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A Series of Sales: Determining the Customs Value under the Union Customs
Code
Martijn Schippers1

Abstract
New customs legislation – the Union Customs Code – became applicable in the EU on 1 May 2016.
These new regulations seem to abolish the use of the ‘first sale for export’ rule for determining the
customs value and introduce the ‘last sale for export’ rule. Although the EU is clearly attempting in
this way to increase the revenue derived from customs duties, it is questionable how the new
provisions for determining the customs value should be interpreted. This contribution discusses the
technical and practical consequences of introducing the ‘last sale for export’ rule, while also
examining how the introduction of this rule in the EU fits into a global pattern of customs valuation
systems shifting from a first sale to a last sale rule.

1. Introduction
Since the new EU customs legislation – the Union Customs Code ('UCC')2 – was introduced on 1 May
2016, customs value is supposed to be determined on the basis of the sale occurring immediately
before the goods were brought into the customs territory of the EU. This approach is also referred to
as the 'last sale for export' rule. Under the predecessor of the UCC,3 however, the customs value in
the case of successive sales could be based on an earlier or first sale. If a Producer sells goods to a
Middleman for 100 and the Middleman subsequently sells those goods to a Retailer for 150 before
they are imported into the EU, the sale for 100 can be used, under this first sale rule, to determine
the customs value upon importation, provided the sale qualifies as a sale for export. Needless to say,
using an earlier or first sale will result in lower customs duties being payable upon import by a party
subject to such duties. However, the abolition of the first sale rule in the EU cannot be seen in
isolation, but seems instead to reflect a global trend of customs valuation systems shifting away from
allowing the first sale and towards a system of requiring the customs value always to be determined
on the basis of the transaction value of the last sale for export.

This contribution examines the term 'sale for export', and more specifically the sale to be used for
determining the customs value in a series of sales under the UCC. To that end, part 2 discusses how
the World Trade Organisation (‘WTO’) and the World Customs Organization (‘WCO’) define the
expression ‘sold for export’ and the sale on which they believe the customs value should be
determined. Application of the first sale rule in a series of sales is discussed in part 3, along with
some general comments on how this rule (or a similar system) has been abandoned by Canada,
Australia and Japan and been subject to heavy discussion in the USA. Part 4 discusses the use of the
first sale rule under the UCC’s predecessor by analyzing relevant court cases and the then applicable
legal provisions, followed by an in-depth analysis of how customs values should be determined under
the UCC. The conclusion is set out in part 5.

2. Customs value in a series of sales under the CVA

If import duties are determined on the basis of an ad valorem right, the customs value is the taxable
amount used to determine the import duties payable.4 This is, therefore, one of the three elements,

1
The author is a member of the Global Trade & Customs team of EY in the Netherlands, programme
2
Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying
down the Union Customs Code (recast), Official Journal L 269/1, 10 October 2013, p. 1-101.
3
Article 147 Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the
implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code,
Official Journal L 253, 11.10.1993, p. 1-766.
4
Import duties can also be determined on the basis of specific rights (not discussed in this contribution).

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alongside the origin of the goods and classification of the goods according to the Combined
Nomenclature, to play a role in determining import duties.

The internationally accepted system for determining the customs value originates from the
Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994
(‘GATT Valuation Code’). The system implemented is based on the Valuation Code established by the
members of the General Agreement on Tariffs and Trade (‘GATT’) and was introduced during the
Tokyo Round in 1979. Only since 1 January 1994 and the establishment of the WTO, have WTO
members been obliged to follow the GATT Valuation Code, which is better known under its current
name of the Customs Valuation Code (‘CVA’). Since the EU is a member of the WTO and the
competence in the area of EU customs law lies with the EU institutions, the EU should take this
obligation into account.

According to the preamble of the CVA, the members of the GATT had the ambition to introduce a
"[...] fair, uniform and neutral system for the valuation of goods for customs purposes that precludes
the use of arbitrary or fictitious customs values". Therefore, "[...] the basis for valuation of goods for
customs purposes should, to the greatest extent possible, be the transaction value of the goods being
valued". Article 1(1) of the CVA states that “The customs value of imported goods shall be the
transaction value, that is the price actually paid or payable for the goods when sold for export to the
country of importation […]”. The transaction value is thus the primary method used to determine the
customs value, provided the imported goods are sold for export and the buyer can freely dispose of
the goods.5

The CVA does not explain the terms ‘sale’ and ‘sold for export’ in any further detail. Neither does it
contain any provisions or appendixes explaining what a sale entails and on which sale the customs
value should be based if a series of sales consists of two or more successive contracts for the sale of
goods. However, the WCO Technical Committee on Customs Valuation (‘TCCV’) gives more guidance
in its Advisory Opinions and Commentaries (referred to collectively as instruments). It should,
however, be noted that the instruments are non-binding on their members. Indeed, they are only an
"[...] advisory opinion on appropriate solutions based upon the facts presented".6 On the other hand,
however, it is important to remember that the CVA is legally binding, with the result that WTO
members are obliged to implement it in their domestic customs law. Since one of the objectives of
the CVA include the uniform application of the valuation rules and the TCCV is established to ensure,
at a technical level, uniformity in application of the CVA, one can argue that the TCCV’s view should,
although non-binding, be kept in mind when valuation rules are being applied. The TCCV may,
however, not supplement or amend certain essential or non-essential elements of the CVA. In that
case WTO members, in my eyes, may deviate from the TCCV’s view expressed in their instruments
insofar the WTO member take into account the WTO obligations that arise from the CVA itself.

The TCCV stipulated in Advisory Opinion 1.1 that the definition of a sale should be taken “in the
widest sense”.7 Furthermore, in 2007, the TCCV published Commentary 22.1, which gives guidance as

5
Article 1(1), CVA and WCO Technical Committee, Commentary 22.1: Meaning of the Expression ‘Sold
th
for Export to the Country of Importation’ in a Series of Sales, 24 meeting on 23/27 April 2007, point
13.
6
Annex II, para. 2(a), of the Agreement on Implementation of Article VII of the General Agreement on
Tariffs and Trade 1994.
7 nd
WCO Technical Committee, Advisory Opinion 1.1: The concept of ‘sale’. In the Agreement, 2 Session,
2 October 1981, 27.960, the WCO gives examples of situations in which imported goods are deemed
not to have been the subject of a sale.

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to which sale in a series of sales should be used as the basis for determining the customs value.8
According to this Commentary:

The Technical Committee concludes that in a series of sales situation, the price actually paid or
payable for the imported goods when sold for export to the country of importation is the price
paid in the last sale occurring prior to the introduction of the goods into the country of
importation, instead of the first (or earlier) sale.

