Summary on Customs Valuation

  1. The general structure of The Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade is as follows; 

 

The adoption of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (Agreement) is not only the introduction of the uniform valuation criteria but also the facilitation and promotion of international trade. The Agreement provides the simple and fair system which is consistent with commercial practices and enables a trader to proceed with a reasonable degree of certainty and to be fully aware of how the declared value will be determined. It also seeks to achieve the first and principal method of determining Customs Value by basing the customs value as far as possible on the TRANSACTION VALUE OF THE IMPORTED GOODS, that is, the price actually paid or payable for the goods when sold for export to the country of import.

The Agreement was one of the codes resulting in 1979 from the Multilateral Trade Negotiations in GATT, which aimed to reduce or eliminate non-tariff measures with restrictive effect on international trade, and to bring such measure under more effective international discipline.

The Agreement therefore provided a detailed set of valuation rules expanding and giving greater precision to the general principles established in the General Agreement on Tariffs and Trade. 

Their underlying principles and objectives are stated as follows;

  • “to further the objectives of the General Agreement on Tariffs and Trade
  • “to secure additional benefits for the international trade of developing countries”
  • “a fair, uniform and neutral system that precludes the use of arbitrary or fictitious Customs values”
  • the basis for valuation should, to the greatest extent possible, be the transaction value of the goods being valued
  • “Customs value should be based on simple and equitable criteria consistent with commercial practices”
  • “valuation procedures should be of general application without distinction between sources of supply”

The aforementioned principles are developed in the Rules on Customs Valuation (“Code”) . Also it precludes the use of arbitrary or fictitious values.ツ This means that Customs valuation should always be based on factual evidence and should not resort to the creation of values which do not have any basis in commercial reality. That is, Customs should rely on the price actually paid or to be paid between the buyer and the seller in the transaction which brought the imported goods into the country.

The general structure of the Agreement is as follows: 

Part I:  Rules on Customs Valuation     (Article 1 to 17)

Part II:  Administration, Consultation and Dispute Settlement   (Article 18 & 19)

Part III: Special and Differential Treatment (Article 20)

Part IV: Final Provisions (Article 21, 22, 23 & 24)

Annex I: Interpretative Notes 

Annex II: Technical Committee on Customs Valuation 

Annex III: Provisions concerning the special problems and trading needs of developing countries 

Detailed Structure of Part I

Part I: Rules on Customs Valuation

Article 1: The Primary Valuation Method (Transaction Value)

Article 2: The Transaction Value of Identical Goods

Article 3: The Transaction Value of Similar Goods

Article 4: Choice of Alternative Valuation Methods

Article 5: The Deductive Method

Article 6: The Computed Value

Article 7: The “Fall-Back” Method

Article 8: Adjustment of The Price Actually Paid or Payable

Article 9 – 17: Other Provisions

  • Article 9:      Currency Conversion
  • Article 10:   Treatment of Confidential Information
  • Article 11:   Right of Appeal
  • Article 12:   Publication of Laws and Regulations
  • Article 13:  Release of Goods From Customs Control Pending Determination of Customs Value
  • Article 14:  Status of Annexes I, II and III
  • Article 15:   Definition of Terms
  • Article 16:   Importer’ Right to Information as to Determination of the Customs Value of his Goods
  • Article 17:   Customs Right to Verify Information

Annex I – Interpretative Notes

Article 14 provides that the Notes at Annex I form an integral part of the Agreement and the Articles of the Agreement are to be read and applied in conjunction with their respective Notes (Annexes II and III also form an integral part of the Agreement).

Use of Generally Accepted Accounting Principles

The term “Generally Accepted Accounting Principles”, in brief “GAAP”, refers to the recognized consensus of substantial authoritative support within a country at a particular time as to:

  • which economic resources and obligations should be recorded as assets and liabilities
  • which changes in assets and liabilities should be recorded
  • how the assets and liabilities and changes in them should be measured
  • what information should be disclosed and how it should be disclosed, and
  • which financial statements should be prepared.
  • The specific areas of use of GAAP are:
  • determination of adjustments under transaction value (apportionment of assists)
  • determination of usual profit and general expenses under deductive value
  • determination of costs of materials and fabrication, and profit and general expenses under computed value. 

