FAQs: Customs Valuation Part 3

Summary

The script discusses the Agreement on Customs Valuation, emphasizing the transaction value method as the primary valuation approach. It defines transaction value as the actual price paid or payable for goods sold for export, adjusted by specified valuation factors. The script outlines conditions under which the transaction value method applies, including the absence of restrictions on goods and the absence of related parties between buyer and seller. It also details the valuation factors, such as dutiable elements like commissions and non-dutiable elements like discounts, and clarifies procedures for customs officers when doubting the declared value's accuracy. The script concludes with guidelines on currency conversion for customs valuation.

Takeaways

• 📊 The principal method of valuation under the Agreement on Customs Valuation is the transaction value method.
• 💼 Transaction value refers to the price actually paid or payable for the goods when sold for export to the country of importation.
• 💵 The price actually paid or payable can be in various forms, including money transfers, letters of credit, or negotiable instruments.
• 🚫 A commercial invoice usually reflects the total payment made but cannot be used if it misrepresents the price or is fraudulent.
• ✅ Customs officers should base the customs value on transaction value unless there are doubts about its truth or accuracy, or if it doesn't meet valuation conditions.
• ❓ If there are doubts about the declared value, customs officers may ask importers for further explanation and evidence.
• 🔍 The transaction value method can be applied if there's evidence of a sale for export, no restrictions on the goods' disposition, and the sale price is not subject to conditions that can't be valued.
• 🔗 The buyer and seller should not be related, or if they are, the relationship should not influence the price or the transaction value should approximate test values.
• 💼 Valuation factors include dutiable elements (like commissions, royalties) to be added and non-dutiable elements (like discounts) to be deducted from the customs value.
• 🌐 The inclusion or exclusion of charges like freight, insurance, and loading/unloading in the customs value depends on the importing country's legislation.
• 💹 When currency conversion is necessary, the rate of exchange published by the importing country's authorities should be used, reflecting the rate in effect at the time of exportation or importation.

Q & A

What is the principal method of valuation under the Agreement on Customs Valuation?

The principal method of valuation under the Agreement on Customs Valuation is the transaction value method.

What is meant by transaction value in the context of customs valuation?

Transaction value refers to the price actually paid or payable for the goods when sold for export to the country of importation, adjusted by valuation factors.

What does the price actually paid or payable represent in customs valuation?

The price actually paid or payable represents the total payment made or to be made by the buyer, which may include various forms of payment such as money transfers, letters of credit, or negotiable instruments.

Are customs officers required to accept the value declared by the importer as the customs value?

Customs officers are required to base the customs value on the transaction value to the greatest extent possible, but they are not bound to accept the declared value without verification.

What should a customs officer do if they doubt the truth or accuracy of the declared value?

If a customs officer doubts the declared value, they may ask the importer for further explanation and evidence. If doubts persist, they must communicate in writing to the importer, providing grounds for doubt and an opportunity for response.

What are the validation conditions for applying the transaction value method?

The transaction value method can be applied if there is evidence of a sale for export, no restrictions on the goods' disposition or use, the sale or price is not subject to conditions that cannot be valued, no part of the proceeds from subsequent sales accrues to the seller, and the buyer and seller are not related or the relationship does not influence the price.

What are the valuation factors that need to be considered in determining the customs value?

Valuation factors include dutiable factors like commissions, container costs, packing costs, and royalties, as well as non-dutiable factors such as discounts, interest charges, and post-importation charges.

Should the customs value include charges for freight, insurance, loading, unloading, and delivery?

The inclusion or exclusion of these charges depends on the law of the importing country, which may provide for their inclusion in the customs value based on the cost, insurance, and freight (CIF) price or exclusion based on the free on board (FOB) price.

Do charges for pre-shipment inspection need to be added to the customs value?

No, charges for pre-shipment inspection should not be added to the customs value as they are neither paid to the buyer nor for his benefit.

How is the customs value calculated when the currency of the importing country differs from the currency of the imported goods?

The customs value is calculated using the rate of exchange duly published by the competent authorities of the importing country, reflecting the rate effectively in commercial transactions, as at the time of exportation or importation as specified by each importing country.