The TCCV seems to prefer the use of the last sale in a series a sale structure over the first sale. The
TCCV held that the first sale cannot be considered as sale for export even if the transaction with the
importer has already been made, or the goods have been labelled according to the requirements of
the country of importation. The TCCV's view is based on the general text of the CVA and, in the eyes
of the TCCV, is consistent with the aim of the customs valuation system as introduced under the CVA.

It is, however, questionable whether Commentary 22.1 is consistent with the aim of the CVA. Does
the CVA prevail the use of the last sale over the use of an earlier of first sale? Does it prohibit the use
of an earlier sale in a series of sales structure? To answer these questions it is necessary to examine
the assumptions and arguments on which basis the TCCV presented its view in Commentary 22.1.
The paraphrased assumptions and arguments of the TCCV reads as follows:
1. Article 1 of the CVA implicitly assumes that the buyer would normally be located in the
country of importation, as Article 1.1(a)(i) refers to possible restrictions in the country of
importation that have an impact on the declared value.
2. A transaction value based on the first sale may not fully reflect the substance of the inputs
resulting from, or forming part of the entire commercial chain as envisioned by the General
Introductory Commentary, and Articles 1 and 8 of the CVA.9
3. The terms ‘buyer’ and ‘importer’ are used interchangeably among the provisions of the
Valuation Agreement and the various explanatory or additional texts.
4. In a series of sales, the first sale usually involves a sale between a producer and a local
distributor in the same country. Such sales cannot be used to determine the customs value
under Article 7 of the Valuation Agreement which excludes the use of a price in the domestic
market of the seller.
5. Customs authorities may find it difficult to verify the information related to the first sale.
Therefore, they will find it difficult to use the first sale rule as a basis for determining customs
value.

The five arguments supporting the TCCV’s view in Commentary 22.1 are analyzed in a contribution by
Ruessmann and Willems,10 who found the arguments and assumptions to be “flawed”. In my view,
however, it could also be claimed that the use of the first sale rule does not accord with today's
customs valuation system because the original idea of imposing a customs debt upon imports was to
protect the internal market in the country of importation. Establishing a fiscal barrier for goods
entering the country of importation increases the cost price of the imported goods, thus making it
easier for domestic producers in the country of importation to compete with foreign producers.

8
WCO Technical Committee, Commentary 22.1: Meaning of the Expression ‘Sold for Export to the
th
Country of Importation’ in a Series of Sales, 24 meeting on 23/27 April 2007.
9
Article 8 requires certain additions to an invoice price (e.g. royalties and assists). In a series of sales,
the buyer in the first sale is not necessarily the party who pays royalties or provides assists. Thus the
application of the first sale rule would allow such costs to be excluded from the transaction value
which is against the intent of Article 8.
10
L. Ruessmann and A. Willems, ‘Revisiting the first sale for export rule: an attempt to remove fairness in
the interest of raising revenues, without improving legal certainty’, World Customs Journal, Vol. 3,
No. 1, p. 4-5.

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From that perspective, it makes no sense for customs duties to be determined by the taxable amount
as this can be reduced by using the transaction value of an earlier or first sale. Another reason to
disallow the first sale rule is that, in principle, only related parties can use an earlier or first sale,
given that the first sale rule requires the invoice for the earlier sale to be disclosed to the importer.11
Any such disclosure would give the importer insight into the margin fixed in a previous sale. It is
highly unlikely, therefore, that the margin on a previous sale would be disclosed to the importer if
the parties in the supply chain are unrelated. Abandoning the first sale rule in favour of the last sale
rule will, therefore, create a level playing field between related and non-related parties. On the other
hand, if goods are clearly intended for the market of the country of importation, it seems strange
that if they are sold multiple times while on the high seas (as often happens in the case, for example,
of the oil industry), only the last sale will constitute a sale for export. This would also be strange if
this last sale had been concluded between parties established within the EU.

In sum, Commentary 22.1 clearly intends to ensure uniformity in interpretation and application of
the transaction value method, however, as the above examination shows, it is debatable whether the
TCCV’s view is in conformity with the aim of the CVA. Apart from the debate about the aim of the
CVA, the CVA, in my eyes, does not prohibit the use of an earlier or first sale if it is been given its
plain and ordinary meaning. In my view, it could therefore be argued that the TCCV’s view expressed
in Commentary 22.1 restricts the scope of the term ‘sold for export’ as the TCCV seems to amend the
CVA. Consequently, in my view, WTO members, as previously explained, can deviate from
Commentary 22.1 and may continue to apply the first sale rule as the first sale rule is not inconsistent
with WTO obligations which arise for the WTO members from the CVA.

3. Reconsidering the use of an earlier or first sale: A global overview

Countries such as Australia, Canada, Japan and the US, as well as the EU, allowed an earlier or first
sale to be used after the CVA introduced a customs valuation system in which the customs value was
based on the transaction value of a 'sale for export'. Over time, however, most of these countries
changed their views on this. Although the changes to the customs valuation systems in these
countries were all intended to move away from the use of an earlier or first sale, the alterations
made in their customs valuation systems differed from country to country, as briefly discussed
below.

Canada decided to disallow the use of the first sale rule as early as the 1990s, following a Tribunal
decision.12 The legislator responded to this decision by amending Article 48(1) of the Canadian
Customs Act, which currently reads:

Subject to subsections (6) and (7), the value for duty of goods is the transaction value of the
goods if the goods are sold for export to Canada to a purchaser in Canada […].

By adding the words ‘to a purchaser in Canada’, the Canadian legislator introduced an resident
requirement for a sale to qualify as a sale for export. Sections 2 and 2.1 of the Valuation for Duty
Regulations provide further guidance on the definition of ‘purchaser in Canada’.13 An individual or
business that is a resident of Canada qualifies as a purchaser in Canada. So, too, does a non-resident
with a permanent establishment in Canada. Even, however, if the purchaser is not resident in Canada
or a non-resident does not have a permanent establishment there, the ‘purchaser in Canada’ rule still
applies if the person for whom the value for duty is being determined imports the goods for its own

11
In practice, however, there have been examples of third-party procurement companies using the first
sale rule, such as in the clothing industry, where import duties are relatively high.
12
Harbour Sales (Windsor) Ltd v. D/MNR [1994] 4647 ETC.
13
Valuation for Duty Regulations, SOR/86-792.

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use or on the basis of speculation of future sales.14 In other words, the transaction method applies in
that situation, too.

Australia introduced the concept of the ‘import sales transaction’, whereby a contract qualifying as
the import sales transaction must be a "[...] contract of sale for the importation of goods into
Australia".15 If several such contracts exist, the relevant contract is whichever of the contracts was
made last. Literature and case law confirm that the expression ‘import sales transaction’ is a
successful arrangement for shifting away from the first sale rule.16 This concept has some similarities
with the ‘sale for import’ concept that some other WTO members adopted in an effort to move away
from the first sale rule.