 

III. WTO Valuation Epitome

1. The Condition for the use of the transaction value method are as follows:

The first of the six conditions that must be fulfilled if the transaction value is to be taken as the customs value is as follows:

  • There must be evidence of a sale for export to the country of importation i.e. commercial invoices, contracts, purchase order, etc. 

The second condition is:

There are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which:

  • are imposed or required by law or by the public authorities in the country of importation;
  • limit the geographical area in which the goods may be sold; or
  • do not substantially affect the value of the goods. 

The third condition is:

The sale or price is not subject to some condition or consideration for which a value cannot be determined with respect to the goods being valued. 

The fourth condition is:

That no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller unless an appropriate adjustment can be made in accordance with Article 8. 

The fifth condition is:

The buyer and seller are not related, or where the buyer and seller are related, that value is acceptable for Customs purposes if the importer demonstrate that:

  • the relationship did not influence the price actually paid or payable, or;
  • the transaction value closely approximates a test value.

The sixth condition is:

Sufficient information is available to enable the following additions to be made to the price actually paid or payable under Article 8 of the Agreement:

  • commissions and brokerage, except buying commissions,
  • packing and container costs and charges,
  • assists,
  • royalties and license fees,
  • subsequent proceeds, and
  • the cost of transport, insurance and related charges up to the place importation, if the country bases its valuation law on c.i.f.

 (Note)

The Customs value must not include the following charges or costs, if they are distinguished from the price actually paid or payable for the goods:

  • freight after importation into the Customs territory of the importing country;
  • cost of construction, erection, assembly, maintenance or technical assistance occurring after importation; and
  • duties and taxes of the importing country.

 

The Transaction Value

Article 1 describes transaction value as “the price actually paid or payable for the goods when sold for export to the country of importation adjusted in accordance with the provisions of Article 8”.

The price actually paid or payable, vide the Interpretative Note to Article 1, is the total payment for the imported goods whether such payment is made directly, such as by money transfer, letter of credit or negotiable instruments, or indirectly, such as settlement by the buyer of a debt owed by the seller.

Activities undertaken by the buyer on his own account, other than those for which an adjustment is provided n Article 8, are not considered to be an indirect payment to the seller, even though they might be regarded as of benefit to the seller. The costs of such activities are not, therefore, to be added to the price actually paid or payable in determining the customs value. Such activities would include those related to the marketing of the imported goods.

Charges for construction, erection, assembly, maintenance or technical assistance relating to imported goods such as industrial plant, machinery or equipment, undertaken after importation, are not to be included in the customs value if they are distinguished from the price of the goods.

The cost of transport after importation as well as duties and taxes of the country of importation are also to be excluded from the customs value if they are similarly distinguished.

The Sale

The transaction value is based on the price for the goods “When sold for export”.  In order to establish this value there must be a sale of the goods to be valued. If there is no sale there can be no transaction value under Article 1. This would be the case, for example, if the goods were imported on consignment, or on lease or hire, and the valuation of such goods would have to be attempted under subsequent Articles.

The sale in question must also be one for export to the country of importation. If the imported goods have been sold for the domestic market of the country of exportation or for export to a third country, that sale cannot be used to establish a transaction value.

The sale described in Article 1 is the sale of the goods being valued whenever these goods were sold for export to the country of importation, and in whatever quantities. That is to say the definition of transaction value in the Article does not attempt to specify a fixed time or quantity to be taken into account.

2. Related Parties

If the buyer and seller are not related and the other conditions have been satisfied, the transaction value will be the customs value. On the other hand, if the buyer and seller are related in terms of Article 15 that fact in itself gives no grounds for regarding the transaction value as unacceptable. In such a case the transaction value will be the customs value if that value is found to be acceptable under the provisions of either paragraph 2 (a) or 2 (b) of Article 1. These paragraphs provide different means for establishing the acceptability of the transaction value.