Outlines

00:00

📏 Understanding Transaction Value in Customs Valuation

The principal method of valuation under the Agreement on Customs Valuation is the transaction value method, which is based on the price actually paid or payable for goods sold for export to the importing country. This price may include various forms of payment, such as money transfers, letters of credit, or negotiable instruments. It can also involve direct or indirect payments, like settling a debt owed by the seller. The transaction value is reflected in commercial invoices, but if it's misleading or fraudulent, it cannot be used for valuation. Customs officers are required to base the customs value on transaction value whenever possible, but this is subject to the truth and accuracy of the declared value, compliance with valuation conditions, and the availability of objective data for adjustments. If the transaction value method is not applicable, customs value must be determined by another method in a hierarchical order. If an officer doubts the declared value, they may request further explanation and evidence from the importer. If doubts persist, the officer may deem the transaction value method inapplicable and communicate this in writing to the importer, providing grounds for doubt and an opportunity for the importer to respond.

05:01

🔍 Valuation Conditions and Factors in Customs Valuation

The transaction value method can be applied if certain validation conditions are met: evidence of a sale for export, no restrictions on the buyer's disposition or use of the goods beyond legal requirements, no conditions or considerations affecting the value that cannot be quantified, no proceeds from subsequent sales or uses of the goods accruing to the seller unless adjustable, and no relationship between the buyer and seller or a demonstrated close approximation of transaction value to test values if a relationship exists. Valuation factors include both dutiable and non-dutiable elements. Dutiable factors are added to the customs value and include commissions, brokerage, container costs, packing costs, and the value of goods and services supplied by the buyer. Non-dutiable factors are deducted and include retrospective discounts, interest charges, post-importation charges, and duties and taxes in the importing country. The customs value may or may not include charges for freight, insurance, loading, unloading, and delivery, depending on the importing country's legislation. When these charges are included, the customs value is based on the cost, insurance, and freight (CIF) price; when excluded, it's based on the free on board (FOB) price.

10:04

🌐 Currency Conversion in Customs Valuation

When the price of imported goods is invoiced in a foreign currency, the customs value must be calculated using the exchange rate published by the importing country's competent authorities. This rate should reflect the effective rate in commercial transactions and is typically specified as at the time of exportation or importation, as determined by the importing country. The agreement also includes the time of entry for customs purposes. Charges for pre-shipment inspection, which are usually incurred by the importer or the importing country's government, are not added to the customs value as they are not paid to or for the benefit of the buyer.

Keywords

💡Agreement on Customs Valuation

The 'Agreement on Customs Valuation' is a key international treaty that sets out the principles and rules for determining the value of goods for customs purposes. It is central to the video's theme as it provides the framework for the valuation methods discussed. The agreement aims to standardize customs valuation practices across countries to prevent under or over valuation of traded goods, thereby ensuring fair trade and accurate revenue collection.

💡Transaction Value Method

The 'Transaction Value Method' is the principal method of valuation under the Agreement on Customs Valuation. It refers to the price actually paid or payable for the goods when sold for export to the country of importation. This method is crucial as it forms the basis for determining the customs value of imported goods. The video explains that this method is used to the greatest extent possible, highlighting its significance in international trade and customs procedures.

💡Price Actually Paid or Payable

The term 'Price Actually Paid or Payable' represents the total payment made or to be made by the buyer for the goods. This includes not only direct monetary transfers but also payments made through letters of credit or negotiable instruments. The video emphasizes that this price is a critical component in the transaction value method and must be adjusted by valuation factors to determine the customs value.

💡Valuation Factors

Valuation factors are elements that must be considered when determining the customs value of goods. They include both dutiable and non-dutiable elements that can affect the price of goods. The video explains that these factors need to be adjusted to compute the accurate customs value. For instance, commissions, brokerage, and the cost of containers are examples of dutiable factors that are added to the price, while discounts and post-importation charges are non-dutiable factors that are deducted.

💡Customs Authorities

Customs authorities are government agencies responsible for the administration of customs policies and procedures, including the valuation of imported goods. In the context of the video, these authorities are tasked with ensuring that the declared value of imported goods is true and accurate, and they have the power to request further information or documentation to verify the transaction value.

💡Objective and Quantifiable Data

The video mentions the need for 'objective and quantifiable data' with regard to the valuation factors for making adjustments to the price actually paid or payable. This refers to the requirement that the data used to adjust the transaction value must be verifiable and measurable to ensure the accuracy of the customs valuation.

