How to Mitigate Customs Valuation Risks of Price Adjustments?

A decision of the Court of Justice of the European Union has major implications for EU importers that use transfer pricing arrangements, formula-based pricing, or index-linked contract terms. In the landmark decision Tauritus (Case C-782/23, ECLI:EU:C:2025:353 (May 15, 2025)), the CJEU made clear that retroactive price adjustments—including transfer pricing adjustments that are determined after goods enter the EU—are likely to have an impact on imported goods’ customs values.

The Tauritus judgment ended the uncertainty that followed the CJEU’s earlier Hamamatsu ruling (discussed below). Where final prices are only confirmed post-import, the customs value must be adjusted accordingly—potentially increasing the duties remittable or giving right for a claim. Since customs value forms part of the VAT base, this adjustment also impacts the VAT liability.

The CJEU’s earlier ruling in Hamamatsu raised fundamental questions about retroactively adjusting transfer prices in customs valuation. The case involved intra-group transactions where the final transfer price wasn’t fixed at the time of importation but instead subject to end-of-year transfer pricing adjustments under a residual profit split method.

The CJEU held in Hamamatsu that under the Community Customs Code, or CCC, such post-importation adjustments—particularly those based on flat-rate allocations of residual profit—weren’t compatible with the transaction value method, or TVM, of customs valuation. The CJEU emphasized that customs authorities must be able to determine the customs value at the time of importation with sufficient certainty and that since the adjustment mechanism operated unilaterally and lacked transparent objective criteria, the declared customs value couldn’t be reliably verified or corrected in a legally enforceable way.

In Tauritus, the CJEU confirmed that the TVM, as laid out in art. 70 of the Union Customs Code, or UCC, remains applicable even when prices are provisional—so long as adjustments are based on objective and pre-established criteria, and the importer uses the simplified customs procedures outlined in art. 166 and art. 167 of the UCC.

The CJEU distinguished Tauritus from Hamamatsu on factual and legal grounds and explained the different rules applicable under the UCC as compared to earlier CCC. The judgment in Tauritus reinforces the legal basis for using provisional pricing models under the UCC—provided appropriate procedures are followed.

Companies should now evaluate whether their valuation practices, documentation processes, and customs declarations sufficiently account for such adjustments to ensure compliance and avoid penalties or missed refund opportunities.

Legal Context

Rules for determining customs values of goods are set out in the following EU laws and regulations:

• UCC, art. 60 through art. 76 (the UCC, together with its implementing acts, succeeds the CCC and its implementing acts. Council Regulation (EEC) No. 2913/92 of Oct. 12, 1992 establishing the CCC, OJ L 302, at p. 1-50);
• UCC Delegated Act (2015/2446), DA, article 71; and
• UCC Implementing Regulation (2015/2447), IA, art.127 to art. 146.

There are six methods for calculating the customs value of goods:

1. TVM, or the total amount paid (or to be paid) for the imported goods (UCC, art. 70) (primary method);
2. Transaction value of identical goods;
3. Transaction value of similar goods method;
4. Deductive or resale minus method;
5. Computed method; and
6. Fall-back method.

TVM. The primary and most common valuation method is the TVM, which should be used whenever possible. Only when the TVM can’t be used (such as when it can’t be proven that the price hasn’t been affected by the relationship between the parties) should the other methods (“alternative” or “secondary” methods) be considered in sequential order (UCC, art. 74).

If a sale that is the basis for customs valuation takes place between related parties (buyer and seller), the UCC requires importers to ensure that prices used for customs valuation aren’t influenced by the relationship between the parties.

The fact that the buyer and the seller are related shall not in itself be grounds for regarding the TVM as unacceptable (the WTO Customs Valuation Agreement, art. 1(2)(a)).

However, if the relationship has influenced the price paid for imported goods, the TVM can’t be used for customs valuation purposes. The customs value must then be determined using one of the alternative or secondary methods.