(1) The definition of “related” is found in Article 15 which states that ” — person shall be deemed to be related only if: 

  • they are officers or directors of one another’s business;
  • they are legally recognized partners in business;
  • they are employer and employee;
  • any person directly or indirectly owns, controls or holds 5% or more of the outstanding voting stock or shares of both of them;
  • one of them “directly or indirectly” controls the other; both of them are directly or indirectly controlled by a third person;
  • together they directly or indirectly control a third person; or
  • they are members of the same family.

The Interpretative Note to Article 15 states that the term “person” includes legal persons where appropriate. It also provides that for the purpose of the agreement one person shall be deemed to control another when the former is legally or operationally in a position to exercise restraint or direction over the latter.

(2) Paragraph 2(a) – The Circumstances of the Sale

Where the customs administration has doubts about the acceptability of a transaction value the importer should be given an opportunity to supply such further detailed information as may be necessary to enable it to examine the circumstances surrounding the sale.ツ The Interpretative Note Article 1 gives the following examples of circumstances in which transaction value will be accepted between buyer and seller: 

  • If the price has been settled in a manner consistent with the normal pricing  practices of the industry or in the way the seller settles prices for sales to buyers who are not related, this will demonstrate that the price had not been influenced by the relationship.
  • If it is shown that the price is adequate to assure recovery of all costs plus a  profit that is equivalent to the firm’s overall profit over a representative period of time in sales of merchandise of the same class or kind this will demonstrate that the price has not been influenced by the relationship.

Under paragraph 2 (a) the transaction value is to be accepted provided that the relationship did not influence the price. If, in the light of information provided by the importer or otherwise, the customs administration has grounds for considering that the relationship influenced the price, it must communicate its grounds to the importer and he must be given a reasonable opportunity to respond. Where it can be shown that the buyer and seller, although related under the provisions of Article 15, buy from and sell to each other as if they were not related, this would demonstrate that the price had not been influenced by the relationship.  The Interpretative Note to paragraph 2 (a) also states that it is not intended that there should be an examination of the circumstances in all cases where the buyer and the seller, are related. Such examination will only be required where there are doubts about the acceptability of the price. Where the customs administration has no doubts about the acceptability of the price, it should be accepted without requesting further information from the importer.

(3) Paragraph 2(b) – The Test Values

Under paragraph 2(b) the transaction value must be accepted whenever the importer demonstrates that such value closely approximates to one of the following, occurring at or about the same time:

  • the transaction value in sales to unrelated buyers of identical or similar  goods for export to same country of importation;
  • the customs value of identical or similar goods as determined under the provisions of Article 5; and
  • the customs value of identical or similar goods as determined under the provisions of Article 6.

(the transaction value in sales to unrelated buyers for export to the same country of importation of goods which would be identical to the imported goods except for having different country of production provided that the sellers in any transactions being compared are not related.)

In applying these tests, due account must be taken of demonstrated differences in commercial levels, levels, quantity levels, the elements set out in Article 8. Account must be also be taken of costs incurred by the seller in sales in which he and buyer are not related but which are not incurred by the seller in sales in which he and the buyer are related.

Where a test under paragraph 2 (b) is met, it is not necessary to examine the question of influence under paragraph 2 (a). If the customs administration has already sufficient information to be satisfied, without further detailed enquiries, that one of he tests provided in paragraph 2 (b) has been met, there is no reason for it to require the importer to demonstrate that the test can be met. In paragraph 2 (b) the term “unrelated buyers” means buyers who are not related to the seller in any particular case.

The Interpretative Note on the application of the tests under paragraph 2 (b) points out that a number of factors must be taken into consideration in determining whether one value “closely approximates” to another value. These factors include the nature of imported goods, the nature of the industry itself, the season in which the goods are imported, and, whether the difference in values is commercially significant.

The “tests” in paragraph 2 (b) are to be used at the initiative of the importer and only for comparison purposes. Substitute values may not be established by use of the test methods.

If the examination of the circumstances of the sale indicates that the price was influenced by the relationship or if the importer fails to demonstrate that the transaction value closely approximates one of the “test” values the transaction value must be considered to have failed to meet the fourth condition. It must then be disregarded as a basis for customs value and the latter sought under the terms of Article 2.

