KACT, WCO Headquarters, Brussels, Belgium, July, 2 – 3, 2014

Customs Valuation

Ulrika Lyckman-Alnered
Luximan Babajee

1
Introductions

HELLO

3
 Master Class in Customs Valuation
Sessions I-VI

Day 1
I Introduction to the programme and an introduction to WCO
II General introduction to Customs Valuation
III Exercise on customs valuation and its basic components
IV WTO and its work; Dispute Settlement Body

Day 2
V Compulsory adjustments, optional adjustments, assists & royalties,
successive sale and freight terms.
VI Exercise on customs valuation, summary and closing remarks

4 4
 Session I
Introduction to the World Customs Organisation

WCO; Luximan Babajee

 Session II
General Introduction to Customs Valuation

Demos: Ulrika Lyckman-Alnered

WCO: Luximan Babajee
 Value? Your definition?

“ worth; desirability”;
“purchasing power;
equivalent of a thing 
which may be substituted
or exchanged for a thing
”
(Concise Oxford Dictionary)

7 7
 Value

Value Purchase

Importer
Customs
Goods
Value
Imported
Declaration
 Agreement on implementation of
Article VII of the GATT (1994)

Customs Value of Imported Goods is:

“ the value of goods for the purpose of levying ad
valorem duties of customs ”
 Types of Customs Duties

AD VALOREM - % OF CUSTOMS VALUE

SPECIFIC/FIXED - COST PER UNIT OF

MEASUREMENT
e.g. , 1 c.u. per kg

COMPOSITE - AD VALOREM &

SPECIFIC/FIXED
 LESSON 2: General Introductory Commentary

PART I - Rules on customs valuation (Articles 1-17)

PART II - Administration, consultations & dispute
settlement (Articles 18 & 19)
PART III - Special & differential treatment (Article 20)
PART IV - Final provisions (Articles 21-24)

ANNEX I - Interpretative Notes: General Note / Notes

to Articles
ANNEX II - Technical Committee on customs valuation
ANNEX III - Derogations for developing countries
 Methods of Valuation

Article 1 Transaction Value

Article 2 Transaction Value of Identical Goods
Article 3 Transaction Value of Similar Goods
Article 4 Application of Articles 5 & 6
Article 5 Deductive Method
Article 6 Computed Value Method
Article 7 Fallback Method
Article 8 Additional elements to be added to the
transaction value
 Articles 9-17

Article 9 Currency conversion

Article 10 Confidentiality
Article 11 Importers right to appeal without penalty.
Article 12 Obligation to publish laws.
Article 13 Obligation to provide a guarantee system.
Article 14 Refers to Annex I Notes, Annexes II and III.
Article 15 Defines certain words and terms.
Article 16 Right of importers to written explanation.
Article 17 Rights of customs administrations
 Articles 18-24

Article 18 WTO Valuation Committee and WCO

Technical Committee on Customs
Valuation.
Article 19 Consultations and disputes.
Article 20 Special provisions available to developing
countries.
Article 21 Reservations.
Article 22 Obligations regarding national
legislation.
Article 23 Review of implementation and operation
of the Agreement by WTO Valuation
Committee.
Article 24 Responsibilities of WTO and WCO
Secretariats
 LESSON 3: Absence of Sell

• Free of charge shipments

• Goods imported on consignment
• Goods imported by intermediaries, who do not
purchase the goods
• Goods imported by branches
• Leased goods
• Goods supplied on loan
• Waste or scrap for destruction
• Goods which are the subject of barter or compensation
 Relevant Sale

A sale for export to the country of importation

Price Actually Paid or Payable

• All the payments

• Made or to be made
• By the buyer to the seller
• Or for the benefit of the seller
• As a condition of sale of the imported goods
 Discounts

• Accepted if they are available to all buyers

• Negotiated between the buyer and the seller
• Transaction value is always the price actually paid or
payable

Quantity discounts
• Reductions to the price for the purchase of specific
quantities Must be available to all buyers
• The quantity which determined the unit price of the
goods being valued is the relevant “price”
 LESSON 4: Payments
Payments may be direct or indirect by the buyer to the seller