The customs administration determines whether the parties’ relationship has influenced the price paid by reviewing the available information and conducting inquiries with the importer. WCO Guide to Customs Valuation and Transfer Pricing (June. 2015, updated in 2018), p. 7. There are two methods for making this determination:

• Examining the circumstances surrounding the sale (IA, art. 134(1)); or
• Using test values provided by the importer (IA, art. 134(2)).

A test value is a benchmark customs value derived from other customs-accepted transactions (e.g., sale of similar or identical goods between unrelated parties). IA, art. 134(4), provides that the test values are to be used at the declarant’s request and may not be substituted for the declared transaction value. However, if the transaction value isn’t close enough to test values, then alternative methods should be used, unless the declarant is able to prove that the prices haven’t been influenced by the relationship by providing information about circumstances surrounding the sale.

The extent to which the test values are used depends on the importer’s ability to access and produce relevant data. Because the test values are subject to very strict criteria, they are often unavailable. The criteria to be met under art. 134(2)(a), (b), and (c) of IA require prices to be used which relate to identical or similar goods. However, such comparison prices are typically not available. Furthermore, goods sold by companies within their own group are often not sold to unrelated parties. Hence, the option to use test values is rarely used in practice. WCO Guide to Customs Valuation and Transfer Pricing (June 2015, updated in 2018), p. 9. When the test values aren’t available, the declarant should use other means to prove that the price hasn’t been influenced by the relationship between the seller and buyer by explaining the circumstances surrounding the sale.

Transfer Pricing, Customs Value Comparison

The arm’s length principle applies to transfer pricing as well as customs valuations.

Transfer pricing adjustment. Transfer pricing rules relate to corporate income tax, a direct tax. The OECD rules require prices agreed between related parties to reflect arm’s length conditions. A transfer pricing adjustment is required if it appears that these conditions aren’t met, for example, if prices in a certain period or yearly profits aren’t within the required limits.

Customs valuation adjustment. Prices for customs valuation purposes also need to be aligned with the arm’s length principle. The UCC requires importers ensure that prices used for customs valuation aren’t influenced by the relationship of parties.

Adjustments to pricing after importation—such as those resulting from transfer pricing policies—can influence the declared customs value of goods entering the EU, thereby affecting the amount of customs duties owed.

Significant differences exist between the transfer pricing and customs valuation sets of rules. Because the prices between related parties are subject to two similar but different rules, using the prices determined under transfer pricing policies doesn’t ensure that these prices are automatically acceptable for customs valuation purposes.

Aggregation of sales. When the object of customs valuation is imported goods, for transfer pricing purposes the values of various sales are aggregated.

Timing. The time at which the debt is incurred and relevant valuation becomes definitive is the time of importation or clearance for customs valuation but is the year-end period for transfer pricing and corporate income tax purposes.

Harmonization. For customs valuation, the EU harmonizes the rules that are binding for traders and customs, and the methods for determining the customs value is applied in strict order. For purposes of the corporate income tax, there is no harmonized set of rules for the determination of transfer prices. The adoption of a transfer pricing method is left to the discretion of the traders (not of the tax authorities); they can choose the method that’s best suited to the group for economic purposes.

The UCC offers no explicit provisions for handling retroactive adjustments such as transfer pricing adjustments in the context of customs valuation. In practice, the transfer pricing policies and customs valuation should be reconciled by the businesses, to justify them in case of inquiries by the authorities. This reconciliation lacks the necessary legal framework of EU and national law.

When a declarant is able to demonstrate that the relationship hasn’t influenced the price because the transaction value very closely approximates one of the test values of IA, art. 134(1), or the declarant demonstrates it by examining the circumstances surrounding the sale (IA, art. 134(2)), it may be possible that transfer pricing adjustments have no impact on the customs value.