💡Validation Conditions

Validation conditions are the criteria that must be met for the transaction value method to be applied. The video outlines several conditions, such as evidence of a sale for export, no restrictions on the disposition or use of the goods, and no relationship between the buyer and seller that influences the price. These conditions are essential to ensure that the transaction value is a fair and accurate reflection of the goods' value.

💡Commercial Invoice

A 'Commercial Invoice' is a document that usually reflects the total payment made for the goods. It is a key document in customs procedures as it provides evidence of the transaction value. However, the video notes that if the invoice understates or overstates the price, or if it is misleading or fraudulent, it cannot serve as a valid basis for determining the transaction value.

💡Currency Conversion

The term 'Currency Conversion' is relevant when the customs duty is collected in the currency of the importing country, and the price of the imported goods is invoiced in a foreign currency. The video explains that the rate of exchange published by the competent authorities of the importing country should be used for this conversion, and it should reflect the rate effectively in commercial transactions at the time of exportation or importation.

💡Pre-shipment Inspection

Pre-shipment inspection refers to the examination of goods before they are shipped to ensure compliance with import regulations. The video clarifies that charges for pre-shipment inspection are not added to the customs value as they are neither paid to the buyer nor for his benefit. This is an important distinction in the valuation process to prevent overvaluation of goods.

Highlights

The principal method of valuation under the Agreement on Customs Valuation is the transaction value method.

Transaction value is the price actually paid or payable for the goods when sold for export to the country of importation.

Valuation factors must be adjusted to determine the customs value.

Price actually paid or payable can be in various forms, including money transfers, letters of credit, or negotiable instruments.

Indirect payments, such as settling a debt owed by the seller, are also considered in the transaction value.

A commercial invoice usually reflects the total payment made but may not be valid if it understates or overstates the price.

Customs officers are not bound to accept the declared value by the importer without verification.

The transaction value method is applied if customs authorities are satisfied with the declared value's truth and accuracy, compliance with valuation conditions, and availability of objective data.

If the transaction value method is not applicable, customs value must be determined by another method in a hierarchical order.

Customs officers may ask for further explanation and evidence if they doubt the declared value's truth or accuracy.

Importers must be given a reasonable opportunity to respond if the customs officer has doubts about the declared value.

Valuation conditions include evidence of a sale for export, no restrictions on the goods' disposition or use, and no conditions or considerations affecting the price.

The transaction value method can be applied if the buyer and seller are not related or if the relationship does not influence the price.

Valuation factors include dutiable factors like commissions, brokerage, and non-dutiable factors like discounts and post-importation charges.

Charges for pre-shipment inspection are not included in the customs value as they are not paid to or for the benefit of the buyer.

The customs value calculation may require currency conversion using the rate published by the importing country's competent authorities.

The conversion rate for customs value should reflect the rate effectively in commercial transactions and be as at the time of exportation or importation.

