2012 EDITION

1

WTO AGREEMENT

ON CUSTOMS VALUATION

TRAINING

​

JICA CAPACITY BUILDING PROGRAM FOR EAST AFRICAN CUSTOMS ADMINISTRATIONS

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CHAPTER I.

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OVERVIEW OF

THE WTO VALUATION AGREEMENT(GATT 1994)

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By the end of this chapter you should be able to;

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• Give an overview of the WTO Valuation　Agreement

• State the principle objectives of the Agreement

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• Identify salient parts(Structure) of the Agreement

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LEARNING OBJECTIVES

LEARNING OBJECTIVES Cont...

By the end of this chapter you should be able to;

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• State the historical background of Customs Valuation
• State the principle objective of the Agreement
• Outline the structure of the Agreement

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• Distinguish between Brussels Definition of Value (BDV) and Agreement on Customs Valuation(ACV)

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• List annexes to the Valuation Agreement

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• Introduction

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• History of Customs Valuation

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• Objectives of the Agreement

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• The Structure of the Agreement

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CONTENTS

DEFINITION OF CUSTOMS VALUATION

It is the procedure applied to determine the value of imported goods for the purpose of levying

ad valorem customs duties.

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INTRODUCTION

Customs duties are instruments of:

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• Fiscal policy

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• Trade policy

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INTRODUCTION Cont...

IN

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or a combination of the two.

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INTRODUCTION Cont...

1. Ad valorem rates

or

2. Specific rates

Customs duties may be calculated with reference to :

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The choice of the method depends on

various factors such as:

Tariff policy which may be to;

• Raise revenue

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2. Facilitate international trade

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3. Protect domestic Industry

INTRODUCTION Cont...

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4. Encourage the importation of certain products

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5. Collect trade statistics

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6. Any other tariff policy

INTRODUCTION Cont...

• To determine the value of imported goods for the purpose of levying ad valorem duties

Customs Value

Duty Rate

Customs Duty

=

X

Customs Valuation

Classification

Rules of Origin

WHY CUSTOMS VALUATION?

HISTORY OF CUSTOMS VALUATION

• Desperate and unstable systems of

　 valuation

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• 1947:European Union Study Group

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• 1950/1953:Brussels Definition of Value

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• 1973/1979: Tokyo Round: Multilateral Trade

Negotiations

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HISTORY OF CUSTOMS VALUATION Cont...

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• 1981:GATT Agreement on Customs

Valuation

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• 1986/1994: Uruguay Round:

Multilateral Trade Negotiation

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• 1994: GATT 1994(WTO) Agreement

on Customs Valuation

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Brief History of Developments of �International Standards for Customs

Article VII of the GATT 1947

Set principles,

but little guidance regarding their practical application

JPN 1972～

JPN 1981～

JPN 1995～

Notional Concept

Positive Concept

1. Brussels Definition of Value (BDV)

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2. Agreement on Customs Valuation (ACV)

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VALUATION SYSTEMS

BDV ACV

VALUATION SYSTEMS

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-- Based on Notional Concept

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- Based on assumed conditions the merchandise to be valued would be sold

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- Arbitrary administration

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- Lacking transparency

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- Not responsive to today’s international trading environment

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Based on Price Actually Paid or Payable

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- Fair

- Uniform

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- Neutral system

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- Conforming with commercial realities

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- Precludes the use of arbitrary and fictitious values

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BDV

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ACV

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VALUATION SYSTEM

is a notional concept

is a positive concept

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‘further objectives of the GATT 1994 and secure additional benefits for developing countries’

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• Delay in application for up to 5 years

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• Stay the application of Art.4 of the ACV

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• Delay application of the Computed Value Method for 3 years

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OBJECTIVES OF THE AGREEMENT

• Retention of the Price reference database as a risk management tool

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• Greater Uniformity and Certainty

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• A fair ,Uniform and Neutral System that precludes the use of arbitrary and fictitious customs values

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OBJECTIVES OF THE AGREEMENT Cont...

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• The basis of valuation to the greatest extent possible should be the transaction value

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• Simple and equitable criteria consistent with Commercial Practices

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• Valuation procedures should not be used to combat dumping

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OBJECTIVES OF THE AGREEMENT Cont...

