The recipient may pay the supplier nothing at all for a test sample or a warranty spare part. The invoice may then state free of charge. For commercial imports into the Eurasian Economic Union (EAEU), customs still needs a value for the goods in order to calculate customs payments.
This raises the question: what amount should be declared if there was no purchase for money? The answer depends on why the goods were sent free of charge. An advertising sample, a gift and a part sent to replace a defective one arise from different relationships with the supplier. The wording in the invoice - the supplier's commercial bill - does not by itself explain those relationships.
| Payment | May be absent |
|---|---|
| Customs value | Still determined under the applicable method |
Under Method 1, customs value is determined on the basis of the transaction involving the imported goods. Article 39 of the EAEU Customs Code requires a price actually paid or payable for goods sold for export to the Union, with the adjustments provided for by the Code.
The absence of a payment for the current shipment therefore requires an examination of the terms on which the goods were transferred. The amount payable to the seller and customs value may differ. Customs value is used to calculate customs payments even when the seller does not ask for money for the shipment itself.
If a separate free shipment is not a sale at all, Method 1 has no such basis. Paragraph 6 of the Rules for applying Method 1, approved by Decision No. 283 of the Board of the Eurasian Economic Commission (EEC) expressly lists free advertising and exhibition samples among such situations. A symbolic amount stated in an invoice solely for shipping purposes does not create a sale.
For a warranty part, the first step is to return to the original purchase. The seller may send a replacement without a new payment because the obligation to replace a defective component was already provided for in the original contract. The original contract, specification, payment documents, warranty terms, claim and the seller's response are therefore useful.
Those documents can establish why the particular part was sent and how it is connected with the earlier transaction. That connection does not itself mean that Method 1 automatically applies. It is necessary to determine the price attributable specifically to the imported part and check the other conditions of Article 39.
If equipment was bought several years ago for EUR 100,000, that amount does not become the price of a warranty module that the manufacturer is sending now. Where the documents do not allow an appropriate price to be determined under Method 1, the other methods must be considered in sequence.
Paragraph 15 of Article 38 and Articles 41-45 of the EAEU Customs Code establish that sequence. Method 1 is followed by Method 2 based on the transaction value of identical goods, then Method 3 based on the transaction value of similar goods. These are followed by the deductive value method and the computed value method - Methods 4 and 5; the declarant may reverse their order. The fall-back Method 6 is used if the preceding methods do not allow the value to be determined. A free shipment is not a reason to start immediately with Method 6.
When comparing goods, the definitions in Article 37 of the EAEU Customs Code are particularly important.
Identical goods must be the same in all respects, including physical characteristics, quality and reputation. Minor differences in appearance are permitted: they do not prevent the goods from being treated as identical if the other requirements are met.
Similar goods may differ, but they must have similar characteristics, consist of similar components and be made from the same materials. These properties must allow them to perform the same functions as the goods being valued and to be commercially interchangeable with them. Quality, reputation and the existence of a trademark are also taken into account.
For both categories, the country of production is important: the comparison goods must be produced in the same country as the goods being valued. Goods made by a different manufacturer are considered only where suitable information on goods made by the same manufacturer is unavailable or the available information is unsuitable for use.
This means that the same part number helps identify a possible comparison, but does not replace a check of the characteristics. Conversely, a common purpose does not make two products similar: all the criteria established by Article 37 still have to be applied.
For Methods 2 and 3, the customs value used for the comparison goods must previously have been determined under Method 1 and accepted by the customs authority. The comparison goods must have been imported in the same or a corresponding period, but no earlier than 90 calendar days before the importation of the goods being valued. The 90 days are counted from the importation of the goods being valued, not from the invoice date or the date on which the previous shipment was paid for.
The quantity and the commercial level of sale, for example wholesale or retail, must also be taken into account. If they differ, documented adjustments are used. A similar adjustment is possible for a significant difference in transport costs caused by distance or mode of transport. If several values remain suitable after the necessary adjustments, the lowest is used.
Consider a hypothetical training example. A company receives ten new sensors free of charge for testing. Thirty days earlier, it imported ten identical sensors made by the same manufacturer in the same country. Assume that the characteristics, commercial level, quantity, import period and other conditions allow Method 2 to be used. No other suitable values have been identified.
The customs value of the previous consignment had been determined under Method 1, accepted by the customs authority and amounted to RUB 220,000. That amount included RUB 20,000 of transport costs to the place of arrival in the Union.
The new consignment is delivered by a different mode of transport. The relevant costs are RUB 40,000. Also assume that the difference is considered significant for this comparison, its amount is documented, and there are no other differences requiring adjustments.
The old transport costs are first removed from the previous value and the new costs are then added: 220,000 - 20,000 + 40,000 = RUB 240,000. For ten sensors, this is RUB 24,000 per unit.
If RUB 40,000 is simply added to the previous RUB 220,000, the result is RUB 260,000, but the calculation would still contain the previous RUB 20,000 of transport costs. That is why, in this hypothetical example, the transport component is replaced rather than added on top of the previous one.
If Methods 1-3 cannot be applied, the next methods are considered. Method 4 uses information on sales within the Union. As a general rule, the unit price at which the greatest aggregate quantity of the goods being valued, identical goods or similar goods is sold to independent buyers in the same condition as imported is used. The amounts specified in Article 43 of the EAEU Customs Code, including the relevant trade, transport and tax elements, are deducted from that price.
The recipient of free samples may have no plans to sell them at all. This does not prevent a check of whether suitable information exists on sales of the relevant goods to other independent buyers if the valuation has reached Method 4.
Method 5 requires information from the manufacturer. Under Article 44, manufacturing costs, profit and general expenses, and the specified transport and related costs are calculated. A manufacturer's letter giving a single figure such as 'cost - USD 50' should therefore be compared with the data from which that amount was derived.
The fall-back Method 6 retains the general principles of the preceding methods but allows substantiated flexibility. Article 45 of the EAEU Customs Code, for example, permits a reasonable departure from the import period for comparison goods. Arbitrary valuation and the use of a minimum customs value are prohibited.
A price list or a supplier's letter may provide source information for a calculation, but it is necessary to explain how that information is used within the selected method. Such a document is not a separate valuation method.
Documents for samples explain the purpose of the shipment and the properties of the goods, while documents for a warranty part explain its connection with the earlier purchase, the defect and the seller's obligations. If customs value has been determined under the applicable method, the amount and basis of the calculation may be stated alongside the free of charge wording in the invoice.
Customs value is used to calculate customs payments, while the rate, procedure and any exemption are checked separately. A supplier may charge nothing for a sample or replacement, but import payments may still remain payable. The basis for an exemption must follow from the rules governing the importation of the particular goods.
Andrey Bernev, customs lawyer