Here you can read about customs debtor responsibilities for foreign companies registered in Norway (NUFs) and how the different import methods impact the customs value.
An NUF is not a separate legal entity but part of a parent company abroad. There are several customs-related legal consequences of the foreign company and the NUF being part of the same legal entity.
This text address questions of customs law relating to NUFs. Any domestic tax law issues are not dealt with here.
Table of contents
Chapter 2 of the new Norwegian Customs Act that came into force on 1 January 2009 provided new liability rules related to duties and taxes due on import. Under the new rules, whoever is or will be liable is known as a “customs debtor”. The rules on customs debt for goods subject to customs clearance are stated in § 2-2 of the Norwegian Customs Act and provide different groups of customs debtors:
Whoever is declared as the recipient upon the import of goods will be the customs debtor. This applies regardless of who actually owns or will receive the goods. The information stated on invoices and other supporting documentation is of no independent legal significance.
In reality, when an NUF becomes a customs debtor by declaring itself the recipient, it is the foreign company that is the customs debtor because they are part of the same legal entity.
If the declared recipient represents another legal or natural person, the representative also becomes the customs debtor. This raises no specific issues with regard to NUFs.
Whoever gives incorrect information to the customs authorities becomes a customs debtor if the information results in the payment of too little in duties and taxes. If the customs authorities are not paid by the foreign company which the NUF is part of following a recalculation, other customs debtors will be identified. This may have an impact on individuals or companies acting on behalf of the NUF in Norway, such as managing directors, operations managers, or forwarding agents. Liability does not lie solely with the party that ultimately submits the information electronically to the customs authorities. Anyone that can be said to have contributed to the customs authorities receiving incorrect information is affected by the provision.
If there are multiple customs debtors in a case, the customs authorities may lodge a claim with the customs debtor(s) that the authorities consider most appropriate.
Becoming a customs debtor is conditional upon the person providing the information knowing (or being in a position where they should have known) that the information is incorrect – i.e. that incorrect information was provided intentionally or negligently.
The calculation basis of duties and import VAT is determined according to the customs value rules stated in §§ 7-10 to 7-18 of the Norwegian Customs Act.
The customs value rules provide six ways of determining the customs value of goods. However, you cannot choose freely between the different methods. The general rule for determining the customs value is set out in § 7-10 of the Norwegian Customs Act. The customs value in accordance with § 7-10 is the goods’ transaction value. The transaction value is the price of the goods when sold for export to Norway, adjusted by any additions under § 7-17 (e.g. freight costs) and any deductions under § 7-18.
If you cannot determine the customs value based on the transaction value, you must use one of the alternative methods set out in §§ 7-11 et seq. These methods must be tested one by one in the order listed. This determines the customs value based on:
- the transaction value of identical or similar goods (§§ 7-11 and 7-12)
- the selling price for identical or similar goods (§ 7-14)
- the calculated customs value based on production and transport costs (§ 7-15)
- an alternative customs value based on the principles in the preceding provisions (§ 7-16)
The way the customs value of goods is determined depends on the approach used by the NUF to sell the goods. Below we look at three import methods and demonstrate how these affect the determination of the customs value:
Import of goods that the customer in Norway has ordered before importing.
In this case, ideally the foreign company will have a central warehouse abroad.
Import of goods not ordered before importing.
The NUF has its own temporary storage facility in Norway.
Import of goods directly from a manufacturer abroad to customers in Norway
In this case, the company does not have any storage facility at all.
Some foreign companies store the goods at a central warehouse abroad before they are sold to Norwegian customers. Goods traded in this way are not imported until they are sold to customers in Norway.
When a foreign company that has organised itself as an NUF sells goods in the Norwegian market in this way, it means in practice that an order from a customer in Norway is transferred to the parent company abroad via the NUF. After the parent company has received the order, it ensures that the goods are sent to the Norwegian customer. In such cases, the parent company normally raises an invoice to the NUF internally stating the nominal price paid to the supplier. The NUF will add an additional charge to account for profit and operating expenses in Norway to the invoice to be received by the Norwegian customer.