3. ADJUSTMENT OF THE PRICE ACTUALLY PAID OR PAYABLE (ARTICLE 8)

(1) Paragraph 1 – Additions to the Price Actually Paid or Payable

The additions which must be made to the price actually paid or payable are:

(a) Commissions and Charges

To the extent that they are incurred by the buyer but not included in the price of the goods:

  • commissions and brokerage, except buying commissions;
  • the cost of containers which are treated as being one for customs purposes  with the goods in question;
  • the cost of packing whether for labour or materials.

The Interpretative Note to Article 8 states that buying commissions are the fees paid by an importer to his agent for the service of representing him abroad in the purchase of the goods being valued.

(b) Elements Supplied by the Buyer

The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable, has to be added to the customs vale. They are as follows:

  • materials, components, parts and similar items incorporated in the imported goods;
  • tools, dies, moulds and similar items used in the production of the imported goods:
  • materials consumed in the production of the imported goods; and
  • engineering, development, artwork, design work, and plans and sketches undertaken elsewhere than in the country of importation and necessary for the production of the imported goods.

These elements are sometimes referred to as “assists”.  It should be noted that the value of engineering, development, art and design work, and plans and sketches undertaken in the country of importation would not be added to the price of the goods even if supplied by the buyer free of charge or at a reduced cost. The furnishing to the seller by the buyer of engineering and plans undertaken in the country of importation is cited in the Interpretative Note to Article 1 as a condition or consideration relating to the production of imported goods which would not result in rejection of the transaction value under Article 1.

(c) Royalties

Royalties and license fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable, has to be added to the customs value. However, two conditions must be satisfied before a royalty can be made dutiable, i.e.

  • it must be related to the goods being valued, and
  • it must be a condition of sale of the goods being valued.

The Interpretative Note also indicates that payments made by the buyer for the right to distribute or resell the imported goods may not be added to the price for the goods, provided such payments are not a condition of sale for export to the country of importation.

(d) Resale Proceeds

The value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller has to be added to the customs value. 

The Interpretative Note offers no comment on this provision. It is referred to in the third condition for acceptance of the transaction value under Article 1. Together these two provisions ensure that the transaction value is a complete one. That is to say, it represents the total amount o be paid for the goods including any delayed payments consequent upon the importer’s dealing in the goods after importation. 

(2) Paragraph 2 – Inclusions or exclusions from customs value

In framing its legislation, each country shall provide for the inclusion or the exclusion from the customs value, in whole or in part, of the following:

  • the cost of transport of the imported goods to the port or place of importation;
  • loading, unloading and handling charges associated with the transport of the imported goods to the port or place of importation; and
  • the cost of insurance. 

The selection leaves the treatment of such charges for customs value purposes entirely up to each party to the Agreement. There is no attempt even to define the term “port or place of importation”.  As noted in the “Outline of the Code’s Valuation Provisions this represents an option allowing parties to adopt the Code on an FOB or CIF basis. 

4.  ALTERNATIVE VALUATION METHOD

When the customs value cannot be established under Article 1 the Code provides that the value must be sought in the terms of Articles 2, 3, 5, 6 or 7. These must be attempted in that order. The only variation allowed to this sequential procedure is in Article 4 which provides that the importer may choose to have the valuation attempted under Article 6 before Article 5. No other variation is permitted either by invoking the Articles in a different order or by by-passing one or more Articles.

The Transaction Value of Identical or Similar Goods (Article 2 & 3)

General 

Where the customs value cannot be determined under Article 1 it may be sought under Article 2 or, falling that, Article 3. Under Articles 2 and 3 the Customs value is the transaction value of identical (Article 2) or similar (Article 3) goods sold for export to the same country of importation and exported at or about the same time as the goods being valued.

The principal difference between Article 1 and these Articles is that Article 1 prescribes a transaction value based on the price of the goods being valued by Customs, while Articles 2 and 3 prescribe a transaction value based on the price of goods which are identical with, or similar to, the goods being valued. The transaction value of those identical or similar goods must be a customs value already accepted under Article 1.

