If customs value has been determined under the fallback method, the final figure is not the only point to examine. It is important to understand why value could not be determined under the preceding methods, which approach was used under Article 45 of the EAEU Customs Code, where the price information came from, and whether the underlying data are comparable with the shipment being valued.
A separate question is whether the customs calculation and the adjustments made by the competent customs authority can be reproduced.
When Customs May Move to the Fallback Method
The fallback method applies when the customs value of imported goods cannot be determined under Articles 39 and 41–44 of the EAEU Customs Code. Article 43 also allows the declarant, upon application, to reverse the order in which the deductive and computed value methods are applied.
The Rules approved by EEC Board Decision No. 138 do not reduce the move to the fallback method to a closed list of several formal reasons. The conditions governing the preceding methods and the availability of information required to determine customs value remain relevant.
The first question for a particular shipment is therefore how the inability to determine value under the preceding methods was explained. Disagreement with the declared value alone does not explain how the competent customs authority reached Article 45.
Flexibility Does Not Mean Arbitrary Valuation
Article 45 permits flexibility when using approaches derived from the preceding valuation methods. That flexibility does not turn the fallback method into an independent mechanism for selecting any convenient price.
Where customs value can be determined in several ways, the prescribed sequence is retained. Customs value should also be based, to the greatest extent possible, on customs values that have previously been determined.
The Code sets limits at the same time. The calculation cannot be based, among other prohibited bases, on a minimum customs value or an arbitrary or fictitious value. The practical task is therefore to identify not only the name of the method but the particular approach used within the fallback method.
Are the Goods Used by Customs Actually Comparable?
Decision No. 138 allows, subject to specified conditions, information on goods of the same class or kind to be used where the necessary information on identical or similar goods is unavailable. This does not mean that any goods within a broad product category provide an appropriate comparison.
The relevant analysis includes the characteristics of the goods, their quality and reputation, the degree of similarity and other circumstances covered by the Rules. Factors capable of affecting price also matter, including production and sale conditions, shipment quantity, transport circumstances and the relevant market.
Timing matters as well. The Rules refer to a period in which market conditions remained unchanged or sufficiently close, taking account of factors including seasonality.
The practical question is therefore not simply whether another price is higher or lower. It is why information concerning those particular goods and that transaction is suitable for determining the value of the goods under review.
Where Did the Price Come From, and Can the Source Be Verified?
Under the fallback method, information from previously accepted customs declarations and customs value declarations may be used. The Rules also allow neutral sources of price information, subject to the applicable requirements.
For such information, relevant considerations include whether the offer is current for export to the customs territory of the EAEU, whether the information is comparable, and whether its use is consistent with the restrictions in Article 45 of the EAEU Customs Code.
Paragraph 16 of the Rules in Decision No. 138 contains a separate restriction: averaged prices for broadly defined groups of goods must not serve as the basis for determining customs value.
A source is not excluded merely because it originates outside the EAEU. Paragraph 17 permits information obtained from sources outside the EAEU where that information is available within the EAEU and its reliability and accuracy can be verified.
Can the Customs Calculation Be Reproduced?
Article 45(6) of the EAEU Customs Code provides for the declarant to be informed of the sources of information used to determine customs value and the calculations made on their basis. The price source and calculation should therefore be identified across the materials through which the competent customs authority communicated that information to the declarant, rather than being sought only in the text of a single decision.
For practical review, it is useful to collect the materials that identify the starting value, the source used, the characteristics of the comparator goods and the adjustments made.
| What to review | Underlying information needed | Question to ask |
|---|---|---|
| Move to Article 45 | Reasons the preceding methods were not used | Why could value not be determined earlier? |
| Comparator goods | Description and characteristics of the goods | How comparable are the goods in fact? |
| Transaction conditions | Quantity, delivery and transport factors | Were price-relevant differences taken into account? |
| Price source | Customs declaration, customs value declaration or other source used | Can its current relevance, reliability and accuracy be checked? |
| Final customs value | Starting value and adjustments applied | Can the calculation be reproduced? |
A useful practical test is to try to reproduce the calculation. If only the final customs value is known but it is not possible to determine how the underlying information was transformed into that figure, the missing elements of the calculation need to be identified.
How to Assess Transaction Value Documents
When reviewing the use of the fallback method, it is also necessary to examine how customs assessed the information on customs value submitted by the importer.
Where a customs valuation dispute is considered by a Russian court, paragraphs 8–11 of Resolution No. 49 of the Plenum of the Supreme Court of the Russian Federation are relevant to the assessment of customs valuation evidence. The Resolution proceeds from a presumption that information submitted by the declarant is reliable unless rebutted by the customs authority.
Individual defects in documents do not by themselves establish that the terms of the transaction are unreliable. A low price is likewise not, by itself, a basis for rejecting the declared value, although a material difference from comparable price information may provide a reason for further scrutiny.
It also matters whether the declarant had a genuine opportunity to address the concerns raised and provide explanations.
Where the transaction involved payment through an agent or another third party, see Payment Agent and Customs Value: How to Substantiate the Transaction Price.
Questions to Ask About Your Own Customs Decision
For a particular shipment, it is useful to compare the customs decision and calculation with the declaration, the documents supporting the declared customs value, customs requests and the responses previously submitted.
The comparator goods should then be reviewed separately: their characteristics, quantity, delivery conditions, transport factors and the period to which the price information relates. Where a neutral price source was used, the question is what the source actually shows and whether its reliability and accuracy can be verified.
This is not an exhaustive list of documents and does not guarantee the outcome of a challenge. The relevant materials depend on how the competent customs authority actually applied the fallback method in the particular case.
Where documents were requested during customs control, the procedural issues are addressed separately in Customs Request for Documents: the Response Deadline Depends on the Procedure.
Frequently Asked Questions
Can customs move directly to the fallback method simply because it disagrees with the declared value?
Disagreement alone does not explain the use of Article 45. It is necessary to establish why value could not be determined under the preceding methods and which approach was then used.
Can customs use the price of goods that are not identical or similar?
Decision No. 138 permits the use of goods of the same class or kind under the conditions provided by the Rules. Requirements concerning characteristics, similarity and comparability factors still apply.
What should be clear when the fallback method is applied?
The approach used, the source of the price information and the calculation should be identifiable. Article 45(6) provides for the declarant to be informed of the sources used and the calculations made on their basis.
A practical review of a particular decision can begin with three separate questions: why the competent customs authority moved to Article 45, whether the underlying data used are sufficiently comparable, and whether the final calculation can be reproduced. Those questions indicate which transaction documents and which elements of the calculation require further examination.
Official sources: EAEU Customs Code; EEC Board Decision No. 138 of 6 August 2019; Resolution No. 49 of the Plenum of the Supreme Court of the Russian Federation of 26 November 2019.