Recently in the news we have seen allegations submitted against Nike's EMEA logistics hub in Lakdal. The company is currently scrutiny in the media over potential customs breaches. The distribution center is Nike’s gateway for footwear and apparel into markets in Europe, the Middle East and Africa. However, customs authorities have flagged Nike's import practices as suspected non-compliance.
The authorities claim that the Industry Giant is guilty of the following:
- Underpayment of Import Duties since 2018
- Use of “First Sales” value instead of “Last Sales” Value
- Understated VAT payments
EU Customs Valuation Rules
EU Customs Valuation Rules Pre-2016
“First Sale” principle widely accepted.Common practise among major brands.Part of customs planning Strategy.
Common practise among major brands.
Part of customs planning Strategy.
EU Customs Valuation Rules Post-2016
Shift to “Last Sale” principle in May 2016.Focus on final transaction before EU Entry.Aimed at more accurate duty calculation.
Focus on final transaction before EU Entry.
Aimed at more accurate duty calculation.
Conclusion
All in all, using the early sales for customs valuations was once a common and accepted practise. Many companies adopt this tried and tested approach as part of customs planning strategy. Once the methods has been revised and updated, switching to “Final Sale” principle to determine to tax price, undoubtedly some businesses still not aware and continually use the outdated methods which could possibly lead to below consequences:
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