General Introductory Commentary

Part I : Rules on Customs Valuation A.1~17

Part II : Administration, Consultations and Dispute Settlement A.18~19

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Part III : Special and Differential Treatment A.20

Part IV : Final Provisions A.21~24

STRUCTURE OF THE AGREEMENT

Annex I : Interpretative Notes

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Annex II : Technical Committee on Customs Valuation

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Annex III : Special Provisions for Developing Countries

STRUCTURE OF THE AGREEMENT Cont…

GENEVA

SWITZERLAND

BRUSSELS

BELGIUM

Article 18 INSTITUTIONS

VALUATION

COMMITTEE

GENEVA

SWITZERLAND

4/1

• Committee on Customs Valuation composed of representatives from each of the Members.

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• The Committee established in WTO handles the trade policy aspects of the Agreement.

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• The WTO Secretariat shall act as the Secretariat to the Committee.

Article 18 INSTITUTIONS Cont…

WTO VALUATION COMMITTEE

INTEREST

Technical Committee on Customs Valuation (TCCV)

INSTRUMENTS

TCCV INSTRUMENTS

ADVISORY

OPINIONS

answer a question raised on the application of the Agreement on a particular set of facts, actual or theoretical.

Example

Advisory opinion on royalties and licence fees

TCCV INSTRUMENTS Cont…

EXPLANATORY

NOTES

• explain the Technical Committee’s views on a question of a general nature arising from one or more provisions of the Agreement.
• may also examine trade practices as they relate to the question and draw the necessary conclusions.

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Example

Explanatory note on commissions and brokerage

TCCV INSTRUMENTS Cont…

CASE

STUDIES

• are expositions of a complex set of facts based on an actual commercial transaction, which can be used to demonstrate the practical application of one or more provisions of the Agreement.

Example

Case study with special reference to Article 8.1 (b) (iv).

TCCV INSTRUMENTS Cont…

STUDIES

• set out the result of an examination in some depth of any question related to the Agreement, in particular a question put to the Technical Committee under paragraph 2 (b) of Annex II to the Agreement.
• may not be intended for publication outside government circles.

Example

Study on the treatment of used motor vehicles.

CHAPTER II.

TRANSACTION VALUE

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By the end of this chapter you should be able to;

• Define Transaction Value and related terms.

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• Explain the key elements of Price Actually Paid or Payable

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• Explain the concept of sale

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Learning Objectives

By the end of this chapter you should be able to;

• State the conditions for the application of Transaction Value Method.

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• Identify situations where Transaction Value Method cannot be applied

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Learning Objectives Cont…

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• Introduction

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• Definition of terms.

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• Key elements of Price Actually Paid or Payable

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• Concept of sale

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Content

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• Conditions for the application of Transaction Value Method.

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• Where Transaction Value Method cannot be applied

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• Case studies

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Content Cont…

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General introductory Commentary states that;

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• The basis for customs value should be wherever possible, the transaction value of the imported goods being valued and that:

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Introduction

• Transaction value is the price actually paid or payable for goods when sold for exports to the country of importation adjusted in accordance with Article 8, provided certain conditions..

Introduction Cont…

39

Transaction Value

PAPP (Art.1)

Adjustments

(Art. 8)

=

+

All payments actually made or to be made as a condition of sale of the imported goods,

Total payments made or to be made by the buyer to the seller.

The payments need not necessarily take the form of a transfer of money.

Payments may be made directly or indirectly.

Definition and Interpretation of Transaction Value and related terms (Articles 1 & 8)

Maybe, but not always

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PAPP = Invoice Price

IS PAPP = Invoice Price ?

Maybe, but not always

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Importer

(Buyer) A

Exporter

(Seller) B

(Country I)

(Country X)

Case #2

Payment 27,000 c.u 24 May 2012

Advance payment 3,000 c.u

20 Feb 2012

Invoice 27,000 c.u 25 Apr.2012

PAPP ≠ Invoice Price

IS PAPP = Invoice Price ?

42

PAPP : Price Actually Paid or Payable

Made already at the time of customs valuation.

Not yet made at the time of customs valuation but already agreed to be made.