Although Canada and Australia felt the need to abandon application of the first sale rule before the
Technical Committee of the WCO published Commentary 22.1, the debate on the expression 'sale for
export' did not start in the EU (see part 4), the USA and Japan until after publication of
Commentary 22.1.

In the USA it is possible to use the price paid or payable by the buyer in the first or an earlier sale,
provided the importer can produce sufficient evidence that this was an arm's length sale and that, at
the time of such sale, the merchandise was clearly destined for export to the USA.17 However, after
the Customs and Border Protection Agency ('CBP') responded to the WCO’s publication of
Commentary 22.1 by issuing a Federal Register notice on 24 January 2008, in which it stated that it
would no longer allow the application of an earlier or first sale, the question of whether to retain the
first sale rule triggered extensive debates.18 A business lobby was started,19 arguing that blocking the
use of an earlier or first sale would ignore significant judicial precedent, overturn almost two decades
of agency practice and amount to a hidden tax on US consumers.

Eventually the US International Trade Commission was commissioned to prepare a report providing
Congress with information on the use of the first sale method of valuing import transactions over a
12-month period (September 2008 - August 2009).20 The information in this report was based on
information given by importers asked to state whether transaction values used in import

14
Canada Border Services Agency, 4 July 2014, Customs Valuation – Purchaser in Canada, Memorandum
D13-1-3.
15
Section 161(1) of the Australian Customs Act 1901. Article 154 of that Act defines the expression
‘import sales transaction’.
16
Administrative Appeals Tribunal of Australia, 29 April 1991, Re Midland Metals Overseas Ltd v.
Collector of Customs (1991) 13 AAR 389; A. Bakker and B. Obuoforibo (eds.), Transfer Pricing and
Customs Valuation: Two Worlds to Tax as One, IBFD: Amsterdam 2009, p. 257.
17
T.D. 96-87, vols. 30/31, Cust. B. & Dec. Nos. 52/1 (2 January 1997); Customs Informed Compliance
Publication, entitled Bona Fide Sales and Sales for Exportation to the United States, and numerous CBP
rulings.
18
Proposed interpretation of the expression ‘‘sold for exportation to the united states’’ for purposes of
applying the transaction value method of valuation in a series of sales (USCBP–2007–0083), Customs
Bulletin and Decisions, Vol. 42, No. 7, February 6, 2008.
19
See, for example, the letter of 14 May 2008 sent by the American Apparel & Footwear Association, the
national trade association of the apparel and footwear industries, and their suppliers, advising
Congress to prevent the CBP from taking further action to revoke the first sale rule, and the letter of
11 February 2008 signed by 36 industry organizations and 75 companies. A website was even launched
to enable businesses to express their concerns about the revocation of the first sale rule at
'savefirstsale.com' (no longer in the air).
20
Food, Conservation, and Energy Act of 2008 (more commonly known as the ‘Farm Bill’; 19 U.S.C. 1484
note). US International Trade Commission, Use of the ‘First Sale Rule’ for Customs Valuation of U.S.
Imports Investigation No. 332-505 USITC Publication 4121, December 2009.

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declarations were based on an earlier or first sale.21 The report concluded that there was no strong
evidence to suggest that an earlier or first sale was used more often in specific sectors, and neither
did any substantial number of importing entities make use of the first sale rule. Indeed, only 8.5% of
US importers used this rule, and these imports accounted for only 2.4% of the value of total US
imports. During a subsequent hearing before the Senate Finance Committee, the CBP said that it
would no longer seek to revoke the first sale rule, and Congress eventually blocked this revocation.
To date, therefore, it is still possible to use the first sale rule when declaring goods for import into
the USA. As the aim of the tax reform proposed under the Trump presidency seems, however, to be
to protect the internal market, the first sale rule could now conceivably come under attack again.

In Japan, new customs legislation became effective on 1 April 2013. Before then, and under certain
conditions, Japanese customs authorities allowed sales between two non-resident entities to be used
for customs valuation purposes. This system was similar to the first sale rule in Canada, the US and
the EU. Under the revised Japanese customs legislation, however, customs authorities can reject the
use of sales prices as the basis for determining the customs value if the buying entity is a non-
resident of Japan.22 The residency requirements seem even stricter than in Canada since there is no
Japanese equivalent of 'the escape for non-Canadian residents'.23 Furthermore, Japanese customs
legislation now defines a sale for export as “[...] the transaction that brings the goods to Japan”.

4. Customs value in a series of sales under EU customs law

4.1 Council Regulation (EEC) No 1224/80

The Community Customs Code (‘CCC’),24 the predecessor of the UCC, became applicable on 1 January
1994. Before the CCC was introduced, EU customs law was contained in several regulations, each
covering a separate part of EU customs law. The basic EU regulation containing the rules for
determining customs value was Council Regulation (EEC) No 1224/80.25 The equivalent of Article 1
CVA was embedded in Article 3 of that regulation. Further guidance on Article 3 was given in Article 6
of Commission Regulation (EEC) No 1495/80.26 After being amended one year after the regulation
was published, Article 6 stated that:

For the purposes of Article 3 of Regulation (EEC) No 1224/80 the fact that the goods which are
the subject of a sale are declared for free circulation in the Community shall be regarded as
adequate indication that they were sold for export to the customs territory of the Community.
This indication shall also apply in the case of successive sales before valuation; in such case
each price resulting from these sales may, subject to the provisions of Regulation (EEC)
No 1496/80, be taken as a basis for valuation. However, where goods are used in a third

21
‘First Sale Declaration Requirement’ of 25 August 2008 (73 FR 49939) issued by the CBP.
22
Under Japanese customs law, a Japanese resident is a person who has “domicile, residence, head
office, branch, office, business establishment or any other facilities in Japan”.
23
If a non-resident purchaser imports goods for own use or on the basis of speculation of future sales,
the 'purchaser in Canada' requirement is still met, and the transaction value method can thus still be
applied.
24
Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code,
Official Journal L 302, 19.10.1992, p. 1-50.
25
Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes,
Official Journal L 134, 28.05.1980, p. 1-9.
26
Commission Regulation (EEC) No 1495/80 of 11 June 1980 implementing certain provisions of
Articles 1, 3 and 8 of Council Regulation (EEC) No 1224/80 on the valuation of goods for customs
purposes, Official Journal L 154, 21.6.1980, p. 14-15 amended by Commission Regulation (EEC)
No 1580/81 of 12 June 1981 amending Regulation (EEC) No 1495/80 implementing certain provisions
of Articles 1, 3 and 8 of Council Regulation (EEC) No 1224/80 on the valuation of goods for customs
purposes, Official Journal L 154, 13.06.1981, p. 36-37.