If more than one qualifying transaction value of identical or similar goods is found, the lowest of such values must be used to determine the customs value of the imported goods.

Any comparison of acceptable prices for the purposes of selecting the lowest would take after all necessary adjustments (e.g. for level, quantity, freight) have been made. Where a transaction value of a different level and quantity to the goods to be valued is available as well as one that is the same in these respects, the latter must, as indicated later, be used regardless of which of the two is the lower.

 

Definitions of “Identical” and “Similar 

Identical goods are defined in Article 15 as goods which are the same in all respects, including physical characteristics, quality and reputation. Minor differences in appearance would not preclude goods otherwise conforming to the definition from being regarded as identical.

Similar goods are also defined in Article 15 as goods which, although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable. The quality of the goods, their reputation and the existence of a trademark are among the factors to be considered in determining whether goods are similar.

Goods are not regarded as identical or similar goods unless they were produced in the same country as the goods being valued.

Goods produced by a different person may be taken into account only when there are no identical or similar goods, as the case may be, produced by the same person as the goods being valued. Identical goods produced by a different person taken precedence over similar goods produced by the same person, but do not take precedence over identical goods produced by the same person.

“Produced” is defined in Article 15 as including grown, manufactured or mined. While the producer and the seller might be one and the same there is no requirement to this effect. Therefore “Identical” or “Similar” goods can be those sold by a seller other than that of the goods to be valued.

(2) Time

Article 2 and 3, unlike Article 1, mention time in relation to the transaction value established under that Article. They require that the customs value be the transaction value of identical goods exported at or about the same time as the goods being valued. In Article 1, no mention of a fixed time is made because the objective of that Article is to use the price of the imported goods, .e. the invoice price. In Articles 2 and 3 the use of the price identical goods requires consideration of the time factor for reasonable comparability of the prices.

(3)  Level and Quantity

In addition to a time difference, there may be other differences, such as the level at which the sales were made or the quantities sold, which would result in different prices for the goods being valued and the identical or similar goods. When there are sales of identical or similar goods at the same level and in substantially the same quantities as for the goods being valued, the transaction value to be used for Article 2 or 3 purposes must be that established on those sales. However, the absence of such sales is not a justification for rejection of the methods of valuation in Articles 2 or 3. Where there are sales only at a different level and/or quantity, adjustments must be made so that the result ant value is at the same level and for substantially the same quantities as the goods being valued.

Any adjustment for level and/or quantity differences whether it leads to an increase in the value may be made only on the basis of “demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustment” such as price lists containing prices referring to different levels or different quantities. The Interpretative Notes to Article 2 and 3 give the following example. The imported goods to be valued may consist of a shipment of 10 units, and only identical or similar imported goods for which a transaction value exists involve a sale of 500 units. If it is recognized that the seller grants quantity discounts the required adjustments may be accomplished by referring to the seller’s price list and using the price indicated there for a sale of 10 units. It is not necessary that a sale actually occurs in quantities of 10, as long as the price list has been established as bona fide through sales of other quantities shown on the same list.

In the absence of such an objective measure for an adjustment the transaction value in question cannot be used and the determination of the customs value cannot proceed under Article 2 or 3.

Other Adjustment

Where the costs and charges referred to in Article 8.2 (transport, loading, unloading, handling and insurance) are included in this transaction value, an adjustment must be made to take account of significant differences in such costs and charges between the imported goods and the identical or similar goods in question arising from differences in distances and modes of transport.

Choice Of Alternative Valuation Methods (Article4)

The first three Articles of the Code provide for Customs value based on transaction value and give the order of priority for applying those Articles. Customs values which are not based on transaction value and which are relevant only when a customs value cannot be determined under the first three Articles are prescribed in Articles 5 and 6. The sequence of application of those two Articles is laid down in Article 4.

Article 4 requires that if the customs value of the imported goods cannot be determined under the provisions of the first three Articles, it is to be established under the provisions of Article 5 or, if the customs value cannot be established under that Article, under the provisions of Article 6. However, at the request of the importer, the order of application of Articles 5 and 6 shall be reversed.

