Key Considerations When Preparing Customs Value Documentation

The customs value is determined by the declarant using one of the valuation methods prescribed by the Customs Code of Ukraine (“CCU“). This article focuses on the primary valuation method, namely the transaction value method.

As the amount of customs duties payable depends directly on the customs value, the customs authorities carefully examine the documents supporting its calculation.

The CCU establishes the list of documents that may be used to substantiate the customs value, including, among others, contracts, commercial invoices, bank payment documents, transport and insurance documents, import licences (where applicable), and other accounting documents, if available.

Where such documents contain discrepancies, signs of forgery, or fail to confirm the numerical values of the components of the customs value, the customs authorities are entitled to request additional supporting documents and, following their review, may adjust the declared customs value.

Accordingly, it is essential to prepare customs value documentation with due care and avoid leaving any formal grounds for such adjustment.

In this article, we review the most common deficiencies in customs value documentation and explain how to avoid them. Properly prepared documentation reduces the risk of adjustments to the declared customs value on formal grounds and may also serve as key evidence when challenging a customs authority’s decision before the courts.

Goods Documentation

When focusing on the commercial aspects of an import transaction, companies often pay insufficient attention to its documentary requirements. However, errors or inconsistencies in the documents relating to imported goods may result in an adjustment of the declared customs value.

Accordingly, importers should exercise particular care when preparing the documents supporting the declared customs value and pay attention to the following issues.

1. Errors and Inconsistencies in the Declared Value of the Goods

The value of the goods stated in specifications, commercial invoices, acceptance certificates, and other transaction documents should be consistent and free from errors.

In practice, it may be difficult to explain to the customs authorities why the price indicated in the specifications differs from the price stated in the commercial invoice issued upon delivery. If the parties have agreed that the price may be revised or adjusted over time, such an arrangement should be expressly set out in the contract or documented by an amendment thereto. These documents serve as the primary evidence supporting the numerical components of the customs value.

Even minor discrepancies, including simple clerical errors, may provide the customs authorities with formal grounds to reject the declared customs value, apply an alternative customs valuation method, and adjust the customs value accordingly.

2. Inconsistencies Between the Contract Terms and the Actual Import Transaction

The contract should accurately reflect all material terms of the import transaction.

Where the contract provides that the goods must be accompanied by certain documents (such as certificates, warranties, licences, etc.) containing specified information, those documents should accompany the imported goods. Importers should also verify that such supporting documents have been issued by the competent authority, where applicable, and comply with the prescribed form. For example, submitting a quality or quantity certificate that differs from the agreed or required format may raise concerns with customs authorities and provide grounds for requesting additional supporting documentation.

Importers should also ensure that the information identifying the supplier under the contract is accurate. For instance, where the contract states that the goods are purchased directly from the manufacturer, the supplier should, in fact, be the manufacturer, and the importer should be able to substantiate this if requested. Otherwise, the customs authorities may question whether the declared transaction value reflects the actual price of the goods, particularly where differences may exist between prices charged by manufacturers and those charged by intermediaries, whose prices typically include an additional margin.

3. Incorrect Use of Incoterms Rules

The Incoterms rule specified in the contract and other transaction documents should accurately reflect the actual terms of delivery.

The applicable Incoterms rule determines which costs are borne by the importer and, consequently, which costs should be included in the customs value. For example, where, under the applicable delivery terms, transportation costs that are not included in the price of the goods are borne by the importer from the moment of shipment at the port in China, the customs authorities will verify whether such transportation costs from that port onwards have been included in the customs value.

Importers should also ensure consistency in the delivery terms stated in both the export and import customs declarations. Any discrepancies between these declarations may prompt the customs authorities to question the accuracy of the declared customs value.

Accordingly, inaccuracies or inconsistencies in the delivery terms set out in contractual documentation or customs declarations may potentially serve as grounds for an adjustment of the declared customs value.

4. Licence Fees

Where a customs declaration or other transaction documents refer to a particular trademark, the customs authorities may seek confirmation that the importer is authorised to use that trademark. Importers should therefore ensure that they can provide documentary evidence of such authorisation, where required.

When the customs value is determined using the transaction value method, licence fees (including fees for the right to use a trademark) must be added to the price actually paid or payable for the imported goods where the statutory conditions for their inclusion are met.

Accordingly, before importing branded goods, importers should assess whether they have the necessary rights to use the relevant trademark and ensure that the supporting documentation is in place. This helps minimise the risk of additional inquiries from the customs authorities and potential adjustments to the declared customs value.