ACV precludes the use of arbitrary or fictitious customs values (no basis)

Components of PAPP

Cost elements to be considered with PAPP:

• Invoiced amount
• Indirect payment
• Advance payment
• Credit

Component of PAPP Cont…

Cost elements not to be considered with PAPP

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• Discounts

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• Post importation charge

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• Import duties and taxes (Advisory Opinion 3.1)

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• Activities undertaken by the buyer on his or her own account.

Component of PAPP Cont…

Other Factors that may

or may not Influence PAPP

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• Price below the prevailing market prices.

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• Goods subject to export subsidies or bounties.

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• Goods sold at dumped prices

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• Goods not in accordance with the contract.

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• Split shipment

Component of PAPP Cont…

No definition of “sale” in the ACV but

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In general, a transfer of ownership of the goods for some type of consideration

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Advisory Opinion 1.1

:the term “sale” should be interpreted as widely as possible

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Concept of Sale

• Free consignments

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• gifts, samples, promotional items, etc.

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Example of Cases of No Sale (A.O. 1.1)

Goods imported on consignment

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Agent X

Producer P

(Country I)

(Country E)

①Consignment Sale Agreement

②50 Carpets for sale by auction

Auction Participants

③50 Carpets

④500,000 c.u.

⑤Payment

500,000 c.u. – (X’s costs & remuneration)

Illustration of Cases of No Sale Cont…

• “when sold for export to the country of importation” (Article 1)

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• “An Actual International Transfer of goods ”(Advisory Opinion 14.1)

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Meaning of Sale for Export

Advisory Opinion 14.1: Example

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Importer A

Seller S

(Country I)

(Country X)

Manufacturer� M

①Contract of sale (@ 5.75 c.u.)　

②Contract

(@ 5 c.u.)　

Sale for Export to the country of importation

Illustration of Sale for Export

to the country of importation

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Distributor B

Manufacturer C

Importer A

(Country Z )

(Country X)

Illustration of series in sales situation

(Country I)

3).Aug.10 Goods

4).Aug.20 Customs Entry

7).Oct.5 Payment

1,200

1).July 10 A-B Sales Contract

(last sale)

5).Sept.1 Payment 10,000

6).Sept. 5 Payment

2).July 12 B-C Sales Contract

(first sale)

No relationship A, B or C

• Commentary 22.1:

Sale for Export to the country of importation

Illustration of Sale for Export to

the country of importation Cont…

DISCOUNTS

Discounts can be excluded from PAPP if:

• Specified and follow defined criteria
• Backed by a discount schedule
• Based on objective and quantifiable data
• Are in accordance with GAAP.

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PAPP & Discounts

Examples of common discounts:

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• Advance Payment Discount
• Cash Discount
• Quantity Discount
• Clearance Sale Discount

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PAPP & Discounts Cont…

Advance payment

Is a pre-payment or payment made on or in

anticipation of an obligation.

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Cash Discount

Is granted to buyers for payments in cash or

payments made within a specified period.

PAPP& Discount Cont…

Quantity Discount

This is reduction in price for buying in large

volumes.

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Clearance Sale Discount

This is given when out goods season goods

It is usually held to move out completely a

type or brand of a product.

PAPP Discount Cont…

Advance Payment Discount

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Importer

(Buyer) A

Exporter

(Seller) B

(Country I)

(Country X)

5% discount if the payment is made within 1 month after the day of Contract.

PAPP = USD 28,500

PAPP & Discount : Illustration

Cash Discount

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Importer

(Buyer) A

Exporter

(Seller) B

(Country I)

(Country X)

5% discount if the payment is made in cash within 10 days after the arrival of the goods in Country I.

PAPP = USD 28,500

At the time of customs valuation the payment has not been made yet.

(If the importer/buyer A is to pay this amount within the time frame.)

If the importer/buyer A actually made the payment of USD 30,000, 12 days after the arrival of the goods, the PAPP is USD 30,000.

Article 13 may be applied.

PAPP & Discount : Illustration

Transaction value method

can be used only if:

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• there are no restrictions as to the disposition or use of the goods by the buyer. (Art. 1.1 (a))

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• The sale or price is not subject to some conditions or considerations for which a value cant not be determined with respect to the goods being valued.

