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Latvia: “Similar goods” and discounts, deductive method of customs valuation

Latvia: “Similar goods” and discounts, deductive method

The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning the “deductive method” under Article 30(2)(b) of the Community Customs Code in the special context of the customs valuation of the imported medicines.


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The CJEU addressed what is meant by the term “similar goods” and the implications of discounts on the price when applying the deductive method of customs valuation.

The case is: Oribalt Rīga (C-1/18)

KPMG observation

The Community Customs Code has now been replaced by the Union Customs Code; however, the rules governing the deductive valuation method are still effective and are almost identical in wording to the former rules.


A company in Latvia and an Indian company entered into a consignment agreement, under which the Latvian company imported goods (medicines) into Latvia for free circulation in the European Union.

  • In the customs declaration, the Latvian company stated that it was both the recipient and the declarant. It calculated the customs value of the medicines using the transaction value method of Article 29(1) of the customs code, by means of pro forma invoices prepared by the Indian company for customs purposes. The pro forma invoices indicated the type of imported goods, the item, the unit market price, and the total price.
  • The medicines were held in storage by the Latvian entity, but ownership did not change until they were sold to customers. The Indian company determined to whom the imported goods were sold, the terms of sale, the sales price, and the discounts applicable.
  • The Latvian company processed the orders from the Indian company’s customers and completed the invoices using the product sales price provided by the Indian company in an authorized pro forma order.
  • The medicines were sold on a “first expired first out” (FEFO) basis so that several months could elapse between the import and the sale of the goods. Consequently, the sales value of medicines at the time of sale could differ from their declared value at the time of import.
  • The actual sales price of the goods was also affected by the discounts which the Indian company granted to customers. Once the goods had been sold, the Indian company issued new invoices to the Latvian entity for the goods sold.

An inspection by the Latvian customs authorities (VID) ultimately led to questions about the deductive method of customs valuation being referred to the CJEU.

CJEU judgment

Similar goods

The first question addressed to the CJEU concerned which factors are to be taken into account when choosing appropriate “similar goods” in applying the deductive method of customs valuation under Article 30(2)(b) Customs Code to medicines. This question was of central importance in this case because the customs authorities asserted that the imported goods could not be valued on the basis of deductive method since the VID lacked the necessary knowledge and information to assess whether medicines produced by other sellers were in fact similar to the goods produced by the Indian company.

The CJEU noted that the definition of “similar goods” was broad and was based on a factual assessment that allows for a broad application to all types of goods—including medicines. In order to identify the similar goods, the customs authorities must use all data available to determine the customs value as accurately and faithfully as possible. According to the CJEU, the composition of the medicines, the substitutability of their functions, and their commercially interchangeability were factors to be considered in determining whether goods are similar. For purposes of the factual assessment, all the elements of such goods that may affect their economic value, such as the market position of the imported goods and of its producer, must be considered.

90-day time limit

The second question referred to the CJEU was whether the time limit of 90 days as a reference period for similar goods (pursuant to Article 152(1) of the implementing regulation) may be applied flexibly so as to allow “more similar” goods imported beyond a period of 90 days to be considered.

The CJEU concluded that the time limit of 90 days referred to in Article 152(1)(b) was an exception to the principle that the customs value reflects the real economic value of the goods at or about the time the goods valued enter the EU. For this reason, the period of 90 days was found to represent a strict limit when the customs value is determined using the deductive method.


The CJEU was asked to address whether the discounts granted (that determined the price at which the imported goods were in fact sold) were to be taken into account when determining the customs value in accordance with Article 30(2)(c). Here, the CJEU answered in the negative and held that commercial discounts cannot be taken into account when the customs value is determined using the deductive method. The CJEU took into consideration, inter alia, the fact that if commercial discounts were to be taken into account, this would lead to a customs value that would be further removed from the real economic value of the imported goods being valued.

Read a June 2019 report prepared by the KPMG member firm in the Netherlands 

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