Transcripts

what

is the principal method of valuation

under the agreement on customs valuation

the principal method of valuation under

the agreement

on customs valuation is the transaction

value method

what is transaction value

transaction value is the price actually

paid or payable

for the goods when sold for export to

the country of importation

it needs to be adjusted by valuation

factors

which are separately discussed

what is meant by price actually paid

or payable

the price actually paid or payable

represents the total payment made or to

be made

by the buyer the payment may be

made not only in the form of transfer of

money

but also by way of letters of credit

or negotiable instruments payment

may also be made directly or indirectly

an example of indirect payment is

settlement by the buyer of a debt

owed by the seller a commercial invoice

usually reflects the total payment made

however if it understates or overstates

the price

or if it is misleading or fraudulent

it cannot provide a valid basis for

determining the transaction value

are the customs officers bound to accept

the value declared

by the importer as the customs value in

all cases

the agreement on customs valuation

requires

that the customs value should be based

on the transaction

value to the greatest extent possible

however application of the transaction

value method

is subjected to the following one

customs authorities being satisfied with

the truth

and accuracy of the declared value 2

compliance with the valuation conditions

and 3 availability of objective

and quantifiable data with regard to the

valuation factors

for making adjustments to the price

actually paid or payable

in the event of the transaction value

method not being applicable

customs value has to be determined

by another method in the hierarchical

order

what procedure should be followed if the

customs officer

has reasons to doubt the truth or

accuracy of the declared value

when a declaration is made and the

customs officer

has reason to doubt the truth or

accuracy of the particulars

or of the documents produced in support

of this declaration

the customs officer may ask the importer

to provide further explanation including

documents

or other evidence that the declared

value represents the total amount

actually paid or payable for the

imported goods

adjusted by the valuation factors

if after receiving further information

or in the absence of a response the

customs officer

still has reasonable doubts about the

truth or accuracy

of the declared value it may be deemed

that the customs value of the imported

goods

cannot be determined by the transaction

value method before making a final

decision

the customs officer shall communicate to

the importer in writing

if requested the grounds for doubting

the truth

or accuracy of the particulars or

documents produced and the importer

shall be given a reasonable opportunity

to respond

when a final decision is made the

customs officer shall communicate to the

importer

the decision and the grounds therefore

in writing

what are the valuation conditions

the transaction value method can be

applied if the following validation

conditions

are met 1. there should be evidence of a

sale for export to the importing country

such evidence may be in the form of

commercial invoices

sale contracts purchase orders etc

two there are no restrictions on the

disposition

or use of the goods by the buyer other

than restrictions which

a are imposed or required by law or by

public authorities

in the importing country b

limit the geographic area in which the

goods may be resolved

or literacy do not substantially affect

the value of the goods number three

the sale or price should not be subject

to conditions

or considerations for which a value

cannot be determined

in respect of the goods being valued for

example

transaction value will not be accepted

if the seller fixes the price of the

imported goods

subject to the buyer buying other goods

in specified quantities

similarly transaction value will not be

acceptable

if the price is established in the form

of payment

extraneous to the imported goods such as

where

the seller provides semi-finished goods

subject to the condition that he or she

will receive

a specified quantity of finished goods

number four no part of the proceeds of

any subsequent resale disposal

or use of the goods by the buyer should

accrue directly

or indirectly to the seller unless

an appropriate adjustment can be made

there should be sufficient information

for making adjustment

of such proceeds number five

the buyer and the seller should not be

related

the transaction value can still be

accepted

if a the relationship has no influence

on the price

actually paid or payable or letter b

the importer demonstrates that the

transaction value

closely approximates any of the test

values

what are the valuation factors

valuation factors are the various

elements

which must be taken into account in

determining the custom's value

the dutiable factors are to be added

whereas the non-dutiable factors are to

be deducted

to compute the customs value

dutiable factors commissions

and brokerage accept 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 labor or materials

the value apportioned as appropriate

of the following goods and services were

supplied

directly or indirectly by the buyer

free of charge or at a 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

royalties and license fees related to

the goods being valued

that the buyer must pay either directly

or indirectly

as 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

the value of any part of the proceeds of

any subsequent resale disposal

or use of the goods that accrues

directly

or indirectly to the seller and

advanced payments made earlier but not

reflected in the invoice

non-dutyable factors

all discounts accept retrospective

discounts

the following charges provided they are

separately declared

in the commercial invoice a

interest charges for deferred payment

b post importation charges such

as inland construction erection

assembly etc undertaken after

importation

and letter c duties and taxes payable

in the importing country should the

customs value

include charges towards freight

insurance loading unloading and delivery

the importing country has the option

under the agreement on customs valuation

to provide in its national legislation

for the inclusion or the exclusion

from the customs value freight charges

up to the place of importation

loading unloading and handling charges

associated with

transport of the goods to the place of

importation

and the cost of insurance as such

inclusion or exclusion of these charges

will depend on the law of each importing

country

when these charges are included customs

value is based

on the cost insurance freight price

and when these charges are excluded the

customs value is

based on the free onboard price

should the customs value include charges

for pre-shipment inspection

charges for pre-shipment inspection

are normally incurred by the importer or

by the government of the importing

country

such inspection may have been undertaken

as per the importing country's policy or

as per the importer's own requirement

the charges are neither paid to the

buyer

nor paid for his benefit as such

such charges should not be added to the

customs value

customs duty is often collected in the

currency

of the importing country whereas the

price of the imported goods

may be invoiced in a foreign currency

in such a case how is the customs value

to be calculated

article 9 of the agreement on customs

valuation

provides that where the conversion of

currency

is necessary for determination of

customs value

the rate of exchange duly published by

the competent authorities

of the country of importation is to be

used

the same is required to reflect as

effectively in commercial transactions

it is also provided that the conversion

rate

should be as at the time of exportation

or at the time of the importation as

specified by each importing country

the interpretative note to this includes

the time of entry for customs purposes