In this instance, we have two transactions. Firstly, the goods are transferred from the parent company abroad to the NUF in Norway. Secondly, the NUF has entered into a separate purchase agreement with the Norwegian customer.
As mentioned above, the creation of an NUF does not result in the Norwegian-registered part of the foreign company being an independent legal entity. In relation to the purchase and sale of goods, the transfer of goods from the parent company’s central warehouse to an NUF will never be a sale for export to Norway. It is not possible for the individual parts of the same legal entity to sell an item to themselves. In this case, the purchase agreement between the Norwegian customer and the NUF is the export-triggering element. The customs value is thus determined based on this transaction between the NUF and the Norwegian customer.
Some will ask whether the agreement between the Norwegian customer and the NUF is a domestic sale and not an export-related sale. The NUF will be based in Norway, not abroad. However, whether the seller’s place of business is in Norway or abroad is irrelevant to the assessment of the export provision of § 7-10 of the Norwegian Customs Act. The determining provision is whether the sale actually results in goods being exported to Norway. In this case, the transaction between the two units of the foreign company does not result in the export of goods to Norway. Here it is the agreement between the NUF and the Norwegian customer that results in the goods being sent to Norway. This understanding is supported by statements from the WCO. Here it is pointed out that there is no requirement that the sale take place in the country where the goods are being exported from for the general rule to apply.
Consequently, the price the NUF invoices its customers in Norway (excluding VAT) forms the basis for determining the customs value.
If the goods are not stored in a central warehouse abroad, in many cases the goods are stored temporarily in a local warehouse in Norway before the NUF sells the goods to Norwegian customers. In such cases, the NUF must periodically replenish its stock with new goods. This means that the goods are not sold to any customers in Norway at the point of import.
Since the NUF and the parent company are one and the same legal entity, transactions of goods between these units are not considered as sales. This means that the condition in § 7-10 of the Norwegian Customs Act – that there must be a sale for export to Norway – is not met. Consequently, the customs value for goods imported in this way cannot be determined based on the transaction value.
In practice, there are three possible methods for determining the customs value of goods that fall under this sales model. If the customs authorities or the importer has information on identical or similar goods for which the customs value has been determined under the general rule of § 7-10, the new goods must be cleared using this customs value; cf. §§ 7-11 and 7-12 of the Norwegian Customs Act. If such information is not available, the resale method in § 7-14 will usually be the correct way to determine the goods’ customs value.
When the customs value for goods is to be determined according to the resale method, the price a customer in Norway must pay for the goods is used as the basis. Thereafter, deductions are made for profit, domestic VAT, and any shipping and insurance costs incurred after the goods arrive in Norway.
Some companies do not store any goods at all before they are sold. In these cases, the NUF transfers orders from its customers to the parent company abroad. The parent company then orders the goods from its suppliers, who in turn supply the goods direct to the customer in Norway.
Just as in the preceding two cases, the basis for determining the customs value is the general rule of § 7-10 of the Norwegian Customs Act.
As mentioned above, a basic criterion for applying the general rule is that there is a sale that triggers an export to Norway. When foreign companies sell goods to Norwegian customers under this case model, the transaction between the parent company and its supplier is considered as a sale for export to Norway. This is in line with the last-point-of-sale principle, as the seller is represented in Norway by way of an NUF. When the NUF and the parent company are the same legal entity, a sale from the parent company is also a sale for export to Norway, provided the goods are to be delivered to Norway.
This means that the general rule of § 7-10 of the Norwegian Customs Act for determining the customs value based on the goods’ transaction value must be used in cases where the parent company’s supplier delivers the goods straight to the NUF’s customer in Norway.
Foreign companies wishing to establish themselves in the Norwegian market by registering an NUF must consider that the way goods are exported to Norway may affect the way the customs value is determined. Consequently, structuring the sale of goods in certain ways can make the customs value higher – and thus incur higher duties and taxes – than had the sale of goods been structured differently.