The valuation methods prescribed in Article 5 and 6 both present certain difficulties and this, according to the general introduction to Code, is the reason the importer is given the right, under the provisions of Article 4, to choose the order of application of the two methods. The difficulties referred to stem from the calculations involved as well as the problem of obtaining the information on which to base them.

 

5.  The Deductive Method (Article 5)

(1)  General

Under Article 5, the customs value is to be determined by the “deductive” method. It is to be based on the unit price at which the imported goods or identical or similar imported goods are sold in the greatest aggregate quantity in the country on importation. There is no order of precedence but the buyer and the seller must not be related and the sale must take place at or about the time of importation of the goods being valued.

(2) Sales in the Greatest Aggregate Quantity

Firstly, the sales to be considered are those that occur at the first commercial level after importation.

The second consideration is that no sale is to be taken into account for purposes of determining the greatest aggregate quantity, if that sale is to a person who supplies, directly or indirectly, any of the elements specified in Article 8 free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods.

(3)  Commissions or General Expenses and Profit

Deductions must also be made either for commissions or for general expenses and profit. If deductions are made for commissions then no deductions would be made for general expenses and profit and vice versa..

The commissions to be deducted are those usually paid or agreed to be paid in connection with sales in the importing country of imported goods of the same class or kind. Such deductions will be applicable when the sale is made on an agency basis.

The general expenses and profit to be deducted for the purpose of Article 5 are those usually made in connection with sales in the importing country of imported goods of the same class or kind. Such deduction will be applicable when the seller is acting for his own account and at his own risk.

  • Duties and taxes
  • Delivery Costs
  • Goods Processed after Importation

The Customs value is to be based on the unit price at which the imported goods, after further processing, are sold in the greatest aggregate quantity to persons in the country of importation who are not related.

 

6.  The Computed Value Method (Article 6) 

(1)  General

Under Article 6 the customs value is based on a computed value which is the sum of the following:

  • the cost or value of materials and fabrication or other processing employed in producing the imported goods ;
  • an amount for profit and general expenses equal to that usually reflected in  sales of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to the country of importation ;
  • the cost or value of all other expenses necessary to reflect the valuation option chosen by the Party under Article 8, paragraph 2.

(2)  Production Cost or Value

The computed value consists firstly of the cost or value of materials and processing employed in producing the imported goods. In those cases where a cost has been incurred by the producer for the materials or processing, that cost is used in establishing the computed value ; when no cost has been incurred for the materials or processing in question, then their value is used.

(3)  Profit and General Expenses

The general expenses to be used in computed value are the direct and indirect costs of selling the goods for export and any production costs not already taken into account.

(4)  Delivery Expenses

The cost or value of delivery expenses, namely transport of the imported goods to the port or place of importation, loading and handling charges and the cost of insurance, are to be reflected in the computed value depending on the treatment to be accorded to these charges by nation legislation.

(5)  Procurement of Information on Computed Value

The computed value method will generally be limited to those cases where the buyer and the seller are related, and the producer is prepared to supply to the authorities of the country of importation the necessary costing and to provide facilities for any subsequent verification which may be necessary.

 

7.  The “Fall-Back” Method (Article 7)

This Article does not provide a new definition of value but rather requires that the customs value be determined using reasonable means consistent with the principles and general provisions of the Code and of Article 7 of WTO and on the basis of data available in the country of importation.

(1)  Identical Goods

Identical imported goods produced in a country other than the country of exportation of the goods being valued could be the basis for Customs valuation; Customs values of identical imported goods already determined under the provisions of Article 5 and 6 could be used.

(2)  Similar Goods

Similar imported goods produced in a country other than the country of exportation of the goods being valued could be the basis for customs valuation; customs values of similar imported goods already determined under the provisions of Article 5 and 6 could be used.

(3)  Deductive Method

The requirement that the goods must have been sold in the condition as imported in paragraph 1 of Article 5 could be flexibly interpreted; the 90-day requirement could be administered flexibly.

