New Union Customs Code (3/4): first to last sale, licensing rights and fixed rates of exchanges

As from the 1st of May 2016, the new Union Customs Code (UCC) (Regulation 952/2013), the Delegated Regulation (2015/2446) and the Commission Implementing Regulation (2015/2447) entered into force. This new European customs law of course entails some important changes. Kneppelhout & Korthals will, in the days to come, list and detail some relevant ones. Concerning the customs value, there are important changes. One of these is that the base of calculating the customs value is changing significantly. Besides that, there are changes in the provisions concerning royalty’s and licensing rights, and the possibilities concerning forfaits are extended.

From first to last sale

In the new UCC, the transaction value is still the primary method for the calculation of the customs value. If the transaction value cannot be used due to any reason, there are other methods that can be used. However, these methods take second place. For years, the transaction value was calculated by using the ‘first sale’ rule. Under the old customs law, it was allowed to calculate the transaction value based on each sale focused on export to the Union’s customs territory. That could be either the last sale in the supply chain or an earlier one, as long as this sale was focused on export to the EU. In the new UCC, this does not exist anymore. The basis for determining the transaction value is now the sales price paid for the goods, when sold for export to the European Union, immediately before the goods enter the customs territory of the EU (last-sale-principle). In other words, it is no longer possible to base the transaction value on the earlier sales for export to the EU. In some cases, this could result in a higher customs value and, if applicable, higher import duties as a consequence.  If there is no sale before the goods enter the EU customs territory, then the sale which takes place while the goods are placed under a special procedure, like customs warehousing or transit, can be used to calculate the transaction value. The last-sale-principle entered into force as from the 1st of May 2016, except for agreements concluded before the 18th of January 2016 in which it is contained that the previous transaction shall be used. For these agreements there is a transitional period until the 31st of December 2017. Until this date the ‘first sale’-principle can be used under conditions.

Royalties and license fees

In the Union Customs Code, royalties and license fees are earlier considered to be a condition of sale than before. Royalties and license fees are considered to be paid as a condition for the sale of imported goods if one of the following requirements is fulfilled:

  • The seller or a related person requires the payment of the buyer
  • The payment by the buyer is made to satisfy an obligation of the seller, consistent with contractual obligations
  • The goods cannot be sold to or purchased by the buyer without payment of the royalties or license fees to a licensor

Application of forfaits

Fixed rates of exchanges

There are also changes concerning the rates of exchanges. The rates of exchanges is not adapted to possible market fluctuations in the interim anymore. As from the 1st of May 2016, there are fixed periodical rates of exchanges, which are valid for a whole month. Depreciations are thus not included in the rates of exchanges anymore. Naturally, this also has consequences for the customs value and the customs duties.

If you have any questions or would like more information, please do not hesitate to contact our customs specialists.Disclaimer: the content of this information sheet is compiled with utmost care. We are not liable for the content, which cannot be used as a basis for creating individual rights.

Disclaimer: the content of this information sheet is compiled with utmost care. We are not liable for the content, which cannot be used as a basis for creating individual rights.