Interplay Between Customs Valuation and Transfer Pricing in the European Union: General Observations and Administrative Practices in Four Countries After the Hamamatsu Case

Although related party transactions account for most of the international trade transactions, they present a unique set of challenges when it comes to accurately representing the actual value of the transaction. Given the different objectives pursued, transfer pricing and customs law approach the issue in quite different ways, which often leads to discrepancies, complications and inconsistencies to be addressed by multinational businesses. The international business community and international organisations aim for an alignment of the two approaches, but so far, no concrete legal solutions have been reached. In the market of the European Union (EU), the European Court of Justice (ECJ) addressed the issue of the potential interplay between the two legal systems in the Hamamatsu Photonics Deutschland GmbH Case (Hamamatsu Case). However, the position held by the ECJ is not clear, nor are the consequences arising from this case law. The result is that a stronger alignment between the two depends to a large extent on the administrative practices in the local EU countries. This article aims at providing a comprehensive examination of the current strategy used by several member states (Spain, Italy, the Netherlands and Germany) both before and after the Hamamatsu Case, and explores local practices used to reconcile transfer prices and customs values. Furthermore, in the light of the current fragmented administrative national practices, we present some proposals to amend the Union Customs Code (UCC) that may improve the clarity and fluidity of the interrelationship between transfer pricing and customs valuation in the case of related party transactions.