KACT, WCO Headquarters, Brussels, Belgium, July, 2 – 3, 2014
Customs Valuation
Ulrika Lyckman-Alnered
Luximan Babajee
1
Introductions
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
Goods
Imported
Customs
Value
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 PART II PART III PART IV ANNEX I ANNEX II ANNEX III -
Rules on customs valuation (Articles 1-17)
Administration, consultations & dispute
settlement (Articles 18 & 19)
Special & differential treatment (Article 20)
Final provisions (Articles 21-24)
Interpretative Notes: General Note / Notes
to Articles
Technical Committee on customs valuation
Derogations for developing countries
Methods of Valuation
Article 1
Article 2
Article 3
Article 4
Article 5
Article 6
Article 7
Article 8
Transaction Value
Transaction Value of Identical Goods
Transaction Value of Similar Goods
Application of Articles 5 & 6
Deductive Method
Computed Value Method
Fallback Method
Additional elements to be added to the
transaction value
Articles 9-17
Article 9
Article 10
Article 11
Article 12
Article 13
Article 14
Article 15
Article 16
Article 17
Currency conversion
Confidentiality
Importers right to appeal without penalty.
Obligation to publish laws.
Obligation to provide a guarantee system.
Refers to Annex I Notes, Annexes II and III.
Defines certain words and terms.
Right of importers to written explanation.
Rights of customs administrations
Articles 18-24
Article 18
Article 19
Article 20
Article 21
Article 22
Article 23
Article 24
WTO Valuation Committee and WCO
Technical Committee on Customs
Valuation.
Consultations and disputes.
Special provisions available to developing
countries.
Reservations.
Obligations regarding national
legislation.
Review of implementation and operation
of the Agreement by WTO Valuation
Committee.
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
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.
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
Country E
Sells leather goods
@ 50 c.u. per unit
Buyer X
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
US Parent
Company
Measuring/Controlling Devices
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
Importer
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