On 15 May 2025, the European Court of Justice (ECJ) issued its ruling in the preliminary court proceeding between Tauritus UAB and the Lithuanian Customs Department (ECJ 15 May 2025, C-782/23 (Tauritus), ECLI:EU:C:2025:353.)

This Alert provides background information about the case, why it may also have an impact on the interplay between transfer pricing and determining customs values for imports into the European Union (EU), and actions for businesses to consider.

Background

Tauritus imported diesel and jet fuel into Lithuania from 1 October 2015 to 30 April 2017. Contracts concluded with the suppliers and their pro forma invoices mentioned a provisional price for the purchase of these goods. These contracts also provided that the provisional price would be adjusted according to the average market price of the fuel concerned during a given period and the average exchange rate during that period. Therefore, the final price could be higher or lower than the provisional price.

In the customs declaration of the goods, Tauritus utilized the provisional price as customs value, based on the fallback method, using all data available in the customs territory of the EU. Once in possession of the final invoices, Tauritus generally submitted requests to rectify the value of the goods as indicated in its customs declarations.

Tauritus, however, had lodged 13 customs declarations for which it did not subsequently request an adjustment of the customs value of the goods, despite that the available final invoices indicated a higher value than initially reported in their declaration. Consequently, Tauritus did not pay any additional import value-added tax (VAT).

During the post-clearance inspection, the Lithuanian customs authorities noted that the customs declarations had not been adjusted to the final value. In this decision, the authorities applied the transaction value method and requested payment for the additional sums of import VAT, together with default interest, counting from the period of the acceptance of the customs declaration to the date on which the inspection report was drawn up.

The Supreme Administrative Court of Lithuania stayed the appeal proceedings that followed to ask preliminary questions to the ECJ regarding how to determine the customs value if, at the time the customs declaration is lodged, only a provisional price is known and the final price is fixed post-importation.

Decision of the ECJ

The ECJ held that the transaction value of the goods constitutes the primary basis to determine the customs value of the goods imported into the EU. To apply the transaction method, the sale or the price may not subject to a condition or consideration for which a value cannot be determined with respect to the goods being valued.

In the case at hand, the ECJ found that the final sale price of the goods at issue in the main proceedings could have been determined as soon as the contracts for the sale of those goods were concluded, because the contract terms prescribed how the final price would be determined. The revaluation of the provisional price of the imported goods depended on objective factors that were predetermined and beyond the control of the parties to those contracts, and the parties were required to carry out that price revaluation.

The mere fact that that price was not determined at the time of lodging the import declaration is, according to the ECJ, not sufficient to preclude the customs value of those goods from being fixed on the basis of their transaction value. If, however, only a provisional price is known at the time the customs declaration is lodged, the importer should file a simplified (i.e., incomplete) declaration and supplement this declaration at the time the final price is fixed. The regular use of a simplified declaration is, however, subject to authorization from the customs authorities.

Interplay between transfer pricing and customs valuation

The transaction value method can also be utilized if the sale is concluded between related parties, provided that the price has not been influenced by the relationship between the parties. The approach for dealing with transfer price adjustments to determine a customs value varies for each EU country. One ECJ ruling on this matter has not led to uniformity in how local EU countries deal with this matter. In the Hamamatsu case, the ECJ ruled in 2017 that EU customs law does not permit an agreed transaction value, composed of an amount initially invoiced and declared and a retroactive adjustment made after the end of the accounting period, to form the basis for the customs value, when it is unknown at the time of import whether that adjustment would be made up or down at the end of the accounting period. (For background, see EY Global Tax Alert, CJEU issues ruling on determining transaction value for customs valuation, dated 18 January 2018.)

While the Tauritus case also addresses the question of how to deal with post-entry price adjustments, the ECJ considers that the conclusions in the Tauritus case are not called into question by the judgment in the Hamamatsu case. The primary reason seems to be that Hamamatsu concerned the revision of transfer prices concluded between companies belonging to the same group, which was based on an a posteriori allocation of residual profits between the entities of that group, initiated based on criteria set by the parent company. The real economic value of a product, which the customs value must reflect, cannot, according to the ECJ, stem from an a posteriori allocation of profits between the parties to the sale based on a decision by one of those parties. In the ECJ's view, the conclusion is different in the Tauritus case because the adjustment depended on objective factors that were predetermined and beyond the control of the parties to those contracts. It is unclear whether the application of transfer pricing methods that base remuneration on predetermined policies and ratios, stemming from benchmarked third-party data, qualifies as objective criteria agreed pre-importation.

Implications

The ECJ's ruling could have major impact on businesses with international supply chains involving the EU and currently using a transfer prices with possible retroactive adjustments to determine the customs value of their imported goods into the EU. Considering the ECJ's ruling, multinational enterprise groups should consider the following actions:

• Closely monitor the relevant court practice, as well as legislative and other developments when considering challenges related to the interplay between transfer pricing and customs valuation; for example, consider the Guidance to Customs Valuation and Transfer Pricing and various nonbinding instruments, including a new yet-to-be-published instrument adopted during the 60th meeting of the Technical Committee on Customs Valuation.
• Take note of how local authorities in the EU jurisdictions interpret and apply the ECJ's ruling in the Tauritus case.

• Assess how EU local authorities' existing transfer pricing policies and documentation affect customs implications in light of this ruling.
• Consider working arrangements with the customs and/or tax authorities and evaluate standing agreements with the authorities on the impact of both ECJ cases (Tauritus and Hamamatsu).