Indirect Payments

The price actually paid or Settlement by the buyer

payable is reduced due to a of a debt owed by the
debt owed by the seller to seller to a third party
the buyer

These amounts will form part of the customs value of the

imported goods.
 Activities Undertaken by the Buyer on own Account

• Advertising
• Market research & studies
• Preparation of showrooms
• Testing
• Participation in trade fairs
 Legal Deductions

Note 3 to Article 1:

• Charges for construction, erection, assembly, maintenance

or technical assistance, undertaken after importation
• The cost of transport after importation
• Duties & taxes of the country of importation
 LESSON 5: Questions

• Are there restrictions on the disposition or use of the

goods by the buyer?
• Is the sale or price subject to any condition or
consideration?
• Are there proceeds from the resale of the goods which
accrue to the seller?
• Are the buyer and seller related?
 Article 1.1 (a) (i)
Restrictions imposed or required by law or by public
authorities in the country of importation

Examples :

• Requirement to obtain a license or permit prior to any

resale or use
• Requirement for certain types of labelling or packaging
• Requirement for testing or inspection before release
 Article 1.1 (a) (ii)
Restrictions which limit the geographical area
in which the goods may be resold

Examples :

The seller imposes a territorial restriction which allows

resale of the goods by an importer/distributor only in a
specified area such as :
• a country
• a group of countries
• a region (part of a country)
 Article 1.1 (a) (iii)
Restrictions which do not substantially
affect the value of the goods

Consider :
• the nature of the restriction
• the nature of the goods
• the nature of the industry and its commercial practices
• whether the monetary effect is commercially significant

Example : Exhibiting prior to a fixed date

 Seller’s price is on condition that other goods
will be purchased by the buyer

Example:
Exporter F Sells leather goods Buyer X
Country E @ 50 c.u. per unit Country I

• F makes condition of sale that X also purchases a shipment of shoes

at a unit price of 30 c.u.
• By buying the shoes at 30 c.u., the buyer saves 10 c.u. on the
purchase of the leather goods.
• The leather goods can therefore still be valued under the
transaction value method at 60 c.u. (50 c.u. + 10 c.u.)
 Related Parties

• Common officers or directors

• Business partners
• Employer and employee
• 5 % or more of voting stock of both parties is held by one
person
• One directly or indirectly controls the other
• Both directly or indirectly controlled by a third person
• Both directly or indirectly control a third person
• Members of the same family
 LESSON 14: Article 1.2 (b)
Test Value

“The price closely approximates to”:

• The transaction value in sales to unrelated buyers of
identical or similar goods for export to the same country
of importation;
• The customs value of identical or similar goods as
determined under the provisions of Article 5;
• The customs value of identical or similar goods as
determined under the provisions of Article 6.
 Definition of “Closely Approximates”
Points to consider :
(a) The nature of the goods, e.g.,
• Perishables
• High technology goods
• Novelty items

(b) The nature of the industry, e.g.,

• High technology
• Video games
• Toys
• Chemicals

(c) The season in which imported, e.g.,

• Fruits and vegetables
• Apparel
• Seasonal activity equipment such as skiing

(d) Are differences in the value commercially significant ?

 At or About the Same Time

Points to consider :

(a) The time of export

(b) The time of sale in the country of import

(c) The time of import

 Commercial Levels

There are three commercial levels of sale :

(a) Wholesale

(b) Retail

(c) Final customer/end user

 LESSON 16: Alternate Methods

To be used if there is no transaction value OR if the

transaction value is rejected

• Transaction value of identical goods (Article 2)

• Transaction value of similar goods (Article 3)
• Deductive value method (Article 5)
• Computed value method (Article 6)
• Fall back value method (Article 7)
 Identical Goods

• Are produced in the same country as the goods being

valued
• Are the same in all respects
• Have the same physical characteristics
• Are of the same quality
• Have the same reputation
 Similar Goods

Are produced in the same country as the goods being valued

Are not alike in all respects, but

• Have like characteristics
• Perform the same function
• Are commercially interchangeable
 Time Factor

Comparison with identical or similar goods exported

AT OR ABOUT THE SAME TIME
 Commercial Level and Quantity

Wherever possible:
Same commercial level and substantially the same quantity

Failing that
sale of identical or similar goods :
• same commercial level, different quantity
• different commercial level, same quantity
• different commercial level and quantity
• with the appropriate adjustments