(4)  Other Aspects of Article 7

Paragraph 2 of Article 7 lists valuation methods which are not to be employed in determining a customs value under the provisions of that Article; these are:

  • the selling price in the country of importation of goods produced in such country;
  • a system which provides for the acceptance for customs purposes of the higher of two alternative values;
  • the price of goods on the domestic market of the country of exportation;
  • the cost of production other than computed values which have been determined for identical or similar goods in accordance with the provisions of Article 6;
  • the price of the goods for export to a country other than the country of importation;
  • minimum customs values;
  • arbitrary or fictitious values.

The Agreement emphasizes the fact that not only is transaction value the primary basis of valuation, it is the preferred basis.  Also emphasize that language that indicates that the “value should be based on simple and equitable criteria” and that the intent was that customs value should reflect commercial reality.

An importer making declaration for home consumption is required to answer questions relating to the entry or produce commercial documents. The Customs may not give permission for the goods to be dealt with in accordance with the declaration unless Customs have verified the details of particulars.

As for the operation and management of the Agreement, documents relating to the import are very important. Therefore, we need to have some kind of standard for the entry relating documents. The standard for the documents are:

The importer must state;

  • whether any payment in addition to the invoice price has been or will be made;
  • whether the importer is related to the foreign supplier;
  • whether any part of the proceeds of later resale will accrue directly of indirectly to the seller, etc.

If the imported goods are not the subject of a sale, this also has to be stated in declaration of facts.

Goods sent on consignment to an agent or transferred to a branch.

The entry related documents should provide a number of other particulars required by Customs for valuation purposes, including the following;

  • identification of the parties to the transaction;
  • the description and quantity of the goods;
  • the selling price of the goods, including the terms of sale, the currency and method of payment and exchange contract details (where appropriate, such as T/T, D/A, D/P, L/C, private money transfer concerning the targeted importers.);
  • particulars of all arrangements or undertakings that have or may have the effect of varying the selling price of the goods, whether by way of discount, rebate, commission, compensation or any other means;
  • the value of the outside packages and the labour costs incurred in packing the goods into the outside packages, where these costs are not included in the selling price;
  • whether any royalties or license fees or other deferred payments, such as any part of the proceeds of any resale disposal or use of the goods by the buyer, are payable;
  • details of any goods or services that may have been supplied, whether or not free of charge, directly or indirectly, by the buyer in connection with the production of the goods;
  • any inland freight or inland insurance in respect of the goods paid or payable in accordance with the terms of the relevant transaction by the buyer to or for the benefit of the seller, where such costs are not included in the selling price of the goods.

It is always the importer’s responsibility to obtain from the exporter any information not contained in normal commercial documentation which Customs may require to ensure that the goods are entered in accordance with the provisions of the Customs Law. One example of additional evidence that may be required to enable clearance is the production of manufacturer”s/ sellers” invoices in cases of transactions arranged through intermediaries.

One of the main objectives of the Agreement is that customs value should be based on simple and equitable criteria consistent with commercial practice. It follows that entry processing should be based to the greatest extent on normal commercial documentation.

The onus is at all times on the importer to produce complete and legible documentary evidence to support the entry at the time of lodgement, including details of any valuation determinations for previous shipments.

The Agreement Article VII stipulates that the Customs value of imported goods;

  • should be based on the actual value of the merchandise;
  • should not be based on the value of merchandise of national origin or on arbitrary or fictitious values;
  • should be the price at which such or like merchandise is sold in the ordinary course of trade under fully competitive conditions.

The basis for valuation should, to the greatest extent possible, be the transaction value of the goods being valued.

Customs value is the transaction value of the imported goods that is the price actually paid or payable for the goods when sold for export to the country of import and adjusted in accordance with the provisions of Article 8.

In very general terms, a sale could involve the transfer of title of goods for a consideration. That is, a sale requires a “Buyer” who agrees to obtain certain goods for a certain amount and a “Seller” who agrees to transfer ownership of those goods for a certain amount. When both parties agree, we have a “Sale”.

The General introduction to the Agreement on Implementation of Article VII of the GATT states that the Members to the Agreement recognise that the basis for valuation of goods for Customs purposes should, to the greatest extent possible, be the transaction value.