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Conditions for use of

Transaction Value Method

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• No part of the proceeds of any subsequent resale, disposal or use … will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Article 8;

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• The buyer and the seller are not related , or where they are related, the importer can demonstrate that the transaction is not influenced by the relationship

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Conditions for use of

Transaction Value Method Cont…

there are no restrictions as to the disposition or use of the goods by the buyer. (Art. 1.1 (a))

Examples of restrictions

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• Buyer is allowed to use the goods only for display

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• The buyer is allowed to use the goods only for charitable purposes.

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Conditions for use of Transaction Value Method

: 1^st Condition

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Exception to use of 1^st condition

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• are imposed or required by law or by the public authorities in the country of importation. (Art 1.1 (a) (i))

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• Limit the geographic area in which the goods may be resold (Art 1.1 (a) (ⅱ))

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• Do not substantially affect the value of the goods (Art 1.1 (a) (ⅲ))

Conditions for use of Transaction Value Method: 1^st Condition

63

Examples of restrictions that may not lead to rejection of Transaction value

limits the geographical area in which the goods can be sold

A condition of the sale is that the buyer in country x cannot sell or dispose of the imported goods in any neighbouring country

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Conditions for use of Transaction Value Method: 2^nd Condition

65

The sale or price is subject to some condition or consideration for which a value cannot be determined with respect to the goods being valued. (Art. 1.1 (b))

50 Fax machines for $100 each

+ 10 Photocopiers for $1000 each

• Sale of Fax machines subject to a condition.
• Not possible to establish how the condition has effected the value of the fax machines.

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Conditions for use of Transaction Value Method: 3^rd Condition

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No part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue to the seller and an appropriate adjustment cannot be made under Article 8. (Art. 1.1 (c))

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Conditions for use of Transaction Value Method: 4^th Condition

The buyer and seller are related, and the transaction value is not acceptable under the provisions of paragraph 2. (Art. 1.1 (d))

Related parties

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1. Officers or directors in business
2. Legaly recognized patners in business
3. Employer and employee
4. Shareholders
5. Directly or indirectly controls the other
6. Both controlled by third person
7. Both control a third person
8. Members of the one family

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Related Parties Article 15.4

�

1. There is no sale
2. Transaction value has been rejected:
• Conditions of application not met.
• Customs have reason to doubt the truth or accuracy
• Transaction Contrary to GAAP.

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Where Transaction Value Method can not be used

CHAPTER III.

ADJUSTMENT (Art 8)

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By the end of this session, participants will be able to;

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• Define Adjustments under Article 8
• Categorise Adjustments under Article 8
• Explain treatment of Adjustments under article 8.1
• Explain provisions of Article 8.2
• State requirements of Article 8.3
• State requirement of article 8.4

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Objectives of Chapter III

Definition of Adjustments (Art. 8)

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“Adjustments” is a value added to the price of the imported goods of the buyer but are not included in the price actually paid or payable for the goods .

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The Adjustments Must be based on…According to Art 8.3

OBJECTIVE DATA

(based solely on facts)

Art 8 can not be based on judgment, estimation, best-guess or personal experience.

QUANTIFIABLE DATA

(capable of being measured by using real or actual numbers and figures.)

Article 8�“1. In determining the customs value under the provisions of Article 1, there shall be added to the price actually paid or payable for the imported goods:”

Types of Adjustments

8.1 a) Commissions,

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i) Selling Commissions and brokerages

ii) The cost of Containers,

iii) The cost of packing

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8.1. b) Assists,

8.1.c) Royalties & License Fees,

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8.1. d) Proceeds of any subsequent resale

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8.2.(a) Cost of transport,

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8.2.(b) Loading, Unloading, & Handling Charges.

8.2.(c) Insurance

1.(Compulsory Adjustments)

2. (Optional Adjustments):

Article 8

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“2. The legislation of each WCO Member shall provide for the inclusion in or the exclusion from the customs value, in whole or in part, of the following:³

Inclusions

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Types of Adjustments Cont…

Exclusion

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According to Art 8.1 a) (i) Buying commissions is excluded from the Customs value.

