Goods value adjustments by the customs authority: counteraction and defence methods

Goods value adjustments by the customs authority: counteraction and defence methods 150 150 Esquires

One would remember that 2019 has started with numerous complaints from the business community regarding the suspension of customs clearance of goods. Most of the complaints relate to the adjustment of goods customs value by decisions of the customs authorities. The reason why the customs authorities increased goods customs value is obvious: increase in goods customs value results in a proportional increase in tax liabilities for the declarant (both customs duties and value added tax).

The ESQUIRES experience in appeals against the customs authorities decisions on customs value adjustments demonstrates that there is a positive strategy developed by professionals to counteract unlawful actions of customs authorities and to defend declarants` rights.

Viktoriia Kovalchuk, a partner of ESQUIRES, leading corporate and tax practice, describes the main means to protect against unlawful actions of customs authorities, which one can exploit both integrated and selectively in specific combinations.

In each specific case a protection method depends on the certain conditions (type of goods and respective potential storage period, availability of working capital to pay guarantee, the declarant’s intention to fight for its rights, etc).

The proper arrangement of goods for declaration in “import” regime is the key point to the successful and swift customs procedures and clearance.

If the customs authority does not agree the declared customs value of goods upon the customs clearance, the declarant has the right to consult in order to reasonably choose a method of determination of the customs value grounding on information available to the customs authority.

Customs inspectors usually take formalistic approach to consultancy procedures, arranging for exchange of additional documents between the customs authority and a broker without any further real impact on the customs clearance decision on adjusting the customs value.

Despite of the formalistic approach to consultancy procedures we advise that the declarants exploit this tool completely, provide all documents and arguments supporting the declared customs value to the customs authority upon such procedures.

The decision on the adjustment of the customs value and the refusal in customs clearance card can be appealed to a higher level customs authority.

The simultaneous submission of a complaint to Business Ombudsman Council (the “BOC”) upon the administrative appeal proceeding against the decision on the customs value adjustment is also an effective tool (

The ESQUIRES experience in customs disputes resolution demonstrates that the involvement of BOC’s inspectors helps to strengthen the petitioner’s position in the administrative appeal proceeding due to start of real communication between the parties and making the issue public.

BOC’s inspectors take part in resolution of the case at the pre-trial stage only. They do not have powers to intervene the proceeding after the court trial is initiated.

The adjustment of the customs value and the card on refusal in acceptance of the customs declaration are subject to challenge in administrative court.

The courts mostly satisfy the claims to declare unlawful and to cancel the decision on the customs value adjustment. Compliance by the declarant with the procedure of customs clearance, provision of supporting documents for each component of the goods customs value and effective work in the trial are the necessary background for the satisfaction of the claim.

The declarant has a right to issue goods in free flow in case a complaint against the decision on the adjustment is filed or such decision is challenged in court and the respective financial guarantee is provided.

Declared goods can be issued in free flow in case the declarant disagrees with the decision of the customs authority to adjust the goods customs value.

The issue of goods in free flow before the administrative or court proceedings are completed would allow the declarant to dispose of the goods freely and decrease for temporary storage of goods under customs control.

The conditions when goods could be issued in free flow are the following: (1) the declarant has paid the goods customs value determined in the respective declaration (-s); (2) the declarant has provided the financial guarantee according to the procedure established by the Customs Code of Ukraine covering the difference between customs value determined by the customs authority and the declarant respectively.

After the goods are issued to free flow an entity has the right to provide additional documents to confirm that the customs value was determined correctly.

In case the customs authority refuses to accept the customs value determined by the declarant, excessively made customs payments in the form of a guarantee can be reimbursed after the respective court judgment granting the declarant’s claims against customs value adjustment is in force.

If the entity has no intention to pay the goods customs value in the amount determined by the customs authority, it is possible to consider the possibility to store the goods in the warehouse of temporary storage for the period of appeal.

However, expenses for goods storage is a disadvantage of this option. One also should take into account the characteristics of the goods (it is not possible to store perishable products for a long period of time). On the other hand, such expenses may be recovered from the customs authority as losses after the decision to adjust the goods customs value is declared unlawful by the court.

We propose to our Clients to collect losses caused by unlawful decisions / actions / failures to act of the customs authorities.

The declarant has the right to claim losses from the customs authority caused by unlawful decisions on customs value adjustment. Expenses for customs warehouse storage, the loss of profit due to restrictions on flow of goods during the time of appeal/challenge the decision, the related sanctions of counteragents, and other losses shall be deemed as the declarant’s losses in such case.

Compensation for damage caused to a legal entity as a result of unlawful decisions of state authorities is carried out at the expense of the State Budget of Ukraine.

What should business expect in 2019?

During a recent meeting with officials of the State Fiscal Service of Ukraine held by the American Chamber of Commerce in Ukraine the Deputy Head of the SFS of Ukraine informed: «…In total, from January 11 to January 29, 2019, ASARM[1] has indicated 1230 declarations where 298 events are related to customs value control. Additional revenues from the adjustment of customs value amounted to USD 20.8 million. The declarants themselves adjusted customs value up to UAH 1.4 million as a result of the respective consultancy procedures”.

Only 6.7% of the declarants themselves adjusted customs value or agreed with the respective amounts determined by the customs authorities where 92.3% of those indicated by ASARM received negative decisions on customs value adjustment and now have to commence administrative or court proceedings in order to prove that actions and decisions of the customs authorities were unlawful. 93% of the unilateral decisions of the customs to adjust against 7% of the declarant’s consents. The figures are self-evident that there is an urgent need to change the system of customs clearance and goods transfer the customs border of Ukraine.

The Authorized Economic Operators institution (AEO) can substantially change the relationship between the customs authorities and declarants.

AEO is a world best practice, a special customs audit of a business entity, which results in the company obtaining a respective certificate and information about it is included in the Unified Register of Authorized Economic Operators. The AEO status grants the right to special simplification of customs procedures, to reduce volume of information required to be provided by customs authority prior to arrival in the customs territory of Ukraine, the release of goods, vehicles of commercial purpose outside the customs territory of Ukraine; temporary storage of goods, vehicles of commercial purpose, which are under the customs control, indoors, on open and covered areas of the AEO; withdrawal of customs security without permit of the customs authority; dispatch of goods from the premises, open and covered areas of the AEO without a need of the customs authority inspection; performance of customs control in the first priority; placement of goods in the warehouse of temporary storage of closed type without obtaining a permit; customs clearance of goods at the facilities of the AEO; submission of a single customs declaration, in case goods are repeatedly imported into the customs territory of Ukraine or exported outside the customs territory according to a single contract a certain period of time agreed by the customs authority.

According to the World Bank it takes 96 hours to cover all the formalities with import documents, 32 hours – border and customs control, as opposed to OECD countries – 3.4 and 8.5 hours, respectively. At the same time, the legislation of Ukraine established that the customs clearance of goods should take 4 hours.

The start of the AEO functioning is a milestone for free flow of goods, development of export-import potential for Ukraine and business community.



[3] АСАУР – Автоматизована система аналізу і управління ризиками


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