles to which it refers in its defence is also irrelevant to the decision in the present case.

49. On the basis of all the foregoing, the Court concludes that the applicant's action is not well-founded and therefore dismisses it pursuant to Article 63(1) of the Causes of Action Act. In the present administrative proceedings, the Court of First Instance decided without a hearing, since the decision is based on facts which, on the basis of the evidence duly assessed, were already duly established in the administrative proceedings, and the applicant did not adduce any new facts or new evidence in the present administrative proceedings which are relevant to the decision, so that the factual situation on which the administrative act was based is not in dispute between the parties (paragraph 59(1) of Article 59(1) of the EC Treaty, paragraph 59(1) of the EC Treaty, paragraph 59(1) of the EC Treaty and paragraph 59(1) of the EC Treaty). The dispute is also between the same parties with a similar factual and legal basis and has already been finally decided by the court in its judgment III U 207/2018-12 of 5 September 2019 (Article 59(2)(3), second indent, Causes of Action). The reference to the case-law of the CJEU and the views of foreign experts, which the applicant refers to in its preliminary application, is a question of substantive law, which is not subject to proof at the main hearing.

On point II of the operative part of the judgment:

50. The decision on costs is based on Article 25(4) of the Causes of Action Act, according to which each party is to bear its own costs if the court dismisses the action.