​

The term "buying commissions" means fees paid by an importer to the importer's agent for the service of representing the importer abroad in the purchase of the goods being valued. (Note to Art. 8.1 (a) (i))

Compulsory Adjustments (Article 8.1 (a))

77

Article 8

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In determining the customs value under the provisions of Article 1, there shall be added to the price actually paid or payable for the imported goods :

Art. 8.1. a) Commissions and Packing,

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Art. 8.1. b) Assists,

Art. 8.1. C) Royalties & License Fees,

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Art. 8.1. d) Proceeds of any subsequent

resale

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Commissions Article 8.1.(a)

The provisions of the Agreement are clear on the principle to the treatment of commissions for Customs valuation purposes and depends upon the exact nature of services rendered by the intermediaries (Agents).

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1.Buying Commissions and buying agents

2.Selling Commissions and Selling Agents

3.Brokerage and Brokers or Independent Agents

The intermediaries (Agents)

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• Represents the Buyer

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• Finds Suppliers

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• Obtains samples from the Suppliers

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• Arranges for transport costs

80

Role of the Buying Agent

Con’t role of Buying Agent

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• Negotiates lowest price

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• Helps prepare documents

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• Consolidates shipments

Role of the Buying Agent Cont….

Buying Agent

Buyer

Supplier

�

• Represents the Seller

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• Finds customers (Buyers)

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• Maintains samples

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• Arranges for transport costs

83

Role of the Selling Agent

Role of the Selling Agent Cont…

• Negotiates highest price

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• Helps prepare documents

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• Separate shipments

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• Prepares invoices

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• Acts for both the Buyer and the Seller

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• Connects both parties to the transaction

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• Specializes in certain types of goods

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• Finds buyers for his goods

85

Role of the Independent Agent (Broker)

Selling Agent

Buyer

Supplier

Role of the Independent Agent (Broker) Cont…

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• Confirms all sales

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• Negotiates his own terms of sale

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• Arranges for the shipping of the goods

Container refers to packaging and labeling used to:

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• Store

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• Transport products such as cartons, bottles, cans, perfume bottles……

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88

Cost of Container Art.8.1. (a)(ii)

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Adjustments are made on cost of Containers when they are :

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• Incurred by the buyer

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• They are not already included in the

PAPP

Cost of Container Art.8.1. (a)(ii) Cont…

Bottle

Empty Container

jerrican

Crate

Examples of Containers

Types of Containers Art.8.1(a)(ii)

Containers can be categorised into ;

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• Re-usable (classifiable together with the goods)

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• Non re-usable(classified separately from the goods)

The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods.

Assists Article. 8.1. (b)

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93

ASSISTS

1.Meaning of Assists

2.Categories of Assists

3.Valuation of Assists

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‘’ Assists ” means :

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• The value of goods and services
• Supplied directly or indirectly
• By the buyer
• For free of charge or
• At reduced cost
• To the seller or producer
• For use in connection with the production and sale for export of the imported goods.

94

Meaning of Assists

�

i) Materials, components, parts and 　similar items incorporated in the imported goods e.g. raw materials, finished components;

ii) Tools, dies, moulds and similar items used in the production of the imported goods e.g. hand held drill,

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95

Categories of Assists

iii) Materials consumed in the production of the imported goods e.g. fuel, chemicals;

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iv) Engineering, development, artwork,

design work & plans and sketches undertaken elsewhere other than in the country of importation and necessary for the production of the imported goods.

96

Categories of Assists Cont…

The Assists should only be added to

　　the PAPP :

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i) not already included in the PAPP,

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ii) supplied by the Buyer either free of charge or at reduced cost,

97

Valuation of Assists

Valuation of Assists Cont…

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iii) supplied directly or indirectly by the Buyer to the Seller,

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iv) for use in the production and sale for export of imported goods.

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Royalty or License fee covers payments made for the right;

• To use,
• Re- produce
• Sell a given product.

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Must be based on objective and

quantifiable data.

99

Royalties & License Fees

Add to PAPP if:

• it is related to the imported goods,
• it is a condition of sale,
• it is not already included.

Royalties & License Fees Cont…

�

101

Types of royalties

and license fees

-1.Patents

-2.Trademarks

-3.Copyrights.

• Is a document

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• issued by a government office

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• describes an invention

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• creates a legal right on it

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102

Patent:

Patent Cont…

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• Invention is a novel idea

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• which results from an inventive activity

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• capable of industrial application.

