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1
KACT, WCO Headquarters, Brussels, Belgium, July, 2 – 3, 2014
Customs Valuation
Ulrika Lyckman-AlneredLuximan Babajee
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3
HELLOIntroductions
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4 4
Master Class in Customs ValuationSessions I-VI
Day 1I Introduction to the programme and an introduction to WCOII General introduction to Customs ValuationIII Exercise on customs valuation and its basic componentsIV WTO and its work; Dispute Settlement Body
Day 2V Compulsory adjustments, optional adjustments, assists & royalties,
successive sale and freight terms.VI Exercise on customs valuation, summary and closing remarks
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Session I
Introduction to the World Customs Organisation
WCO; Luximan Babajee
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Session II
General Introduction to Customs Valuation
Demos: Ulrika Lyckman-AlneredWCO: Luximan Babajee
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7 7
Value? Your definition?
“ worth; desirability”; “purchasing power;
equivalent of a thing which may be substituted or exchanged for a thing ”
(Concise Oxford Dictionary)
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Value
Value Purchase
Importer
Goods Imported
Customs Value
Declaration
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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 ”
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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
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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
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Methods of Valuation
Article 1 Transaction ValueArticle 2 Transaction Value of Identical GoodsArticle 3 Transaction Value of Similar GoodsArticle 4 Application of Articles 5 & 6Article 5 Deductive MethodArticle 6 Computed Value MethodArticle 7 Fallback MethodArticle 8 Additional elements to be added to the
transaction value
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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
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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
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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
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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
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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
• 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”
Quantity discounts
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LESSON 4: Payments
Payments may be direct or indirect by the buyer to the seller
Indirect Payments
The price actually paid or payable is reduced due to a debt owed by the seller to
the buyer
Settlement by the buyer of a debt owed by the seller to a third party
These amounts will form part of the customs value of the imported goods.
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Activities Undertaken by the Buyer on own Account
• Advertising• Market research & studies • Preparation of showrooms • Testing• Participation in trade fairs
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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
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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?
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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
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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)
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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
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Seller’s price is on condition that other goods will be purchased by the buyer
Example:
Exporter FCountry E
Sells leather goods @ 50 c.u. per unit
Buyer XCountry 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.)
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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
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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.
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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 ?
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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
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Commercial Levels
There are three commercial levels of sale : (a) Wholesale (b) Retail (c) Final customer/end user
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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)
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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
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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
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Time Factor
Comparison with identical or similar goods exported AT OR ABOUT THE SAME TIME
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Commercial Level and Quantity
Wherever possible: Same commercial level and substantially the same quantity
Failing thatsale 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
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LESSON 17: Article 4
Prior to consideration of Article 5, Article 4 may be used, however article 4 is not a method of valuation.
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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.
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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.
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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
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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.
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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)
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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 ... ”
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LESSON 18: Computed ValueMaterials
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
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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.
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Example of Computed Value Method
US Parent Company Importer
No Sale
Examples of identical / similar goods
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
Measuring/Controlling Devices
No
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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
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Reasonable Means
• As far as possible, previously determined Customs values
• Flexible application of Articles 1 to 6, respecting the sequential order of those methods
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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
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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
insuranceBASED ON OBJECTIVE AND QUANTIFIABLE DATA
NO OTHER ADDITIONS SHALL BE MADE, EXCEPT AS PROVIDED IN ART. 8
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Session III
Exercise on customs valuation and its basic components
Demos: Ulrika Lyckman-AlneredWCO: Luximan Babajee
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Session IV
WTO and the Dispute Settlement Body within WTO
WTO: Roy Santana; Counsellor at the Market Access Division
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Session V
Compulsory adjustments, optional adjustments, assists & royalties, successive sale and freight
terms.
Van Bael & Bellis: Pablo Muñiz
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Session VI
Group exercise, summary and closing remarks
Demos: Ulrika Lyckman-AlneredWCO: Luximan Babajee