Therefore, the first and principal method of determining Customs value is the TRANSACTION VALUE OF THE IMPORTED GOODS, that is, the price actually paid or payable for the goods when sold for export to the country of import and adjusted in accordance with the provisions of Article 8.

The term “importation” itself is not defined as that particular definition has been left up to each nation’s legislation or regulation.  This is appropriate because the term has relevance beyond the scope of just valuation.  It can be that date which determines when goods are released, when entry occurs, when a rate of duty will be fixed, etc.

Before the examination of the primary method of valuation under the Agreement, let us have a look at two of the terms used in Article 1 which are defined in Article 15 of the Agreement:

  • “Customs value of imported goods” means the value of goods for the purposes of levying ad valorem duties of Customs on imported goods; and
  • “Country of importation” means country or Customs territory of importation.

 

投稿者: NagaiMunehiko

2002 to 2012: PricewaterhouseCoopers (Tokyo) Representative in Japan, Worldtrade Management Services Japan 1980: Prior to joining WMS Japan, spending more than 27 years with Japan Customs in both operations and senior executive roles including commercial fraud investigation, handling protests to the Director-General of the Customs, Appeal to the Minister and court cases (drafting briefs and refutations) plus leading Post-entry Examinations and Audits. Represented Japan Customs in numerous international forums in Europe, USA and parts of Asia where I was invited to present and train on the WTO GATT Rules on Customs Valuation, Commercial Fraud Investigation Technique, and international Customs and trade issues. Also a lecturer on Customs Law and Customs Tariff Law for training senior Japan Customs personnel and those customs personnel from ASEAN, Middle East, South America, and Africa. And, translated the Japan Customs Law, Customs Tariff Law, Temporary Tariff Measures Law and their Cabinet Orders into English. International Cooperation Missions: Japanese Government Representative on the following: 1992: Lecturer at ‘GATT Valuation and Compliance Mission’ to Mongolia 1994: Lecturer at ‘GATT Valuation and Compliance Mission’ to Philippines 1995&1996: Speaker at ‘GATT Valuation and Compliance Mission’ to Indonesia International Conferences: Japanese Government Representative at the following: 1991: Speaker at ‘7th Annual Pacific Basin Customs Enforcement Conference’ at Hawaii, USA 1991: Speaker at ‘SKYNAC Conference held by Drug Enforcement Administration at Los Angeles, USA 1995: Speaker at WCO’s Committee Meeting for Revision of Kyoto Convention 1995: Speaker at ‘International Valuation Symposium’ as a panel member, World Customs Organisation Headquarters at Brussels, Belgium Summary of Relevant Work Experience: With PricewaterhouseCoopers 2002 to 2012 PricewaterhouseCoopers Pte Ltd Japan Branch Representative Developed new business systems with wide range of industry clients working with Japan Customs and the Ministry of Economy, Trade and Industry (“METI”), and carries out a range of assignments including: • Assisting importers with customs duty and excise duty related issues • Assisting exporters to maximise their sales by international trade planning • Liaising with the Japan Authorities, including the Customs Department, METI and Government Departments over issues affecting both the Japan Government and individual companies • Customs valuation, classification and procedures (e.g. duty drawback, customs warehousing) consulting and solutions • Compliance and risk management advice on customs and trade matters, inclusive of Export Control (Supported the Self-Defence Foce) • Strategic trade consulting e.g. establishing or restructuring import and export channels, site and process location. • Published a book on Customs Valuation “関税評価ハンドブック” in Japanese Major projects completed : ・ Unbundling of Transfer Price - Supporting multi-national companies to unbundle transfer prices for tangible and intangible transactions and to satisfy those requirements set by Tax and Customs authorities. ・ Anti-Dumping Filing to Department of Commerce of US Government - Supporting and assisting a Japanese Company for the filing of administrative review and secured a zero rate for the company. ・ Implementation of Limited Risk Distributor Business Model - Supporting a company to implement a Limited Risk Distributor business model which enables it to satisfy both tax and customs requirements and minimize overall costs and expenses associated with cross-border transactions for tangible and intangible. ・ Implementation of resale minus valuation method Assisting and supporting a company to introduce a resale minus valuation method to arrive at appropriate and correct customs value.