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C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
C5 Global Customs Conference 14 15 May 2008 (Customs Value)
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C5 Global Customs Conference 14 15 May 2008 (Customs Value)

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Discussion on customs value savings options under EU customs law with hypothetical case study

Discussion on customs value savings options under EU customs law with hypothetical case study

Published in: Health & Medicine, Business
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  • 1. Customs Value C5 Global Customs Compliance May 14-15, 2008 Jasper Helder
  • 2. Agenda
    • Transaction Value: what is a Sale ?
    • Sucessive sales: First Sale for Export
    • Adjustment Transaction Value: Assists & Exclusions
      • Tangible vs. Intangible
      • Royalties & License Fees
      • Buying Commissions
    • Evaluation
  • 3. Case (1) Product/Assist Flows Unrelated Plant (Korea) XYZ Sourcing (Hong Kong) XYZ Marketing (EU) XYZ IP (Switzerland) ABC Software (PRC) DEF Materials (Taiwan) GHI IP Licensing (USA) XYZ D & D (Germany) XYZ Plant (PRC) EU Import 10 % Tariff Product Product Product Materials Software Materials Patents Product Development Designs Sketches IP License
  • 4. Case (2) Money Flows Unrelated Plant (Korea) XYZ Sourcing (Hong Kong) XYZ Marketing (EU) XYZ IP (Switzerland) ABC Software (PRC) DEF Materials (Taiwan) GHI IP Licensing (USA) XYZ D & D (Germany) XYZ Plant (PRC) Price 160 Price 80 Tolling Fee 20 Materials Cost 50 Patent Royalties 10 D&D Royalties 30 License Fee 40
    • Customs Value for:
    • Korea Product
    • PRC Product
    Patent Royalties 10
  • 5. Transaction Value: Issues
    • Can we apply TV ?
    • Which Transaction ?
      • Price 160 = 16 Duties
      • First Sale for Export ?
      • PRC Product:
        • Price 80 = 8 Duties but Assists to be added ?
      • Korea Product:
        • Tolling = Sale ?
    XYZ Sourcing (Hong Kong) Unrelated Plant (Korea) XYZ Plant (PRC) XYZ Marketing (EU) Tolling Fee 20 Price 80 Price 160
  • 6. What is “Sale” ?
    • “ Sale” in Customs Law independent from Contract Law
    • Key elements:
      • Transfer of title
      • Compensation
      • Transfer of (financial) risk
    • “ Tolling” is seen by some as “Sale”
    • Justification: General Note to WTO Valuation Agreement prefers TV, thus extensive interpretation
      • Example: NL
  • 7. First Sale for Export (EU)
    • 29 CCC: “ sold for export to the customs territory of the Community ”
    • 147.1 ICCC: “ only the last sale, which led to the introduction of the goods into the (...) Community ”
      • ECJ, C-263/06 (“Carboni”) : “ the prices relating to sales made after export, but before release into free circulation in the Community, may be taken into account for the purpose of determining the ‘transaction value’ within the meaning of Article 29(1) of the Community Customs Code ”
      • ECJ, C-11/89 (“Unifert”) : “ it is permitted to use not only the price of a sale concluded immediately before export from a non-member country, but also any of the prices relating to sales made after export but before release into free circulation in the Community”
  • 8. First Sale for Export (EU)
    • Burden of Proof on Importer (147.1 3rd sentence CCC)
    • Commentary No 7 EU Customs Code Committee (Customs Valuation Section):
      • goods manufactured according to EC specifications, or are identified (according to marks etc.) as having no other use or destination
      • goods were manufactured specifically for a buyer in the EC
      • specific goods are ordered from an intermediary who sources from a manufacturer and goods are shipped directly to the EC
    • Once TV is chosen based on FSFE, no change possible
      • ECJ, C-11/89 (“Unifert”)
  • 9. First Sale for Export (WCO)
    • Commentary 22.1 (July 2007) Technical Committee
    • 1 and 8 WTO Valuation Agreement envisage that TV reflects all economic inputs forming part of the commercial chain
    • Sub 15: TV takes account of “ substance of the entire commercial import transaction prceding import of the goods, including the economic inputs and related transactions which arise therefrom ”
    • Sub 20: FSFE “ may not fully reflect the substance of the inputs resulting from, or forming part of the entire commercial chain ”
  • 10. First Sale for Export
    • US: Proposal to exclude FSFE by CBP
    • EU: Amendment of 147.1 ICCC required ?
    • Future FSFE: Unclear
      • US: Substantial resistance from Industry
      • EU: Public debate not yet started ?
  • 11. Transaction Value: Conclusions
    • PRC Product: FSFE is option, if product is made for EU, but + Assists
    • Korea Product: FSFE is option, if Customs accept Tolling = Sale, but + Assists
    • FSFE Future: ?
    • Agreement with Customs
      • EU: Proof required varies
