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

Customs Valuation

Ulrika Lyckman-Alnered
Luximan Babajee

1
 Introductions

HELLO
e?
What's my nam
rk?
Where do I wo
?
Why am I here

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

Purcha
Value se

Import
er Customs
Goods Value
Imported Declarati
on
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)
ANNEX I - Interpretative Notes: General
PART IV - Final provisions (Articles 21-24)
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 Settlement by the

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

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

 Sellers price is on condition that
other goods will be purchased by the
buyer

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

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
US Measuring/Controlling Devices
Parent
Importer
Compan No Sale
y
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 Muiz

 Session VI
Group exercise, summary and closing
remarks

Demos: Ulrika Lyckman-Alnered

WCO: Luximan Babajee