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country between the time of sale and the time of entry into free circulation the customs value
need not be the transaction value.

In its judgment in the Unifert Handels GmbH27 case, which was ruled on under Regulation (EEC)
No 1224/80, the Court of Justice (‘CJEU’) seems for the first time to have given more guidance on
how the customs value should be determined in cases of successive sales, with two preliminary
questions (questions 1A and 1B) being of particular interest in this respect:

1A Can the transaction value within the meaning of Article 3(1) of Regulation No 1224/80 also
be the price stipulated in a contract of sale between persons resident in the Community?
1B If Question 1(a) is answered in the affirmative, may the person concerned determine the
price to be taken as the basis for customs valuation purposes if prices stipulated in other
contracts of sale fulfil the requirements of Article 3(1) of Regulation No 1224/80? Is the
person concerned bound by his choice once exercised?

On question 1A the CJEU answered that the “[…] criterion which emerges from the term ‘sold for
export’ relates to the goods and not to the situation of the seller.”28 In other words, the decisive
criterion is whether it can be proven that the goods were sold for the purpose of export to the
customs territory of the EU. The place of residence of the parties involved in the sale for export is not
a criterion. This means that if a sale is concluded between two entities established in the EU before
the goods’ arrival in the customs territory of the EU, the transaction value of that sale can be used to
determine the customs value. This view reflects the CJEU’s interpretation of Article 3 Regulation
No 1224/80 and is “born out” by Article 6 Regulation (EEC) No 1495/80.29 In my opinion, ‘born out’
implies that even if Article 6 had not been included in Regulation (EEC) No 1495/80, the CJEU would
still have reached the same conclusion. Article 6 was, in my view, used simply to strengthen the
CJEU’s argument that the place of residence of the parties involved in the sale is not of interest and
that the criterion emerging from the term ‘sold for export’ relates to the goods. It can be argued,
therefore, that, in arriving at its conclusion, the CJEU adopted a more teleological rather than a
purely textual approach.

With respect to question 1B the CJEU ruled that it follows from Article 6 of Regulation (EEC)
No 1495/80 that:

[…] it is permitted to use not only the price of a sale concluded immediately before export from
a non-member country, but also any of the prices relating to sales made after export but before
release into free circulation in the Community, irrespective of the place where the parties to the
contract of sale are established.30

The CJEU clearly confirms that if multiple sales occur after export, but before the goods are released
into free circulation, the customs value can be based on an earlier sale than the sale that brings the
goods into the customs territory of the EU. The question, however, is why did the CJEU take this
view? Did it do so based on the plain and ordinary meaning of Article 3 of Regulation No 1224/80? Or
was it necessary to establish the object of Article 3 of Regulation No 1224/80 by referring to the
guidance provided by the European Commission in Article 6 Regulation (EEC) No 1495/80? In other
words, is Article 3 of Regulation No 1224/80 unambiguous and can it be derived from this provision
alone that, in the event of successive sales, an earlier or first sale can be used to determine the
customs value? Or is it only possible to establish the object of this provision by reference to other

27
CJEU 6 June 1990, C-11/89, ECR 1990 I-02275 (ECLI:EU:C:1990:237).
28
CJEU 6 June 1990, C-11/89, ECR 1990 I-02275 (ECLI:EU:C:1990:237), para. 11.
29
CJEU 6 June 1990, C-11/89, ECR 1990 I-02275 (ECLI:EU:C:1990:237), para. 12.
30
CJEU 6 June 1990, C-11/89, ECR 1990 I-02275 (ECLI:EU:C:1990:237), para. 13.

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sources? This is an important question because it gives insight into the extent to which the
interpretation of ‘a sale for export’ is influenced by Regulation (EEC) No 1495/80, which was drafted
by the European Commission. Would the CJEU's decision have been different if, for example,
Regulation (EEC) No 1495/80 had prohibited the use of the first sale rule? This is important because,
under the UCC, the European Commission clearly limits the use of an earlier or first sale.

It could be claimed that the CJEU allows the use of an earlier or first sale only because it reads
Article 3 of Regulation No 1224/80 in conjunction with Article 6 of Regulation (EEC) No 1495/80. This
view is based on the fact that the CJEU’s conclusion in paragraph 13 of its judgment begins with "It
follows from that provision [...]". It could therefore be argued that the CJEU would have come to a
different conclusion if Article 6 or a delegated act of the European Commission had limited the use of
an earlier or first sale. Based, however, on a court decision of the Canadian Tribunal, it could be
claimed mutatis mutandis that Article 3 of Regulation No 1224/80 is ambiguous. The Canadian
Tribunal was asked to give its view on Article 48(1) of the Canadian Customs Act – a provision similar
to Article 3 of Regulation No 1224/80 – before that provision contained the addition ‘to a purchaser
in Canada’.31 The Tribunal ruled that this provision should be given its plain and ordinary meaning
because the provision was not ambiguous. Based on this plain and ordinary meaning, the Canadian
Tribunal ruled that the use of an earlier sale was possible under the former Article 48. If translated
into EU customs law, this would mean that the CJEU’s decision to allow the use of an earlier or first
sale could also be based on Article 3 of Regulation No 1224/80 itself, and that Article 6 of Regulation
(EEC) No 1495/80 was used only to reinforce the CJEU's view.

4.2 Community Customs Code

After the CCC came into force, Article 147 of the Customs Code Implementing Provision (CCIP)32
replaced Article 6 of Regulation (EEC) No 1495/80. However, fairly soon after the CCIP became
applicable, Article 147 was amended33 in order to ensure the uniform application of Article 29.34 To
that end, terms of evidence were introduced in Article 147 CCIP. My impression is that these terms
were introduced so as to prevent excessive use of an earlier or first sale as the basis for determining
the customs value and that this could maybe be seen as the first attempt to abolish the use of this
rule in EU customs law.

The amended Article 147 reads as follows:

In the case of successive sales before valuation, only the last sale, which led to the introduction
of the goods into the customs territory of the Community, or a sale taking place in the customs
territory of the Community before entry for free circulation of the goods shall constitute such
indication.

31
See part 3 of this contribution.
32
Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the
implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code,
Official Journal L 253, 11.10.1993, p. 1-766.
33
Commission Regulation (EC) No 1762/95 of 19 July 1995 amending Regulation (EEC) No 2454/93 laying
down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the
Community Customs Code, Official Journal L 171, 21.7.1995, p. 8-35.
34
Initially the customs value, in case of successive sales, could be determined on an earlier or first sale,
without the need to provide any evidence to the customs territory that this sale of goods took place
for export to the customs territory of the EU. The lack of such provision led to extensive (ab)use of the
first sale rule. The European Commission therefore found that it was appropriate to set out terms of
evidence in Article 147 CCIP implying the obligation to demonstrate to the satisfaction of the customs
authorities that the earlier or first sale took place for export to the customs territory.