    XYZ Sourcing (Hong Kong) Unrelated Plant (Korea) XYZ Plant (PRC) XYZ Marketing (EU) Tolling Fee 20 Price 80 Price 160
  • 12. Adjustment TV: + Assists
    • Korea Product: Consigned Materials
    • Software: Assist or License Fee ?
    • Patent Royalties: Condition of Sale ?
    • D&D Royalties: Assist ? Generated where (in/out EU) ?
    XYZ Sourcing (Hong Kong) DEF Materials (Taiwan) ABC Software (PRC) GHI IP Licensing (USA) XYZ IP (Switzerland) XYZ Marketing (EU) Patent Royalties 10 Patent Royalties 10 License Fee 40 Materials Cost 50 D&D Royalties 30
  • 13. Material Costs: + !
    • 32.2.b.i CCC
    • Korea Product:
      • If TV = FSFE Korea – Hong Kong, Materials not included in Price (“Tolling Fee”)
      • Otherwise: TV = Hong Kong – EU, Materials included in Price
    • PRC Product:
      • TV = Hong Kong – EU, Materials included in Price
    Unrelated Plant (Korea) XYZ Sourcing (Hong Kong) XYZ Plant (PRC) XYZ Marketing (EU) Price 80 Tolling Fee 20 Price 160
  • 14. Software + ?
    • ECJ, C-306/04 (“Compaq”): Software = Assist = dutiable
    • But is it ?
    • Software-license = right of use of copyright/IP protected work
    • Remuneration = License Fee
    • Case:
      • If Software is Assist: dutiable
      • If Software is not Assist: Is License Fee dutiable ?
        • No: License Fee is paid to Unrelated Party (160 ICCC)
  • 15. Patent Royalties + ? (1)
    • Royalties: Dutiable if Condition of Sale & Related to Goods
      • CoS: Payment required by Seller (related party) for Sale
      • No CoS: if paid to 3rd Party and not required by Seller (related party)
    • EU Customs Code Committee (Valuation Section): Commentary 11
      • Policy Statement ?
      • Restatement of CCC & ICCC ?
  • 16. Patent Royalties + ? (2)
    • EU Valuation Committee Commentary 11
    • “ Related”: Exercise Legal/Operational Restraint/Control (143.1e ICCC + Annex 23b)
    • “ A combination of indicators, beyond purely quality control checks by licensor”:
      • the licensor directly or indirectly exercises actual control over manufacture (centres and /or methods of production)
      • licensor entitled to examine manufacturer’s/ buyer's accounting records
      • the manufacturer is not allowed to produce non licensed competitive products without the consent of the licensor.
      • the goods are specific to licensor (i.e., in their concept/design and trade mark)
  • 17. Patent Royalties + ? (3)
    • “ Central Licensing-In”
    • XYZ IP (CH):
      • Transparant
      • No Mark-Up
    • Patent Rights: Direct Grant by GHI to XYZ
    • Not dutiable
      • Not required by Seller/related party
    XYZ Marketing (EU) XYZ IP (Switzerland) GHI IP Licensing (USA) Patent Royalties 10 Patent Royalties 10 Patents XYZ Plant (PRC) Unrelated Plant (Korea)
  • 18. Design & Development Royalties + ?
    • Assist or Royalty ?
    • Royalty = Remuneration for Assist (D&D, 32.2.b.iv CCC)
    • But: in Case not dutiable
      • D&D activities undertaken by XYZ Germany: in EU (32.2.b.iv CCC)
      • Payment to XYZ Switzerland = not relevant
    • Never dutiable: “General Research” (155 ICCC)
      • “ Unauditable” ?
      • Rule of Thumb: Until Product Development Begins
  • 19. Buying Commisions - ?
    • Typical Functions:
      • Sourcing/contracting
      • QA
      • Logistics
      • Etc.
    • Separate Invoice Item
    • At Arm’s Length
    XYZ Sourcing (Hong Kong) XYZ Marketing (EU) XYZ Plant (PRC) Unrelated Plant (Korea) DEF Materials (Taiwan) Materials - Sourcing - QA - Logistics Product - QA - Logistics Product - Sourcing - QA - Logistics Price 160 -/- Buying Commission ?
  • 20. Evaluation (1)
    • TV Hong Kong – EU
    • Price = 160
    • Duties 10 % = 16
    • * = Compliance Risk/Cost
      • FSFE = Tolling = Sale ?
      • FSFE: audit/proof
      • Software: Assist or License Fee ?
      • Patent Royalties: 160 ICCC ?
      • Buying Commission: audit
    • Korea Product:
      • FSFE: Price = Tolling Fee = 20 *
      • + Assists:
        • Materials Cost = 50
        • Software = 0/40 *
        • Patent Royalties = 0/10 *
        • D&D Royalties = 0
      • - Buying Commission = ? *
    • Price = 70 - ?/120 - ?
    • Duties = 7/12 ?
  • 21. Evaluation (2)
    • TV Hong Kong – EU
    • Price = 160
    • Duties 10 % = 16
    • * = Compliance Risk/Cost
      • FSFE: audit/arm’s lentgh ?
      • Software: Assist or License Fee ?
      • Patent Royalties: 160 ICCC ?
      • Buying Commission: audit
    • PRC Product:
      • FSFE: Price = 80 *
      • + Assists:
        • Materials Cost = 0
        • Software = 0/40 *
        • Patent Royalties = 0/10 *
        • D&D Royalties = 0
      • - Buying Commission = ? *
    • Price = 80 - ?/130 - ?
    • Duties = 8/13
  • 22. Evaluation (3)
    • “ Hidden Costs”
      • Compliance Resources/Program Management
      • Documentation
      • Legal Fees
      • Audits & Responses
  • 23. Thank You ! Jasper Helder + 31 6 46 17 94 82 [email_address]

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