Customs value may include free of charge software produced in the EU

25 November 2020 - The Court of Justice of the European Union (CJEU) concluded in the case of BMW (Bayerische Motorenwerke AG) - Hauptzollamt München (C-590/19) that the value of free of charge supplied software should be taken into account for determining a customs value of imported goods regardless of the fact that the software was developed in the EU.


BMW, a German automotive company, purchases control units from third party manufacturers established outside of the EU. The third party manufacturers install the software, provided by BMW free of charge, in control units. Initially, the transaction value of these control units, once there were imported in the EU, did not include a free of charge software.

Following the inspection of the German Customs Authorities, it was concluded that the software provided free of charge should be included in the transition value of the control units for the purpose of determining the customs value. The German Customs Authorities took the position that the software constitutes a dutiable assist, based on the Article 71(1)(b) of the Union Customs Code (UCC).

BMW appealed to the Customs Authorities’ decision and the German court referred the case to CJEU with the question:” Should the development costs for software that has been produced in the European Union, made available to the seller by the buyer free of charge and installed on the imported control unit be added to the transaction value for the imported product pursuant to Article 71(1)(b) of the Union Customs Code if they are not included in the price actually paid or payable for the imported product?”

Court decision

The CJEU decided that the economic value of software designed in the EU and made available free of charge by the buyer to the seller established in a third country should be added to the transaction value of imported goods.

The complexity of this case lays in:

  • The fact that UCC Article 71(1)(b) does not explicitly mentions software.
  • However, a guidance issued by the Customs Code Committee states that intangible assets, such as software, could, in principle, fall under two subparagraphs of Article 71: as “materials, components, parts and similar items incorporated into the imported goods” under subparagraph 1(b)(i); or as “engineering, development, artwork, design work, and plans and sketches undertaken elsewhere than in the Union and necessary for the production of the imported goods” under subparagraph 1(b)(iv).
  • The important difference is that software developed in the EU would be dutiable under subparagraph 1(b)(i) and non-dutiable when classified under subparagraph 1(b)(iv) of the Customs Code Committee guidance.

In this decision the CJEU states that the software at hand is an integral part of the control units which are end-product, because it is connected to, or incorporated in the units and makes it possible for the units to function or improve the way in which they function. Thus, the CJEU concluded the value of the software should be added to the transaction value of the imported control units under article 71(1)(b)(i) regardless of the fact that software was produced in the EU.

The important takeaway is that CJEU confirmed the principle that even intangible assets developed in the EU might be added to the price actually paid, as long as they increase the economic value of imported goods. However, the CJEU did not provide for the clear guidance according to which provisions of the UCC software should be classified.

Impact on your business

If you are importing goods into the EU, you are advised to consider the customs valuation treatment of software, even if, by you, imported goods included free of charge software produced in the EU. In practice this means that, you should screen your supply chain and contractual arrangements as the customs valuation has been recently frequently scrutinized in the EU. The conclusion from Curtis Balkan case and now BMW imply that the customs authorities will more frequently check your customs valuation process.  

Want to know more?

Do you need help to determine an impact of this ECJ case to your customs valuation process? Please contact Eline Polak by e-mail or by telephone: + 31 (0)88 277 23 25 or Ellen van Heugten by e-mail or by telephone: +31 (0)88 277 12 465. They will be happy to help you.