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Where a price is declared which relates to a sale taking place before the last sale on the basis
of which the goods were introduced into the customs territory of the Community, it must be
demonstrated to the satisfaction of the customs authorities that this sale of goods took place
for export to the customs territory in question.

The provisions of Articles 178 to 181a shall apply.

The European Commission has provided guidance on how an importer can satisfy the customs
authorities that a sale taking place before the last sale on the basis of which the goods were
introduced into the customs territory of the EU qualifies as a sale for export and, as such, can be used
for valuation purposes. Commentary 7 of the Customs Code Committee (Customs Valuation
Section)35 includes a non-exhaustive list of possible elements of proof:
- The goods are manufactured according to EC specifications, or are identified (according to the
marks etc. they bear) as having no other use or destination;
- The goods in question were manufactured or produced specifically for a buyer in the EC;
- Specific goods are ordered from an intermediary who sources the goods from a manufacturer
and the goods are shipped directly to the EC from that manufacturer.

Although all the above conditions involve proving that the goods are destined for the customs
territory of the EU, no residency requirements have been included.

The use of an earlier or first sale under the CCC was confirmed by the CJEU's ruling in the Carboni e
derivati Srl case, where the court held in paragraphs 28 to 30 that:36

Article 29(1) provides that the customs value concerns only goods ‘sold for export to the
customs territory of the Community’. It follows that it must be agreed, at the time of sale, that
the goods originating in a non-member country will be transported into the customs territory of
the Community (see, by analogy, with regard to Article 3(1) of Council Regulation (EEC) No
1224/80 of 28 May 1980 on the valuation of goods for customs purposes (OJ 1980 L 134, p. 1),
a provision essentially identical to Article 29(1) of the Community Customs Code, Case C‑11/89
Unifert [1990] ECR I‑2275, paragraph 11).

Under the first sentence of Article 147(1) of the implementing regulation, the fact that the
goods which are the subject of a sale are declared for free circulation is to be regarded as
adequate indication that the abovementioned condition has been fulfilled. The second sentence
of Article 147(1), in the version in force at the time of the facts in the main proceedings,
provided that that indication was also to apply in the case of successive sales before valuation.

Thus, in the case of successive sales, the prices relating to sales made after export, but before
release into free circulation in the Community, may be taken into account for the purpose of
determining the ‘transaction value’ within the meaning of Article 29(1) of the Community
Customs Code (see, by analogy, Unifert, paragraph 13).

Essentially the CJEU repeats its Unifert Handels GmbH decision in the Carboni e derivati Srl case.
Again, the court allows an earlier or first sale to be used to determine the customs value in the event
of a series of sales. Although the CJEU has not changed its position, it remains questionable – as
explained in part 3.1. of this contribution – whether this position is based purely on a textual analysis

35
Commentary 7 of the Customs Code Committee (Customs Valuation Section) on the application of
Article 147 of Commission Regulation (EEC) No 2454/93 of 2 July 1993.
36
CJEU 28 February 2008, C-263/06, ECR 2008 I-01077 (ECLI:EU:C:2008:128), paras 28-30.

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of Article 147 CCIP. Would the CJEU have reached a different conclusion if Article 147 had not been
embodied in EU customs law? Again, this is an interesting question under the UCC.37

In Carboni e derivati Srl, which related to anti-dumping, the CJEU ruled that customs authorities are
not allowed to choose the price of the first sale as a basis for calculating the customs value when
determining an anti-dumping duty if the importer uses a later sale for export.38 When deciding which
price to take as a basis for determining the customs value of goods in a series of sales, the importer is
allowed to select from the prices agreed for each of the sales.39 However, although the importer is at
liberty to choose a price, he is not permitted to adjust his declaration once he has chosen which price
to use to determine the customs value.

4.3 Modernised Community Customs Code

The Modernised Community Customs Code (‘MCC’)40 represented an attempt to introduce new
customs legislation in the EU and was intended to replace the CCC. However, although the MCC
entered into force on 24 June 2008, its provisions never become fully applicable as it was repealed by
the UCC in 2013.41 The main aim of the MCC was to implement IT solutions in order to create a
simple and paperless environment for customs and trade. The MCC Implementing Provisions
(‘MCCIP’)42 also set out new provisions concerning the valuation of imported goods. In Article 230-2
of the 2009 draft edition (and later editions) it was proposed that “[…] in the case of multiple
contracts of sale, transaction value is determined on the basis of the last sale in the commercial
chain”.

In an earlier draft of the MCCIP, however, the last sale condition was lacking, while this draft –
interestingly – included a paragraph allowing the first sale rule. Ruessmann and Willems suggested
that this was probably because, at that time, the member states had not yet decided on how the last
sale rule should be introduced into EU customs law,43 while the first sale rule was also treated
differently by the EU member states under the CCC.

Already under the MCCIP proposals, parties in industry opposed the abolition of the first sale rule.
The American Chamber of Commerce to the European Commission ('AmCham'), for example,
published a position statement stating that the changes to the European valuation rules could be
interpreted as a breach of the CVA. It also warned the EU that the MCCIP could potentially cost EU
businesses and consumers millions of euros per year.44 Moreover, AmCham pointed out, the
European Commission, in contrast to the US Congress, had not conducted an impact assessment of
the proposed changes. The most important reasons for arguing that the EU should not move away
from the first rule were that, by doing so, the EU would introduce a new concept of valuation,
without this being defined in EU or WTO customs law. It could therefore lead to legal uncertainty and
to differing interpretations by EU member states, and this would not align with the objective of
achieving uniformity in customs processes throughout the EU. Besides the voices of protest from

37
See part 4.4 of this contribution.
38
CJEU 28 February 2008, C-263/06, ECR 2008 I-01077 (ECLI:EU:C:2008:128), para. 33.
39
CJEU 6 June 1990, C-11/89, ECR 1990 I-02275 (ECLI:EU:C:1990:237), paras 16 and 21.
40
Regulation (EC) No 450/2008 of the European Parliament and of the Council of 23 April 2008 laying
down the Community Customs Code (Modernised Customs Code). Official Journal L 145, 4.6.2008.
41
Article 286(1), UCC.
42
Consolidated preliminary draft of the Commission Regulation of the Modernised Community Code
Implementing Provisions (MCCIP), Taxud/1717/2008 Rev 1.1, Brussels 24.02.2009.
43
L. Ruessmann and A. Willems, ‘Revisiting the first sale for export rule: an attempt to remove fairness in
the interest of raising revenues, without improving legal certainty’, World Customs Journal Vol. 3,
No 1, p. 6-7.
44
AmCham position on the proposed changes to EU customs valuation of 24 April 2012.

