E-commerce: fulfilment, a story in itself

A new business model makes it more complicated to determine the customs value of goods entering the EU. Differences of opinion between Customs and companies may arise.

Recently, the national media was filled with the news: the Chinese internet giant Alibaba has chosen Liège in Belgium as the site for its first European logistics hub. This news points to a relatively new trend, namely that an increasing number of online sellers are stockpiling on other continents. Frequently, they then use the fulfilment* services of well-known sales platforms. For goods that enter the EU in this way, a particular question is often asked: how must their customs value be determined?

International webshops are increasingly storing up stock around the world: they move their products closer to their destination in advance – before they have even been ordered by the consumer. They are then distributed from enormous distribution centres. This means the products are now just around the corner from the consumer, which, of course, greatly reduces delivery times. A growing number of modern mega-warehouses are sprouting up in the Netherlands, where products are stored waiting to be sold.

Reasonable means
These ‘pre-commerce-goods’ do not fall under the VAT exemption scheme, even if the customs value is less than 22 euros. Moreover, determining the customs value is often pretty difficult in practice, since the product has not been sold at the moment of import. Since a transaction has not yet occurred, there is also no transaction price – and that generally forms the point of departure for determining the customs value. Though various statutory methods exist for calculating the customs value of the goods in question, sometimes none of them work. In such a case, Customs can apply the method of ‘reasonable means’. Roughly speaking, it amounts to determining the product’s market price based on the information displayed on the supplier’s website. Then taxes and a number of costs and commissions are deducted from this price – subject to conditions. The balance is then used as the customs value.

Fundamental questions
Determining the customs value of fulfilment goods often turns out to be a laborious chore. Some market parties make agreements with Customs about the method that they wish to use, with the intervention of the administration’s National Value Team. Companies have an interest in the customs value not being set unnecessarily too high, since the VAT and the import duties payable are linked to this. A difference of opinion between Customs and the company may arise over the declared value. Indeed, Customs may sometimes be confronted with improbably low customs values for all sorts of product categories. In such cases, the shipment can be physically inspected. Fundamental questions are asked if irregularities come to light. For example: what do the findings actually say about the total load – which we cannot control in its entirety? This is extra complex for e-commerce, owing to the enormous diversity of goods that are imported (from hair bands to 3D-printers) and great variation in findings (from value differences to incorrect categorisation to non-fiscal risks). A relatively high number of discrepancies detected in internet purchases sometimes results in discordance between the number of declarations to be checked and their processing turnaround time. Customs’ capacity is limited, but at the same time incorrect declarations cannot pass unchecked. In addition, experience has shown that e-commerce shipments must actually always be seen to determine whether the declaration is correct. Just an administrative control afterwards is often insufficient.

Of course, such dilemmas also affect trade. Customs’ doubts and questions generally mean delay in the logistics chain. Yet the idea behind fulfilment was that the customer would have his product delivered more quickly. It again shows how important it is for market parties to take filling in their declarations seriously. Because Customs gives each company the attention it deserves.

* Fulfilment is the processing of goods after a transaction (via internet). It can concern buying in, storing, stockpiling, packing and dispatching products to the address indicated.

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