Customs Valuation of Assists, Engineering and Development Costs

The issue at stake is not limited to whether a specific cost should be added to customs value. Rather, the decisive questions are at which stage the cost arises, how its functional link to the imported goods is established, which documentation substantiates that link, and which declaration logic governs the process.

International Legal Basis and Valuation Principles

At international level, the primary reference point is the WTO Customs Valuation Agreement. While the Agreement establishes transaction value—defined as the price actually paid or payable—as the cornerstone of customs valuation, it also clearly identifies cost elements that must be added to that price. Within this framework, assists and engineering services are understood as buyer-supplied elements directly connected to the production of the imported goods.

A key principle under the WTO approach is that the inclusion of a cost in customs value depends not on the timing of payment or invoicing, but on the causal and economic relationship between the cost and the imported goods. The absence of an invoice at the time of importation does not, in itself, remove the valuation obligation.

EU Customs Practice

This principle is mirrored in EU customs legislation and guidance. Under EU practice, engineering and development services performed outside the customs territory must be included in customs value if a functional relationship with the imported goods can be demonstrated. The focus lies on whether the service is product-specific and production-oriented, rather than on accounting or billing formalities.

In audit practice, EU customs authorities routinely rely on project documentation, technical files and contractual arrangements, rather than solely on commercial invoices, reinforcing the view that customs valuation is a substantive, not formalistic, assessment.

Turkish Legal Framework and Secondary Regulation

In Turkish law, assists and engineering costs are explicitly regulated under Article 27 of the Customs Law, which is fully aligned with the WTO framework. Buyer-supplied goods and services provided free of charge or at reduced cost, and not included in the price actually paid or payable—often due to the very nature of project-based transactions—must be added to customs value where they are used in the production or sale for export of the imported goods.

A particularly important legal condition, frequently overlooked in practice, is that engineering, design and development services must be performed outside the country of importation to qualify as dutiable assists. This requirement serves as a critical boundary for valuation and is often misinterpreted, leading to incorrect compliance positions.

Another significant limitation arises from Article 51(2) of the Customs Regulation, which expressly excludes research and preliminary design costs from customs value. This exclusion covers early-stage activities such as feasibility studies, concept development, market and technology research, exploratory designs, alternative design trials, concept sketches and initial drafts—provided these activities have not yet been allocated to a specific product or used directly in production.

This distinction is fully consistent with the WTO Interpretative Notes and established EU practice:preliminary or initial design work is excluded, whereas final design, product-specific technical drawings, and engineering services directly used in production—if performed outside Türkiye and paid by the buyer—must be included in customs value. The decisive criterion is whether the work is specifically allocated to the imported product and directly applied in production.

Evolving Administrative and Audit Approach

Recent audit practice demonstrates a clear shift in administrative perspective. Assists are no longer treated as exceptional valuation issues but as standard audit risk areas, particularly in related-party transactions. In such cases, customs authorities scrutinise not only the existence of intercompany services, but also how service fees are calculated, allocated and justified.

This scrutiny frequently extends beyond customs law into areas such as transfer pricing, resulting in audits that are long-term, highly technical and multidisciplinary in nature.

Why an Import-Moment Focus Is Insufficient

One of the most common compliance errors is assessing assists solely at the moment of importation. In reality, engineering and development costs typically arise within extended project lifecycles that begin before import, continue during importation, and conclude long after the goods have been released.

From a customs valuation perspective, the decisive factor is not when a cost is incurred, but whether the imported goods could exist in their imported form without that cost. If the answer is no, the valuation link is generally established.

Technical Nature of Detection and Evidence

Identifying assists cannot be achieved through a routine review of customs declarations and attachments. By nature, this area requires deep technical analysis. Authorities and taxpayers alike must examine project contracts, development agreements, technical specifications, drawings, work packages, budgets and cost-allocation keys in an integrated manner.

This technical complexity explains why assist-related cases frequently escalate during audits and why arguments based solely on invoicing timelines tend to be unsuccessful.

Declaration Logic

Another critical aspect is the selection of the appropriate declaration mechanism. Assists and engineering costs are generally incompatible with the mechanism set out in Article 53/5 of the Customs Regulation. That provision is designed for cost elements whose existence could not objectively be known at the time of importation.

In project-based imports, however, assist-type costs are usually known in principle from the outset. What remains uncertain is typically the final amount or allocation, not the existence of the cost itself. For this reason, reliance on this specific method in assist cases carries significant compliance risk.

The potential applicability of exceptional valuation mechanisms under Articles 53(1)–(4) and (6) must also be assessed with caution. In practice, these mechanisms have a very limited scope for assists, as such costs are often determinable before importation due to their project-driven nature.

Risk Exposure and Consequences

Failure to correctly identify and declare assists exposes importers to risks far beyond additional duty assessments. In practice, deficiencies frequently result in administrative penalties, late payment interest and prolonged disputes. In related-party transactions, these risks are amplified due to heightened scrutiny and lower tolerance thresholds in audits.

Conclusion

Assists and engineering costs remain among the most complex, technical and high-risk areas of customs valuation. Effective risk management does not begin at customs clearance, but at the project design stage. Integrating customs valuation considerations into contract drafting and technical documentation is essential to achieving sustainable compliance.

This area cannot be managed by customs teams alone. It requires coordinated involvement from procurement, engineering, R&D, finance and accounting functions. Without such coordination, post-import corrections are rarely sufficient to neutralise audit risk. From a customs valuation perspective, assists will continue to represent one of the most critical and sensitive compliance areas.