In addition to the Binding Origin Information (BOI) and Binding Tariff Information (BTI) advanced rulings, last month the EU gave the green light on a third pillar of advanced ruling in the EU. The Binding Valuation Information (BVI) ruling will provide binding decisions for valuation, giving the holder legal certainty over the customs value of the product it pertains to and easing import and export formalities covered by that decision. Furthermore, it helps customs authorities unify and streamline processes of legitimate traders and manage potential risks. Set to be introduced in December 2027, there is still quite a bit of time before the agreement will take effect. Nevertheless, it gives us a chance to take a deeper dive into the origin of the advanced rulings.
The history of binding information decisions and advanced rulings
The idea of Binding Valuation Information is not new. We already have binding decisions for origin and tariffs, allowing economic operators to request a ruling by the customs authorities to fix their origin determination or tariff classification for a period of 3 years. The prior two rulings have been around for many years and have assisted numerous traders with certainty about classification or origin determination of a given product.
The rationale behind the binding information decisions is grounded in the World Trade Organisation (WTO) Trade Facilitation Agreement (TFA) that entered into force in 2017. On an international scope, the name used is advanced rulings and should be an instrument for trade facilitation and increased compliance, which is strongly supported by the WTO.
Article 3 of the TFA sets an obligation for WTO Members to issue advanced rulings on tariff classification and origin, while in valuation concerns (an area generally considered more complex than tariff classification and origin), the WTO Members are “encouraged” to provide for advanced rulings. Several countries around the world, including the United States of America, Canada, Japan, China, South Korea, Australia, and New Zealand, are already issuing all three categories of advanced rulings (tariff classification, origin, and valuation).
Using Binding Valuation Information in the EU to reduce forum shopping
The introduction of the Binding Valuation Information decision stems from a report issued by the European Court of Auditors. They found that Member States differ in their approach of applying customs controls and hence create cases of ‘forum shopping’, meaning that traders choose to import goods that are undervalued into the Member States with lighter controls. To avoid this kind of forum shopping, Member States should act as one when it comes to issuing any type of decision, including valuation.
Issuing BVI decisions provides legal certainty and ensures a level playing field for economic operators active in several Member States. The recommendation, that was already given in 2000, was given again in 2017. It took until 2024 to introduce the BVI framework.
What are the benefits of the BVI decisions?
The BVI decisions scheme is expected to bring similar benefits as the other EU advanced rulings. With a BVI, a decision relating to binding information taken by one Member State is valid in all Member States, and binding on its holder as well as the customs authorities. This means that, like with the other provisions, economic operators will be able to benefit from a binding decision that they can use in the situation as described in the decision, in any EU Member State. This is different from the current practice of national or local customs valuation decisions in some Member States. Companies operating in different Member States with complex customs valuation determination, such as intercompany transactions with transfer pricing-based transaction values, often must go into cumbersome negotiations with different authorities, leading to different interpretations.
The legal certainty of the BVI is also a kind of risk mitigation, since you know that, for the same situation as described in the binding decision, the transaction covered by the BVI decision will be treated as described in the decision. This provides valuation predictability for the economic operator.
An additional benefit is that the time limit for taking a decision and the validity of the decisions will be similar to the ones in the BTI and BOI decisions. First of all, this gives some predictability in terms of timing to grant the decision. Secondly, when you have a BTI, BOI, and BVI, you can rely on the fact that the classification, origin determination, and valuation will remain the same for the set period of time, namely three years for each of them, given that there are no circumstances under which the decisions are withdrawn. Authorities will have to respond to an application for a BVI within 30 + 120 days. For the current practice of customs valuation decisions in some Member States, there are no time limits and companies fully depend on the willingness and co-operation of customs to issue a decision.
How will the BVI decisions work?
In essence, the BVI decisions will function similarly to the two decision mechanisms that already exist.
Once the application is submitted, authorities have a 30-day window to confirm the receipt of the decision and verify whether it meets the acceptance criteria. After this verification has happened, the customs authorities have another 120 days to investigate and accept the request. If additional information is required, another 30 days are added to provide this information. Once the request has been accepted, this will be published on an electronic portal. The electronic system has yet to be developed, but according to DG TAXUD, the system will be linked to the European Binding Tariff Information database (EBTI system) that is already being used for BTI decisions. This system will be an EU-wide system.
There are also situations in which a BVI request cannot be accepted. These include when a decision has already been taken on the process by another customs authority or where the application does not relate to any intended use of the BVI decision or the linked customs procedure.
To be able to apply a BVI to specific import transactions in the future, we recommend that, in the request for the BVI, you describe the relevant factual circumstances of the transaction for which you want to use a BVI as precisely and completely as possible, and explain how it will be re-usable. All circumstances, e.g., trade terms and point of entry, relation between the parties, etc., must be identifiable and relate to the transactions for which you want to use the BVI in future, otherwise customs authorities may dispute using the BTI for those import declarations. Your BVI will be linked to a specific procedure and circumstances as described in the BVI and cannot be interchanged with other ones.
As soon as a decision for a BVI has been taken by the customs authorities, the decision will be valid for a period of three years, unless the customs authorities decide to annul the decision beforehand. This can happen due to an infringement from the side of the economic operator or when legislation or a legal decision negates the applicability of the decision. When the latter happens, the economic operator can request to keep the decision valid for another 6 months. This rule is set in place to ensure that any contractual obligations that the holder has with other parties can be dealt with to avoid any contractual fines.
When will the first BVI decisions be made?
Unfortunately, it will still take a few years before economic operators can finally profit from this ruling. While the regulation will be adopted soon, it will not be until December 2027 that the first BVIs will be issued.
Why the wait? No official reason for the delay has been given by the European Commission, but the guess is that they first wish to make sure the IT system for requesting and maintaining BVI decisions seamlessly fits into the EBTI system, which is already in place for BTI decisions. The European Commission expects this to take at least until December 2027 to be fully operational.
It is doubtful whether this is the only reason for the delay, because the initial deadline was December 2025. Potentially, there could be a lack of IT development capacity from the side of the Commission and the Member States. As we all know, we are still in the midst of the development of the MASP systems, of which most should have been implemented by 2025. Did the Commission already foresee an extra buffer with this date, because they are of the opinion that the MASP-C projects might be delayed even further?
It’s a pity that it will still be some time before the BVI decisions can be requested. BTI and BOI decisions have been possible without a centralised system for many years. To our opinion, the benefits of BVI outweigh the temporary lack of a centralised system.
In the meantime, are you wondering whether you may benefit from a BOI or BTI decision or current national customs valuation decision? Contact us to assess your situation.