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industry, the European Parliament, too, called for the first sale rule to be retained.45 The European
Commission nevertheless continued to pursue its plans. Consequently, and even though the MCC
never became applicable, the European Commission's position in this matter was made clear.

4.4 Union Customs Code

4.4.1 Last sale rule in EU customs law

4.4.1.1 Introduction
The wording of Article 70 UCC is practically the same as Article 29 CCC. Since the MCCIP made it clear
that the European Commission’s intention was to abolish the first sale rule, it still remained to be
seen what the Commission would come up with in the Implementing Act of the UCC (‘IA UCC’) after
the UCC entered into force on 30 October 2013. The IA UCC was ultimately published in the Official
Journal of the European Union on 29 December 2015. Article 128(1) IA UCC reads as follows:

The transaction value of the goods sold for export to the customs territory of the Union shall be
determined at the time of acceptance of the customs declaration on the basis of the sale
occurring immediately before the goods were brought into that customs territory.

This shows that the European Commission has clearly maintained the view set out in the draft
versions of the MCCIP, given that the above Article 128(1) IA UCC deviates from Article 147 CCIP and
seems to imply that an earlier or first sale can no longer be applied to determine the customs value.46
From the Commission’s non-binding guidance document on customs valuation (‘Guidance
Document’) it can be derived that the sale that is relevant for valuation purposes is the last sale
taking place before the goods physically cross the border of the EU customs territory.47 To put it in
Japanese customs terms: the sale that brings the goods to the customs territory of the EU is the sale
for export that should be used to determine the customs value upon import. The UCC does not
introduce a ‘purchaser in the EU’ requirement, as embodied in Japanese and Canadian customs
law.48 In my opinion, the absence of this requirement is consistent with commercial reality since a
non-EU-established purchaser involved in a sale should not be burdened with the need to use the
transaction value method to determine the customs value (see also part 3 of this contribution).

The European Commission’s reasoning for abolishing the first sale and move away from the settled
case-law of the CJEU and provisions of the CCC, in particular Article 147 CCIP, are based on the
following arguments:49

45
European Parliament resolution of 1 December 2011 on modernisation of customs (2011/2083(INI)),
P7_TA-PROV(2011)0546, under 46.
46
Not all member states were in favour of abolishing the first sale. The UK, for example, stated that
"Despite the best efforts of HM Revenue and Customs (HMRC), it became increasingly difficult to
maintain the current EU position on the use of an earlier sale due to increasing pressure from the EU
Commission to withdraw it and a general lack of support from other member states." See ‘Customs
Information Paper 41 (2015): transitional arrangements for the withdrawal of the 'earlier sale' facility
under the Union Customs Code’, published on 3 November 2015.
47
European Commission, 28 April 2016, Guidance Document on Customs Valuation Implementing Act
Articles 128 and 136 UCC IA, and Article 347 UCC IA, 28 April 2016, Taxud B4/ (2016) 808781
revision 2.
48
See part 3 of this contribution.
49
M. Perrick, P. Vander Schueren and M. Neville, ‘First sale’ under severe pressure in the EU, Practical
Trade & Customs Strategies Volume 3, Issue 6, p 13-15. The authors point out why in their view the
European Commission’s reasoning for abolishing the first sale is not convincing.

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- The need to provide a clear and simple basis for the valuation of goods in international trade.
In that regard, the European Commission feels that the last sale eases the task of the
Customs authorities to verify the information.
- The last sale rule is in conformity with Commentary 22.1 of the TCCV.
- Discrimination against small and medium Enterprises as they do not have related
intermediate companies, and the first sale rule is typically only applied between related
intermediate companies part of a multinational company (see part 2).
- Difference between the customs value and amount entered unto importer’s accounts.

Different stakeholders called for a UCC that continued the first sale rule. Among others in a joint
statement they strongly opposed against the introduction of the last sale rule.50 The concerns were,
however, not be taken into account and, as Article 128(1) IA UCC shows, the UCC moves away from
the first to the last sale rule.

4.4.1.2 What is a last sale?

The main issue remains what the European Commission means by "[...] sale occurring immediately
before the goods were brought in the customs territory." One important question in this respect is
the extent to which purchase orders constitute a sale for export. A few weeks after the IA UCC was
published, the Dutch Customs Authorities (‘DCA’) issued a memo stating that a purchase order
should also be regarded as a sale.51 Consequently, purchase orders agreed between parties in the
'post-import' supply chain could potentially constitute a sale for export in the eyes of the DCA. In my
opinion, the DCA’s interpretation is incorrect as a purchase order cannot usually be regarded as a
sale for customs purposes, given that such orders lack an essential character of a sale: transfer of
ownership.

From a practical point of view, an importer in a supply chain working with back-to-back ordering will
not be informed about purchase orders in later stages of the supply chain, thus making it impossible
for that importer to comply with this interpretation. Furthermore, if a purchase order does constitute
a sale, it will not be the last sale before the goods cross into the customs territory and so cannot be
regarded as the last sale. In example 1, therefore, the customs value should, in my opinion, be
determined on the basis of the sale at 100 between Company A and the Producer.

Purchase order

Invoice flow Producer 100 Company A 120 Company B

(USA) (CH) (EU)
Goods flow

Non-EU EU

Example 1: Purchase order

4.4.1.3 CJEU’s interpretation of Article 70 UCC, based on CJEU’s ruling in Unifert Handels GmbH and
Carboni e derivati Srl
Based on the analysis in parts 4.1 and 4.2 of this contribution, it could be argued that Article 70 UCC
is ambiguous and that, based on Unifert Handels GmbH and Carboni e derivati Srl, the first sale rule
can be applied, given that the wording of Article 70 UCC is equivalent to that in Article 29 CCC and

50
Joint Statement of concern on proposed Valuation Principles, October 2014.
51
After the Guidance Document was published, the DCA issued a new memo on the interpretation of
Article 128 IA UCC. Although not explicitly stated in this memo, the DCA would seem no longer to
believe that a purchase order should in any event be regarded as a sale for export.

