In appeal proceedings VII R 28/21, the Federal Fiscal Court (BFH) stayed the proceedings and referred various questions concerning the interpretation of EU customs valuation provisions to the Court of Justice of the European Union (CJEU). The CJEU referred the case, a so-called preliminary ruling procedure, to the General Court of the European Union (General Court) (Case T-28/25; OJ EU C/2025/1548 of 17 March 2025).
At its core, the case concerns the question of whether costs for design services must be taken into account as increasing the customs value where the design is used in the production of materials that are supplied free of charge to the manufacturer of the imported goods in a third country and are incorporated into the finished product.
This is doubtful because Article 71(1)(b)(iv) UCC provides that the costs of intellectual inputs – which include design development – are not to be included in the customs value of the imported goods where they are undertaken within the European Union – as was the case here:
The company bringing the action (plaintiff, respondent in the appeal on points of law and appellant in the appeal on points of law) (plaintiff) had ceramic goods, including porcelain mugs with various designs, manufactured in China and released them for free circulation in the Union. The respective designs were applied to the porcelain mugs by firing decals bearing the individual designs onto the mugs. The plaintiff had the decals manufactured by other manufacturers in Asia. It transmitted to them by PDF the designs developed by advertising agencies in the EU (Germany). The same process was used in the case of gift boxes and cork coasters with which the porcelain mugs were imported into the EU and offered for sale in the EU. The plaintiff provided these goods to the manufacturer of the porcelain mugs free of charge.
The defendant Main Customs Office (defendant, appellant in the appeal on points of law and respondent in the appeal on points of law) took the view that the costs paid by the plaintiff to advertising agencies and licensors for the development and use of the respective designs had to be added to the customs value of the supplied goods (decals, cork coasters, outer packaging) and subsequently levied import duties. The same was to apply to the costs of producing printing templates for the gift boxes.
The procurement of the materials supplied free of charge was handled by an agent, which received a commission from the plaintiff for this activity. The Main Customs Office took the view that these payments likewise had to be taken into account as increasing the customs value.
The Düsseldorf Fiscal Court, which decided the case at first instance (judgment of 11 August 2021 – 4 K 818/20 Z), largely agreed with the legal position of the customs administration. Only in the case of the cork coasters were the design costs and buying commissions not to increase the customs value, because these were to be regarded not as assists but as imported goods (Article 71(1)(b)(iv) UCC, Article 71(1)(a)(i) UCC). The Fiscal Court allowed an appeal on points of law to the BFH.
Following the oral hearing, the BFH referred the following questions concerning the interpretation of the customs valuation provisions of the UCC and the substantively identical provisions of the Customs Code to the CJEU (presented here in abbreviated form and limited to the provisions of the UCC):
- Are the costs of printing templates produced within the customs territory of the Union for containers to be added to the transaction value pursuant to Article 71(1)(a)(i) UCC or pursuant to Article 71(1)(b)(iv) UCC where the buyer established in the Union provides the printing templates to the suppliers of the containers in the third country free of charge in electronic form?
- Are the costs of producing printing templates within the customs territory of the Union for assists to be added to the transaction value pursuant to Article 71(1)(b)(i) UCC where the buyer established within the customs territory provides the printing templates to the suppliers of the assists in the third country free of charge in electronic form?
Is the criterion “value of materials contained in the imported goods” pursuant to Article 71(1)(b)(i) UCC to be interpreted as meaning that the value of an intellectual input undertaken within the customs territory and used to produce a material assist forms part of the value of that material assist, or is such an addition governed exclusively by Article 71(1)(b)(iv) UCC?
With these two questions, the BFH has put its finger on the problem and explained that the distinction between the scope of Article 71(1)(a)(ii) UCC in the case of container costs and Article 71(1)(b)(i) UCC in the case of material assists, on the one hand, and the intellectual assists referred to in Article 71(1)(b)(iv), on the other, is unclear.
In the case of container costs, the BFH considers an interpretation conceivable according to which point (b) contains a specific general rule for intellectual assists, which could mean that, when assessing intangible items for customs valuation purposes – here, printing templates for gift boxes – the application of point (a)(ii) (container costs) is excluded.
With regard to the second question referred, the BFH raises the issue of whether the value of an intellectual input (design) used to produce a material assist (decal) forms part of the value of that supplied item. This is doubtful because, according to the administrative interpretation, the production method chosen determines whether the costs are to be taken into account as increasing the customs value: if the design template is provided directly to the manufacturer in the third country, the costs would not be included in the customs value pursuant to point (b)(iv); if, however, it is first sent to another company, which uses it to produce production materials and supplies those materials to the manufacturer, the costs would have to be added pursuant to point (i). This would result in inconsistent customs valuations.
- Are buying commissions to be included in the value of assists pursuant to Article 71(1)(b)(i) UCC where those buying commissions are paid in connection with the procurement of the supplied input materials and not for the procurement of the goods as such?
The BFH suggests that this question should be clarified in order to ensure uniform application of EU law. This is to be welcomed. Pursuant to Article 71(1)(a)(i) and Article 72(e), buying commissions are not to be included in the customs value. The “detour” taken by the German customs administration, namely to include buying commissions where they are paid for the procurement of assists, is so contrary to the wording that it can be assumed that other Member States do not make such an addition.
- Does classification as “goods put up in sets” pursuant to General Rule 3(b) for the interpretation of the Combined Nomenclature mean that those goods must also be regarded as a single unit for customs valuation purposes?
The porcelain mugs, which in certain cases are imported and offered for sale together with a cork coaster and outer packaging, are classified as goods put up in sets pursuant to General Rule 3(b). In the view of the Fiscal Court in the main proceedings, however, classification as goods put up in sets for customs tariff purposes does not mean that they must also be regarded as a single unit for customs valuation purposes. The question is relevant because, if the goods put up in sets are not to be treated as a single unit for customs valuation purposes within the meaning of General Rule 3(b), the cork coasters are to be regarded as “imported goods”, with the consequence that point (b)(iv) applies and the value of the intellectual input and the buying commissions are not to be taken into account as increasing the customs value.
Conclusion
The comprehensive nature of the questions alone demonstrates that this case takes us into legally complex territory. Nevertheless, the questions raised are of considerable practical importance because they are relevant to the structuring of modern production processes, which are not uncommon in this or a comparable form.
As we are following the proceedings before the General Court, we will continue to keep you closely informed of further developments. Should you have any questions in the meantime regarding the relevance of individual costs for customs valuation purposes, please do not hesitate to contact us.