Transfer pricing documentation is often used to analyze the circumstances of a sale and to demonstrate that the price hadn’t been influenced by the relationship between the parties. However, its use isn’t obligatory under the law and other sources could be used to demonstrate that the relationship didn’t influence the price. If the prices meet the requirements of transfer pricing rules, this doesn’t guarantee that they are acceptable for customs valuation purposes because the parties must still demonstrate that their relationship didn’t influence the customs valuation price.

Retroactive Price Adjustments

The question of how to deal with post-import adjustments has been referred to the CJEU.

In the CJEU’s ruling in the Hamamatsu case (C-529/16), the Court found that the legal framework under the CCC didn’t support the inclusion of retroactive transfer pricing adjustments in the customs value. The ruling, however, was issued on the basis of specific factual circumstances, which left room for debate over its broader applicability. Moreover, with the CCC having been replaced by the UCC in 2016, uncertainty remained as to whether the same reasoning still applied under the new legal framework.

The Tauritus judgment helps clarify these open questions.

Hamamatsu Case

The CJEU concluded that the CCC didn’t support the inclusion of retroactive transfer pricing adjustments in the declared customs value and that the legal framework didn’t obligate importers to disclose upward price corrections, nor did it enable authorities to prevent the selective reporting of only downward adjustments aimed at obtaining refunds.

According to the later CJEU judgment in Tauritus, the factors determining the adjusted prices weren’t known at the moment of customs clearance (“pre-determined”) in the Hamamatsu case.

The Hamamatsu decision introduced significant uncertainty for importers using transfer pricing models, as it was unclear whether the judgment applied broadly to all forms of year-end adjustments or only to specific factual patterns—such as flat-rate internal reallocations. Practitioners questioned whether the findings remained valid under the UCC, which introduced new mechanisms for post-clearance amendments and simplified declarations.

The judgment also appeared to diverge from international guidance, particularly from the World Customs Organization, which encourages coordination between direct tax and customs authorities and recognizes the relevance of transfer pricing documentation in customs valuation.

In this legal context, the Tauritus judgment offers important clarification.

Tauritus Case

Tauritus, a Lithuanian importer of diesel and jet fuel, declared goods between 2015 and 2017 using provisional prices based on contractually agreed terms. Final prices would be determined by reference to published fuel prices and exchange rates over a defined period. Market prices and currency rates variables were outside the control of the contracting parties.

Despite using provisional prices in the customs declarations, Tauritus didn’t always revise the customs value after receiving the final invoices, even when they showed a higher price. Lithuanian customs authorities challenged this approach during a post-clearance audit, arguing that the TVM should have applied, and that Tauritus had an obligation to update the declarations once the final prices became known. Tauritus, facing penalties for underreported customs values, questioned the authorities’ approach in the Lithuanian courts.

The referring national court asked whether the TVM could still apply when the price payable at the time of importation was only provisional and subsequently adjusted based on contractually pre-agreed mechanisms. It also asked whether the adjustment should be made to the customs value once the final price is known.

CJEU Ruling. The CJEU held that the TVM remains the correct method for customs valuation in situations where:

• The provisional price is part of a valid commercial transaction;
• The sales contract includes clear, objective, and predetermined rules for determining the final price; and
• Those rules refer to external, verifiable data (such as fuel indices, exchange rates).

The CJEU distinguished this case from Hamamatsu, where adjustments were based on internal group profit allocations without a binding method visible to customs authorities. Tauritus involved a pricing formula built into the original agreement, not a discretionary adjustment, the rules of which weren’t known at the time of importation.

Final prices should not be known at the moment of importation to make use of the TVM: However, they should be determined according to the clear objective rules that are known and agreed to by the parties when the goods are cleared into free circulation. Before importation takes place, the parties should agree on how the final price will be determined and shouldn’t have influence on the factors that determine the final price.

The TVM may be usable if the transfer pricing rules determining final prices are sufficiently clear and objective and agreed by the parties before the importation takes place.