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Article 3 of Regulation No 1224/80. If, however, the CJEU shares this view, the validity of the IA UCC,
in particular Article 128, should be questioned, since this provision would then be inconsistent with
the UCC. The inference then would be that the European Commission has abused its delegation
power as the Commission is only allowed to adopt measures that are necessary to implement legally
binding Union acts and “[…] in exercising an implementing power, the Commission may neither
amend nor supplement the legislative act, even as to its non-essential elements.” 52/53 If the CJEU
were to allow the first sale rule under the UCC, I would argue that the IA UCC has clearly amended
essential elements of the UCC. From a purely legalistic point of view, therefore, the EU’s abolition of
the first sale rule would seem not yet to be carved in stone.54

4.4.1.4 Mitigating the consequences of introducing the last sale rule?

Businesses could respond to the introduction of the last sale rule by deciding to import goods at an
earlier stage of the supply chain and so by having them imported by a party positioned earlier in the
value chain.55 This will serve to mitigate the consequences of this rule, whereby the customs value is
determined on the basis of the transaction value of a later sale. However, this will lead to VAT
registration requirements and the need to submit local (and potentially intra-community) VAT
returns, as well as Intrastat returns. In addition, the introduction, but also the mitigation, of the last
sale rule will have an impact on the IT systems of businesses handling imports to the EU.

4.4.1.5 Grandfathering clause

The legal framework of the UCC provides for a grandfathering clause, in Article 347 IA UCC, to allow
importers to use the first sale rule until 31 December 2017, provided the person on whose behalf the
declaration is lodged is bound by a relevant contract concluded before 18 January 2016. The IA UCC
provides no further guidance on what such contracts should entail and whether they should explicitly
refer to the earlier or first sale agreement. However, the way in which these transitional
arrangements should be interpreted is explained in the non-binding Guidance Document, which
states that a ‘relevant contract’ can even refer to framework contracts or the like, insofar as such
contract relates exclusively to a product and specifies a precise delivery date, quantity and purchase
price. The European Commission also points out that a contract does not necessarily need to be
concluded between the buyer and seller, but can also be between the buyer and parties to whom the
buyer forwards the goods. In my opinion, a ruling between the customs authorities and the economic
operator should also constitute a sufficient basis for applying these transitional arrangements, both
because of the legitimate expectations on the part of the economic operator and because the
Guidance Document makes clear that the reference to a ‘relevant contract’ is not intended to be
restricted to a sales contact between a buyer and seller. Of course, any such ruling will have to have
been concluded before 18 January 2016.

4.4.2 Introduction of the ‘domestic sale’

The Guidance Document also introduces the concept of the ‘domestic sale’, with the Commission
stating that such a sale cannot constitute a sale for export. According to the Guidance Document, the
sale prior to the domestic sale in a series of sales – if that sale constitutes a sale for export – should

52
Article 291(1), Treaty on the Functioning of the European Union (‘TFEU’).
53
CJ EU 15 October 2014, C-65/13 (European Parliament/European Commission), Official Journal of the
European Union C 462, p. 5, para. 45.
54
A case is currently pending at the CJ EU on the conformity of Article 145(3) CCIP with the provisions of
the CCC. A-G Saugmandsgaard Øe concluded that Article 145(3) CCIP must be declared invalid as it
runs counter to Article 29 CCC read in conjunction with Articles 78 and 236(2) of the CCC. See A-G
Saugmandsgaard Øe of 30 March 2017, C-661/15, ECLI:EU:C:2017:252. A similar question and view
are, in my view, likely in the event of a national court referring a preliminary question on the
compatibility of Article 128(1) IA UCC to the CJEU.
55
M.L. Schippers, ‘BEPS and Transfer Pricing but What about VAT and Customs?’, EC Tax Review 2016/3,
p. 178.

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be used to determine the customs value of the imported goods. The introduction of the domestic
sale seems, therefore, to make it possible, to a certain extent, for the customs value under the UCC
to be determined on the basis of a sale before the sale bringing the goods into the EU customs
territory: in other words, the revival of the first sale rule!

4.4.2.1 What is a ‘domestic sale’?

According to the Guidance Document, a domestic sale is a sale concluded between a buyer and seller
who are both established in the EU. The Guidance Document gives no further explanation as to what
the European Commission means by 'established in the EU'. However, Article 5(31)(b) UCC states the
definition of a person established in the customs territory of the EU to be "[...] in the case of a legal
person or an association of persons, any person having its registered office, central headquarters or a
permanent business establishment in the customs territory of the Union".56 It is not necessary,
therefore, to have capital and resources in the EU as being established as an EU legal person seems
to be sufficient, even if that person has all its activities outside the EU. The definition of a 'permanent
establishment', in turn, is given in Article 5(32), which states this to be "[...] a fixed place of business,
where both the necessary human and technical resources are permanently present and through
which a person's customs-related operations are wholly or partly carried out."

Although the wish to attract businesses to the EU seems to be one of the drivers behind some of the
new rules in the UCC, it is doubtful whether the EU will achieve its aim in this respect since the
establishment requirements do not force a business to perform activities within the territory.
Instead, it is sufficient merely to have a registered office in the EU. A company could, therefore,
easily make use of ‘the revival of the first sale rule’ by moving its registered office to the EU or setting
up a permanent establishment in an EU member state.

4.4.2.2 Justification of the ‘domestic sale’

The concept of the domestic sale could be understood to mean that where the customs value is
based on the transaction value of a domestic sale, the value added between parties established in
the EU should be subject to import duties. It could be argued, however, that it would be
inappropriate to levy import duties on value added in the country of importation if the added value
can be allocated to production factors located in the country of importation only. If the companies
involved in the domestic sale are established in the EU ‘on paper’ only, it would be hard, for the
above reason, to justify use of the domestic sale.

4.4.2.3 ‘Domestic sale’ vs. CJEU ruling in Unifert Handels GmbH

Despite the justification set out in 4.4.2.2, the introduction of the ‘domestic sale’ principle would not
seem to be in line with the CJEU's ruling in Unifert Handels GmbH, where the court held that the
place of residence of the parties involved in the sale is not decisive for determining whether a sale
qualifies as a sale for export. Instead, there has to be sufficient indication that the goods are meant
for export into the customs territory of the EU. My impression is that the concept of the 'domestic
sale' will not stand up in court. However, only time will tell whether this impression is correct.

4.4.2.4 Practical consequences of introducing the ‘domestic sale’

The domestic sale could potentially lead to a declining use of the transaction method in daily
practice. This is clearly not in line with the CVA, which prescribes that the transaction value method is
the primary method for determining the customs value and should be used as often as possible.
Example 2 illustrates how application of the domestic sale could lead to a declining use of the
transaction value method. If the Middleman in this example is established outside the EU, the
transaction price of 120 will be used to determine the customs value, being the price of the sale

56
Article 5(31)(a) UCC states that a natural person is considered to be established in the EU if that
person has his or her habitual residence in the customs territory of the Union.