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Example of the Patent:

The director of the United States Patent and Trademark Office

Has receive an application for a patent for a new and useful invention, the title and description of the invention are enclose, the requirements of law have been complied with…

A trade mark is:

• a sign which is used by a business to set its business activities (whether be a product or serviced based on business) apart from those of its competitors.

Trademarks

Trademarks Cont…

A trade mark is a business’s main

brand name but it can also be its:

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• Business name
• Product names
• Sub brands
• Logos and symbols
• Colours. Etc.

Examples of Trademarks

Some famous examples of trademarks

Coca Cola

versace

addidas

Puma

Is a reserved right which protects the holder from unauthorized use of his work from reproduction, copying or translation.

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108

Copyright

It protects works like,

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• literary musical,

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• artistic, photographic works,

• maps & technical drawings

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• and motion pictures.

Copyright Cont…

- Miriam Makeba; discography of CDs

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- Wole Soyinka; conversations with Wole Soyinka

- Titanic movie

Example of Copyright

111

Proceeds Art. 8.1 (d)

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In determining the customs value under the provisions of Article 1, there shall be added to the PAPP for the imported goods:

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• the value of any part of the proceeds of any subsequent resale,

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• disposal or use of imported goods that

accrues directly or indirectly to the

seller.

Proceeds Art. 8.1 (d) Cont…

Article 1

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“The customs value of imported goods shall be the transaction value, that is the PAPP for the goods when sold for export to the country of importation adjusted in accordance with the provisions of Article 8, provided:

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(c) that no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Article 8;”

Proceeds Art. 8.1 (d) Cont…

Article 13

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“If, in the course of determining the customs value of imported goods, it becomes necessary to delay the final determination of such customs value, the importer of the goods shall nevertheless be able to withdraw them from customs, if, where so required, the importer provides sufficient guarantee in the form of a surety, a deposit or some other appropriate instrument, covering the ultimate payment of customs duties for which the goods may be liable. The legislation of each Member shall make provisions for such circumstances.”

Proceeds Art. 8.1 (d) Cont…

• are paid by the buyer either directly

or indirectly to the seller on a basis

of Contractual agreement and

are not to be confused with the transfer of dividends.

115

Proceeds Art. 8.1 (d) Cont…

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Article 8

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“2. The legislation of each WCO Member shall provide for the inclusion in or the exclusion from the customs value, in whole or in part, of the following:³

cost of transport

loading, unloading and handling

cost of insurance.

Optional Adjustments (Article 8.2)

Costs associated with;

physical movement of goods from the factory of manufacture through the port of loading to the port of discharge in the country of importation.

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117

Cost of Transport

Cost of Transport Cont…

Such costs or charges include;

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• Inland freight (trucking),
• Rail freight,
• Ocean freight,
• Air freight.

Cost of transport to the port or place of importation

NOT

buyer/Importer

Eastern African region

Mombasa

Dar es salaam

119

Loading & unloading include costs or charges for the movement of goods to or off from any conveyance (vessel, truck or aircraft).

120

Loading, Unloading & Handling

Handling costs or charges include

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• preparation of manifests
• preparation of bills of landing
• preparation of customs

　　documents,

• 　obtaining export licenses, etc.

��� Example of Loading and Unloading ���

Includes costs or charges;

that cover any risk on the goods being transported from the place of manufacture in the country of exportation to the country of importation.

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123

Cost of Insurance

Insurance cost include;

• Land insurance

• Marine insurance
• Air insurance

125

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　Additions to the PAPP shall be made under this Article only on the basis of ;

• objective

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• quantifiable data

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Additions to PAPP Art. 8.3

126

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　　 No additions shall be made

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to the price actually paid or payable in

determining the customs value except

as provided in Article 8.

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Limitations to PAPP Art. 8.4

CHAPTER IV.

OTHER METHODS OF VALUATION

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127

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128

Objectives

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At the end of this course you should be able to;

• Define terms used in other methods of valuation.
• State the requirements for transaction 　value of identical goods.

