Unlawful Imposition Of Excessive Customs Duties: A Precedent – Setting Decision

A recent decision by the Istanbul 5th Tax Court (Case No: E.2024/1686, K.2024/2889, dated 24.12.2024) confirmed that the imposition of additional customs duties based on unsubstantiated “foreign expenses” is unlawful. In the case at hand, the customs administration initially accepted the declared customs value of the imported goods. However, it subsequently calculated and collected taxes based on an inflated value by adding alleged foreign expenses under a “surveillance price” scheme.

The Court reviewed the underlying customs procedures and emphasized that the administration had initially accepted the declared transaction value without objection during customs clearance, and yet later invoked a surveillance value threshold without proper legal justification or factual ground.

In particular, the dispute arose from a customs declaration dated 31 July 2024 concerning goods imported by a Turkish telecommunications company. While the sales price of the goods had already been accepted by the customs administration during import procedures, the authorities later imposed additional taxes based on a “foreign expense” item tied to a reference (surveillance) price as outlined in the Communiqué on Surveillance in Imports. The company, acting with a reservation, paid TRY 55,352.78 in excess customs duties and TRY 199,270.02 in value-added tax and filed a lawsuit for their refund along with accrued legal interest.

The Court emphasized that the customs authority had not conducted any concrete investigation into the actual transaction value or justified why the declared invoice price was inconsistent. Further, the administration had not demonstrated that the invoice price was inaccurate, nor had it conducted any investigation into the exporter’s market or obtained findings from competent foreign authorities to suggest under-invoicing.
It was found that the surveillance price was unreasonably used to inflate the customs value by adding artificial foreign expenses, despite no evidence of undervaluation or market irregularity. The company had not, by its own will, added this foreign expense to the declared price. The Court concluded that such a declaration was contrary to commercial logic and the ordinary course of business.

In this context, it was also stated by the court that a prudent trader would not voluntarily declare a higher customs value than the actual sales price without legal compulsion, and that the act of artificially inflating the customs value contradicted economic reality.

The Court found that voluntarily declaring an amount above the actual sales price without any legal obligation or clear rationale defies commercial logic and results in an excessive tax burden. It ruled that taxes calculated over the amount exceeding the declared value were unlawful and ordered a refund ofthe overpaid taxes.

Moreover, the Court held that statutory interest under Law No. 3095 must be calculated from the date of payment. The ruling was upheld by the 7th Tax Litigation Chamber of the Istanbul Regional Administrative Court on 06.03.2025, thereby becoming final.

Notably, a letter issued on 3 July 2025 by the Ministry of Trade’s Aegean Regional Directorate explained how the surveillance system would be applied in practice. The letter states that if the declared customs value of a product is below the officially determined unit customs value based on its tariff classification (GTIP), a surveillance certificate must be submitted. On the other hand, if the declared price is above this threshold—or if it is increased by adding a foreign expense item to the invoice—then the goods can be imported without presenting a certificate. This method is described as a temporary solution aimed at protecting compliant importers from unnecessary difficulties.

Legal Significance
• This decision serves as a precedent and clearly demonstrates that customs authorities cannot retroactively impose additional duties without a solid legal ground.
• It confirms that courts are inclined to protect the taxpayer when unjustified increases are made in declared values, particularly when there is no substantiated proof of price manipulation or undervaluation.
• It underscores that surveillance prices and unverified foreign expense additions cannot be used arbitrarily to override accepted customs values.
• Companies that have faced similar practices may consider pursuing legal remedies based on this ruling.