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between the Middleman and the Retailer. If, however, in situation B, the Middleman is established in
the EU, the customs value should be based on the transaction for 100, provided the first sale
constitutes a sale for export. In other words, are the goods, as sold by the Producer (USA) to the
Middleman (EU), destined for the customs territory of the EU? Or are they, for instance, subject to a
domestic sale in the USA? In the latter situation, the transaction value method cannot be used. If,
however, the first transaction qualifies as a sale for export, the Retailer (being the importer in
example 2) should be provided with the invoice relating to the sale between the Producer and the
Middleman. Suffice to say that the Retailer will not receive that invoice if these parties are not
related. In that case, a transaction price for determining the customs value would be lacking and,
technically speaking, the customs value would consequently have to be determined using a
secondary method. In practice, however, the latter situation would be resolved by using the
transaction price of 120 as the basis for determining the customs value.

Producer Middleman Retailer

Invoice flow
(USA) 100 (A: USA/B: EU) 120 (EU)

Goods flow

Non-EU EU

Example 2: Last sale rule under the UCC

4.4.2.5 Principles of the freedom of establishment and freedom of capital vs. the ‘domestic sale’ and
the role of the ‘most favoured nation’ clause
Example 2 makes it clear that an unequal playing field exists between supply chains where the
Middleman is established in a third country (situation A) and situations where the Middleman is
established in the EU (situation B). It could be argued that, in both cases, the Middlemen are in
similar situations and should receive similar treatment, rather than one of them being treated less
favourably simply because of the difference in their places of establishment. A distinction should be
made between EU registered offices without a physical presence in the EU and those with a presence
there. In the latter situation, it could be claimed that the domestic sale serves the main aim of
customs law, namely the aim of levying import duties on goods produced by foreign manufactures so
as to strengthen the competitive position of domestic producers (see 4.4.2.2). On the other hand, if
an entity has only a registered office and no physical presence in the EU, a business could use that
entity’s nationality as grounds for determining the customs value on the basis of an earlier sale,
provided that earlier sale constitutes a sale for export. In such situations, there is clearly an unequal
playing field between supply chains with an EU-established Middleman and those with a Middleman
established in a third country, and this inequality cannot easily be justified.

However, I would regard it as unlikely – admittedly without having performed an in-depth analysis of
the freedom of establishment57 or the freedom of capital58 – that these principles can be relied on in
court.

57
The principle of the freedom of establishment, as referred to in Article 49 TFEU, prohibits restrictions
on the freedom of establishment of nationals of a member state in the territory of another member
state. This provision cannot, however, be relied on in situations involving a company in a non-member
state. See, for example, CJEU 10 May 2007, C-492/04, ECR 2007 I-037751990 (ECLI:EU:C:2007:273). It
will not, therefore, be possible to rely on the principle of freedom in this situation.
58
The freedom of capital provided for in Article 63 TFEU prohibits restrictions on movements of capital
and on payments between member states and between member states and third countries. This
freedom may be invoked in situations involving a company in a non-member state. In such situations,
the restrictive effects of the rules on the free movement of capital are merely an inevitable

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The non-discrimination principle under WTO law – commonly referred to as the ‘most favoured
nation principle’ (‘MFN principle’) – prohibits countries from discriminating between trading
partners. In this case, too, I have not performed any in-depth analysis of the applicability of the MFN
principle, but it would not seem to apply to this situation as the domestic sale does not constitute a
tariff barrier imposed on only a few countries.

4.4.3 Fall-back scenario if Article 128(1) IA UCC does not apply

In case Article 128(1) IA UCC does not apply, the IA UCC provides for a fall-back scenario in
Article 128(2). This reads:

Where the goods are sold for export to the customs territory of the Union not before they were
brought into that customs territory but while in temporary storage or while placed under a
special procedure other than internal transit, end-use or outward processing, the transaction
value will be determined on the basis of that sale.

The Guidance Document emphasises that the following three conditions should be met for this fall-
back scenario to apply:
1. There is no sale for export in accordance with Article 128(1) IA UCC;
2. A non-domestic sale takes place while the goods are in temporary storage or placed under a
special procedure other than internal transit, end-use or outward processing;
3. The sale meets the requirements of Article 70(3) UCC.

120 140
Producer Producer Middleman Retailer
(USA) (USA) (USA/EU) (USA/EU)

Invoice flow Non-EU EU

Goods flow

Customs warehouse

Example 3: Goods under customs supervision

If the US-based Producer in example 3 transfers its own goods to the EU, there is no sale for export.
This will also be the case if the US Producer acquires the goods domestically since the goods in that
sale would not, at that moment, have been the subject of a sale for export. However, if, upon arrival,
the goods are placed under, for example, a customs warehouse regime, Article 128(2) IA UCC will
apply.

In that situation, the importer can, in principle, choose to determine the customs value either on the
basis of the sale concluded between the Producer and the Middleman or on the sale concluded
between the Middleman and the Retailer. However, this will not be the case if one or both sales
constitute a domestic sale. If both sales constitute a domestic sale, Article 128(2) IA UCC will not
apply and the customs value should be determined using a secondary method. If the sale concluded

consequence of the unequal treatment between a Middleman established in a non-member state and
a Middleman established in a member state. A company established in a non-member state cannot
therefore rely on Article 63 TFEU.

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between the Producer and the Middleman cannot be used to determine the customs value because,
for instance, it does not comply with the requirements of Article 70(3) UCC and the goods are
released by the Middleman before the actual sale to the Retailer takes place, Article 128(2) IA UCC
also does not apply. In that case, a sale for export is lacking, and a secondary method should
therefore be used to determine the customs value.

5. Conclusion
The first sale rule allows the use of an earlier or first sale to determine the customs value upon
import where there are multiple sales of goods before the goods are imported into the customs
territory of the importing country rather than using the price the importer ultimately paid for the
goods. Both in the EU and internationally – except, for the time being, in the US – we have seen the
revocation of the first sale rule and the introduction of the last sale rule. Although the latter has been
widely embraced around the world, the way in which this rule is applied varies from country to
country. In the EU, meanwhile, the way in which the customs valuation provisions should be
interpreted is ambiguous in view of CJEU case law, the interaction between the UCC and the IA UCC,
and the European Commission’s Guidance Document. Furthermore, the concept of the ‘domestic
sale’, as introduced by the Guidance Document, gives rise to a series of questions, such that I foresee
this type of sale being subject to a multitude of court cases in the near future. More in-depth
research should therefore be performed to establish whether the domestic sale is compatible with
the freedom of establishment, the freedom of capital and the MFN clause. It should also be noted, in
this regard, that the Guidance Document provides only provisional guidance and that the Customs
Valuation Compendium, as drafted under the CCC, still has to be fully integrated into the existing
guidance.59 Until then, therefore, we will have to make do with the current Guidance Document. To
be continued!

59
Although this should have taken place in 2016, no integrated guidance has yet been published.

17