A discount for a large order can reduce the purchase price, but on import that saving sometimes has to be explained again - this time to customs. The seller’s price list shows one price, while your invoice shows another. The buyer remembers the negotiations and understands the difference; the inspector sees the documents and may not.
A list price applies to specific terms of sale. Those terms may differ for a one-off purchase, an annual order or a purchase with prepayment. A price list therefore does not by itself explain how much a particular buyer was required to pay. The history of the order - the seller’s offer, the agreed discount and the final amount - helps explain the difference.
Method 1 for determining customs value is based on the price of your transaction. Article 39 of the EAEU Customs Code allows the amount paid or payable by the buyer for goods sold for export to the Eurasian Economic Union to be taken into account. The conditions of method 1 must be met, and the expenses specified in Article 40 are added to the price. An agreed discount explains the purchase price, but it does not displace the other calculation rules.
The invoice - the supplier’s commercial bill - usually states the final amount. How that amount was reached can be seen from an earlier offer, correspondence, the order or the specification. If customs compares it with an earlier price, the dates, model, quantity, currency, delivery and payment terms are material. If the comparison terms are not disclosed in the request, you can ask customs to clarify them. Your own discount can meanwhile be explained by the documents for the order itself.
With a volume discount, the entire agreed order matters. It may arrive in several shipments, each of which is smaller than the quantity that gives entitlement to the discount. A document covering the total volume explains the difference: how much the seller undertook to supply, how much the buyer agreed to purchase and how the shipments were divided.
A forecast of future purchases is a different situation. If the company merely expected to buy a certain volume during the year, that forecast does not yet confirm an accepted obligation for the entire volume. In that case, the terms on which the discount was actually granted to the current order need to be identified.
A prepayment discount should be linked to the amount of the advance and the deadline for making it. The condition can be seen from the seller’s offer, and performance from the date, amount and payment reference of the bank transfer. If the advance was made later, correspondence may confirm that the supplier kept the discount and the parties agreed to the change.
| Offer | Discount amount and condition |
|---|---|
| Order | Agreed price |
| Payment | Date, amount, purpose |
At the same time, Article 39 does not require every item of goods to be paid for before declaration. The transaction price may already have been paid or may still be payable. With a prepayment discount, the issue arises because the parties themselves linked the price reduction to a particular payment, not because method 1 generally requires an advance payment.
In a clearance sale, the price reduction should be linked to the particular goods and the purchase period. The supplier may have been clearing seasonal stock, changing its model range or freeing warehouse space. Its offer, sale announcement, correspondence and order may serve as evidence if they show that the markdown applied specifically to the imported model. An old promotion for different goods does not establish that connection.
A discount for a regular customer also needs an explanation. It may be based on recurring purchases, a certain volume or an established payment arrangement. Previous orders are useful when they show that practice and allow it to be compared with the current shipment. The phrase “regular customer discount” is better explained through the specific terms that the seller actually took into account.
It makes sense to retain correspondence together with attachments and transmission details. The order number, model and quantity link a particular message to the invoice and specification. If a document was signed after the negotiations, explain when the parties actually agreed the price and which shipments the agreement covered. A difference between the negotiation date and the signature date calls for an explanation, but does not by itself show that the price is inaccurate.
Sometimes customs requests the manufacturer’s costing - a calculation of its costs - or the export declaration, meaning the document used to clear the goods for export in the country of dispatch. These documents may be held by the supplier. If the importer does not have them, request them from the holder and tell customs the actual reason for their absence. If the supplier refuses, its response can be submitted; if there is no response, submit evidence that the request was made.
If the dispute concerns how the discount was agreed, the accepted order, the seller’s offer and the correspondence may explain the price even without the requested costing. Documents showing that the discount condition was satisfied add to that explanation. Whether they are sufficient depends on the particular circumstance that customs has questioned.
Paragraph 9 of Resolution No. 49 of the Plenum of the Supreme Court of the Russian Federation dated 26.11.2019 links confirmation of customs value to whether the transaction itself can be established, the price can be matched to the quantity of goods, and the delivery and payment terms can be determined. A separate error in the formal execution of a document that does not disprove that the transaction was concluded on specific terms does not by itself mean that the declared value lacks documentary support.
A supplier letter prepared only after a customs request may explain an earlier agreement. Such a letter is better compared with the order and correspondence from that period. If the price was in fact changed only after the shipment, it is necessary to determine separately why this happened, which shipments the change affected and what consequences it has for customs value. The mere appearance of a new agreement does not mean that a previously declared value must automatically be recalculated.
Consider a hypothetical example. Two independent companies enter into a single transaction for 2 000 identical components. The seller’s initial price is EUR 50 per unit. It grants an 8% discount for the purchase of the entire volume. Before shipments begin, the parties agree on EUR 46 per unit and a total price of EUR 92 000. The goods are supplied in four equal shipments, with payment due after delivery.
The first shipment contains 500 units. The invoice is for EUR 23 000. Customs sees the initial offer at EUR 50 and asks why the actual price is lower. The response can show in sequence the first offer, the agreement of the discount for 2 000 units, the accepted order, the terms for the four shipments and the invoice for the first shipment.
The calculation is as follows: an 8% discount from EUR 50 is EUR 4, so the unit price is EUR 46. For 2 000 units, the total is EUR 92 000. The first shipment is one quarter of the total quantity, so it corresponds to one quarter of the total price - EUR 23 000.
Paragraph 3 of Article 39 permits this proportional calculation when the goods being declared are part of a larger quantity of the same goods purchased under a single transaction. In this hypothetical example, those conditions are given in advance: the goods are identical, the total volume was agreed in one transaction, and the shipments divide it into four equal parts. If the 2 000 units appeared only as a plan for future purchases, the same conclusion could not be drawn from paragraph 3 without analysing the order that was actually accepted.
Payment after delivery is not inconsistent with this example. The documents establish the amount payable and the payment terms. At the same time, EUR 23 000 is the price of the goods in the first shipment. The full customs value requires a separate review of the additions under Article 40.
Also check whether there are any other payments for these goods. Paragraph 3 of Article 39 covers direct and indirect payments to the seller or another person for the seller’s benefit if they relate to the imported goods. Additional payments should therefore be assessed according to their actual basis, rather than included in customs value merely because money was transferred to the same counterparty.
There is another condition of method 1. The sale or price must not depend on an obligation whose effect on the price cannot be determined in monetary terms. Paragraph 19 of Resolution No. 49 requires customs to identify the specific condition that creates the problem. The Resolution gives as examples an obligation to purchase additional goods or a price that depends on a reciprocal sale of goods or services. If the order volume and discount amount are clear from the documents and can be calculated, the mere agreement on quantity does not turn the discount into a condition with an indeterminable monetary effect.
A material difference from the prices of comparable shipments may justify further verification. But paragraph 10 of Resolution No. 49 does not allow a price to be rejected merely because it is lower. In the example with four shipments, the small first shipment received a discount because of the large overall order. It is the agreed order that explains why the invoice price is lower than the seller’s initial offer.
Andrey Bernev, customs lawyer