The CJEU further stressed that if the final price isn’t known at the time of importation, importers must use the simplified customs declaration procedure under art. 166 of the UCC. This allows a provisional declaration, followed by a supplementary declaration once the final price is known. Art. 146(4) and art. 146(3b) of the UCC Delegated Regulation allow for an extended window of up to two or three years for submitting corrections related to customs value. This procedural framework creates legal certainty around post-import adjustments and enables upward corrections (leading to additional duties) and downward corrections (potentially generating refunds).

Practical Takeaways. The judgment confirms that the TVM isn’t automatically excluded in cases of importation involving post-import price adjustments. What matters is whether the adjustment mechanism is objective and contractual, as well as outside the influence of the parties of the contract and outside the importer’s discretion. In such cases, provisional pricing is compatible with the TVM, provided the simplified declaration process is properly followed.

The judgment is especially relevant for importers using transfer pricing arrangements, formula-based pricing, or index-linked contract terms. It reinforces the need for structured processes to track, document, and report post-import price changes—to remain compliant and avoid penalties in case of upward adjustments or to secure potential refunds in case of downward adjustments.

Where final prices are only known post-import, importers should make use of the simplified procedures, submit a “simplified declaration” (declaration IM-B) with provisional values and later submit a “supplementary declaration” (declaration IM-X). The customs value must be adjusted accordingly—potentially increasing the duties payable or justifying a refund.

Since customs value forms part of the VAT base, this adjustment also impacts the VAT liability.

Companies should now evaluate whether their valuation practices, documentation processes, and customs declarations sufficiently account for such adjustments to ensure compliance and avoid financial penalties or missed refund opportunities.
Customs authorities are now better equipped under the UCC to authorize such valuation models and enforce disclosure obligations, including binding valuation rulings where appropriate.

The Tauritus judgment narrows the scope of the Hamamatsu precedent and confirms that retroactive pricing adjustments, when contractually fixed and objectively measurable, don’t disqualify the use of the TVM. Importers may use provisional pricing based on external benchmarks—so long as these terms are clearly reflected in the sales contract and the simplified customs procedure is used.

Businesses should closely assess whether their customs declarations, pricing arrangements, and transfer pricing policies are aligned. Where price changes occur post-import, companies must be ready to make use of the simplified procedures, submit supplementary declarations and where applicable seek refunds or pay additional duties and VAT.

Practical Business Implications

These developments highlight the growing importance for companies to assess the customs impact of their transfer pricing frameworks carefully. As the CJEU and national courts continue to rule on similar matters, the legal landscape surrounding customs treatment of intra-group transactions is expected to gain further clarity.

It may be prudent to expressly include the indirect tax implications of transfer pricing adjustments in the relevant documentation. Doing so could help reduce the risk of future disputes with the tax authorities. Where there is any uncertainty about whether such agreements affect indirect tax, it is recommended to seek advance clarification or ruling from the authorities. This may also involve obtaining prior approval of their proposed approach directly with the customs authorities.

Businesses should closely assess whether their customs declarations, pricing arrangements, and transfer pricing policies are aligned. In case of differences in pricing under two sets of rules, businesses should be ready to explain them. Where price changes occur post-import, companies must be ready to make use of the simplified procedures, submit supplementary declarations and—where applicable—seek refunds or pay additional duties and VAT.

To minimize compliance risk, importers using recurring or systematic adjustments should consider:

• Engaging with customs authorities in advance to obtain authorizations for using the simplified declaration process when necessary;
• Communicating with authorities about the future adjustments, such as by obtaining valuation rulings in advance;
• Formalizing procedures for adjusting customs value after release; and
• Ensuring internal controls are in place to track final pricing and submit timely corrections.

By taking these steps, businesses can strengthen compliance, reduce audit exposure, and avoid unnecessary penalties or lost refund opportunities.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Dr. Aiki Kuldkepp is a senior manager in the VAT and Customs group of the International Tax Services practice.

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