Transportation Documents

Where the customs value is determined using the transaction value method, the price actually paid or payable for the imported goods must also include transportation, loading, unloading and handling costs incurred in bringing the goods to the place of importation into the customs territory of Ukraine, to the extent such costs are not already included in the purchase price.

For this reason, transportation costs included in the customs value are subject to close scrutiny by the customs authorities. Importers should therefore ensure that all supporting documents evidencing such costs are complete, consistent and properly executed.

• Transport Documents

Each transport document (such as a bill of lading or a CMR consignment note) should contain all mandatory information required under the applicable document format.

In practice, however, suppliers and carriers do not always complete transport documents in full. As a result, the customs authorities may take the position that no proper transport document has been provided. For example, they may identify the absence of the carrier’s signature on a bill of lading or discrepancies in the details of accompanying documents referenced in a CMR consignment note.

The customs authorities also pay close attention to the parties identified in transport documents. For example, where the consignor is a third party (such as a warehouse operator) rather than the contractual supplier, the customs authorities may request evidence explaining the storage arrangement, confirmation of any storage charges incurred, and proof that such costs have been properly reflected in the customs value, where required.

• Use of Logistics Providers and Other Intermediaries

In many cases, importers engage a logistics provider to organise the transportation of the goods. Upon completion of the services, the logistics provider typically issues a single invoice describing the services simply as “transportation services”. However, that invoice or the corresponding services acceptance certificate may not specify whether it also includes storage, loading, unloading, transhipment or other related services.

Likewise, such costs may not be identified in any other documents submitted to the customs authorities, including certificates or letters issued by the carrier confirming transportation costs incurred outside the customs territory of Ukraine.

Accordingly, agreements with logistics providers should clearly define the full scope of services to be provided. In addition, invoices and services acceptance certificates should itemise each service performed together with its corresponding cost. Otherwise, the customs authorities may conclude that the importer has failed to provide sufficient documentary evidence to verify the numerical components of transportation costs included in the declared customs value.

Other Supporting Documents

As noted above, in addition to the primary set of documents prescribed by the CCU, the customs authorities frequently request additional documentation to verify the declared customs value. Likewise, importers often submit additional supporting documents to eliminate any doubts about the accuracy of the declared customs value.

When preparing such documents, importers should also pay attention to the following.

1. Price Lists

When reviewing price lists, the customs authorities consider both their content and any requirements regarding their form or content set out in the relevant contract.

In practice, the customs authorities may reject a price list as evidence of the customs value if it is addressed to a specific customer, treating it as a commercial offer rather than a generally applicable price list. They may also expect the price list to specify its period of validity and to include the supplier’s full product range, rather than only the goods purchased by the importer.

2. Errors and Inconsistencies in Customs Declarations

Importers should carefully review the information relating to the imported goods contained in both export and import customs declarations.

It is important that the description and other particulars of the goods remain consistent across these declarations. Discrepancies in the information or characteristics of the goods may cause the customs authorities to question the accuracy of the declared customs value.

Importers should also ensure that all costs included in the customs value are correctly reflected in the Customs Value Declaration (“CVD“). For example, loading or handling charges should be declared under the appropriate section of the CVD rather than being included within transportation costs. Incorrect completion of the CVD often results from logistics providers issuing invoices or other supporting documents that do not separately identify individual cost components.

The issues outlined above may, to varying degrees, lead the customs authorities to conclude that the documents submitted in support of the declared customs value contain inconsistencies, which may ultimately result in an adjustment of the declared customs value.

To minimise these risks, importers should identify in advance which documents will be required to substantiate the customs value and ensure that they are properly prepared before the import transaction takes place. Where import operations are already ongoing, a legal review of the existing documentation can help identify potential weaknesses and mitigate the risk of the adjustments to the declared customs value.

GOLAW has extensive experience in:

1. conducting legal reviews of import documentation for customs purposes;
2. advising clients on the preparation of supporting documents to substantiate the declared customs value;
3. representing clients in the declared customs value adjustment disputes.

GOLAW’s team can promptly assess the circumstances of an import transaction, provide practical recommendations on documentary compliance, assist in preparing and submitting the supporting documentation required to substantiate the declared customs value, develop an effective legal strategy for challenging the declared customs value adjustments, and represent clients in both administrative and judicial proceedings against decisions of the customs authorities.