Where there is more than one transaction value for identical

or similar goods THE LOWEST VALUE WILL APPLY
 LESSON 17: Article 4

Prior to consideration of Article 5, Article 4 may be used,

however article 4 is not a method of valuation.
 Article 5: Deductions

Either commissions or profit & general expenses costs of

post importation transport & insurance costs and charges of
Article 8.2 as appropriate customs duties & taxes payable in
the country of importation.
 Deductive Value Method: Key Elements

Selecting the appropriate price

• The time of sale & condition in which the goods being
valued, or identical or similar goods, are sold.
• The greatest aggregate quantity.
 Greatest Aggregate Quantity

The price at which the greatest number of units is sold

to unrelated buyers at the first commercial level after
importation at which such sales take place
 Example

Sales Quantity Unit Price

5 units .65 c.u.
20 units .95 c.u.
40 units 1.00 c.u.
10 units 1.10 c.u.
30 units .65 c.u.
18 units .95 c.u.
 Goods of the Same Class or Kind

Goods which fall within a group or range of goods

produced by a particular industry or industry sector, &
includes identical or similar goods.”
(Article 15.3)
 Article 5.2

“... if the importer so requests, the customs value shall

be based on the unit price at which the imported
goods, after further processing, are sold … due
allowance being made for the value added by such
processing ... ”
 LESSON 18: Computed Value
Materials
Include:
• Raw materials, components or parts, subassemblies
• Costs of transporting the raw materials etc. from
their source to the place of manufacture

Do not include:
• Any recoverable amounts for either scrap or waste
• Internal taxes as appropriate
 Fabrication/processing include

• All costs for labour

• Assembly costs relevant to the production process
• Machinery costs relevant to the production process
• Indirect costs such as plant supervision, plant
maintenance, overtime, etc.
 Example of Computed Value Method
Measuring/Controlling Devices
US Parent
Importer
Company No Sale

Examples of identical / similar goods

No
Articles 2 and 3 cannot be used

Article 6 is applied using Article 4

provisions

Value includes:
• All costs of components used in manufacture
• Profit and general expenses
• Freight charges
 LESSON 19: Fallback Method

• Reasonable means
• Consistent with the principles of the Agreement
• Consistent with the principles of Article VII of the GATT
• On the basis of data available in the country of
importation
 Reasonable Means

• As far as possible, previously determined Customs

values
• Flexible application of Articles 1 to 6, respecting the
sequential order of those methods
 Article 7

The following prices/values cannot be used when applying Article 7

• The selling price in the country of importation of goods produced in

that country
• 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 a computed value of Article 6
• The price of goods sold for export to a country other than the
country of importation
• Minimum values (except for the situation provided for in Annex III)
• Arbitrary or fictitious values
 Article 8 – Costs to be added to the price
actually paid or payable for the imported goods

- Commissions and brokerage (except buying commissions), Containers, cost

of packing
- Costs (provided free of charge by the buyer for use in the production and not
inclued in the price):
- Materials, components, parts
- Tools, dies, moulds
- Engineering, development, artwork, design work, and plans and sketches
- Royalties and license feeds (as a condition of sale of the goods)
- Value of proceeds of any subsequent resale
- Cost of transport, loading, unloading, and handling charges and cost of
insurance
BASED ON OBJECTIVE AND QUANTIFIABLE DATA
NO OTHER ADDITIONS SHALL BE MADE, EXCEPT AS PROVIDED IN ART. 8
 Session III
Exercise on customs valuation and its basic
components

Demos: Ulrika Lyckman-Alnered

WCO: Luximan Babajee
 Session IV
WTO and the Dispute Settlement Body within
WTO

WTO: Roy Santana; Counsellor at the Market

Access Division
 Session V
Compulsory adjustments, optional adjustments,
assists & royalties, successive sale and freight
terms.

Van Bael & Bellis: Pablo Muñiz

 Session VI
Group exercise, summary and closing remarks

Demos: Ulrika Lyckman-Alnered

WCO: Luximan Babajee