Other Methods of Valuation

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• State the requirement s for transaction value of similar goods method
• State the requirements for deductive value method
• State the requirements for computed value method
• Explain the application for fallback method

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Objectives Cont…

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• Introduction
• Definition of terms used in other methods of valuation.
• Transaction value of identical goods
• Transaction value of similar goods method
• Deductive value method

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Content �

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Content Cont...

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• Computed value method

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• Fallback method

Introduction

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Where the customs value cannot be determined under Article 1(Transaction value method), the customs value will be determined under Article 2 through Article 7.

�(If the customs value of the imported goods cannot be established using Method 1)

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　The customs value shall be the transaction value of identical goods sold for export to country of importation and exported at or about the same time as the goods being valued.

THE TRANSACTION VALUE OF IDENTICAL GOODS (METHOD 2)

Introduction Cont…

“The value of identical goods must be a previously accepted transaction value”.

Definition of Identical goods

These are goods, which are the same in all respects, including physical characteristics, quality and reputation.

Definition of identical goods Cont…

Minor differences in appearance shall not preclude goods otherwise conforming to the definition from being regarded as identical. The minor differences in appearance would include the following ;

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THE SAME IN

PHYSICAL

CHARACTERISTICS

MINOR DIFFERENCES

COLOUR

QUALITY

LABEL

SIZE

PATTERN

REPUTATION

IDENTICAL GOODS

Requirements for transaction value of identical goods method

• Goods are exported at or about the same time as the goods being valued.
•  Goods are sold at the same commercial level and same quantity.
• Where costs and charges under Article 8(2) are included, appropriate adjustments should be made.

Requirements Cont…

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• If more than two values are found, the lowest of such values should be considered

Conditions for transaction value of identical goods method

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• A sale at the same commercial level but in different quantities
• A sale at a different commercial level but in the same quantities;

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If more than one transaction value of identical goods is found, the lowest should be used.

Conditions Cont…

• A sale at a different commercial level and in different quantities is exported at or about the same time as the goods being valued.

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Adjustments

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QUANTITY LEVEL

COMMERCIAL LEVEL

BOTH

Hierarchical Order

• IDENTICAL – SAME LEVEL

• IDENTICAL GOODS – DIFFERENT LEVEL

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Commercial Levels

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WHOLESALE

RETAIL

END USE

Example

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ASSEMBLED

UNASSEMBLED

ARE THESE BICYCLES IDENTICAL ?

The answer is;�

Commentary 1.1

Example No 3.

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Yes

THE METHODS

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1. Transaction Value

2. Transaction Value of identical goods

3. Transaction Value of similar goods

Each method must be tried in sequential order

�(If the customs value of the imported goods cannot be established using Method 1 - 2 )

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The customs value shall be the transaction value of similar goods sold for export to the country of importation and exported at or about the same time as the goods being valued.

The Transaction Value of Similar Goods (METHOD 3)

Similar goods Cont…

“The value of similar goods must be a previously accepted transaction value”.

Definition of similar goods

“Similar goods’’ means goods which, although not alike in all respect, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable 

Definition of similar goods Cont…

. The quality of the goods, their reputation and the existence of a trademark are among the factors to be considered in determining whether goods are similar.

In that regard, similar goods will be like the imported goods in the following respects:

Definition of similar goods Cont… �

(Goods which are not alike in all respects) BUT,

• Must have like characteristics
• Must have like component materials
• Must be able to perform the same functions
• Must be commercially interchangeable
• Must be produced in the same country

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Definition of similar goods Cont…

• Must be of similar quality and reputation
• Trademarks must be considered

Common Requirements

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PRODUCED IN THE SAME COUNTRY

EXPORTED AT OR ABOUT THE

SAME TIME AS IMPROTED GOODS

SAME COMMERCIAL AND QUANTITY LEVEL

WITH TWO OR MORE PRICES

SELECT THE LOWEST PRICE

For Similar Goods

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• The Quality of the goods

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• Their reputation

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• The existence of the trademark

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Hierarchical Order

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• SIMILAR GOODS – SAME LEVEL

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• SIMILAR GOODS – DIFFERENT LEVEL

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Similar Goods

COMMERCIALLY

INTERCHANGEABLE

SAME FUNCTION

COMPONENT

MATERIALS

PHYSICAL

CHARACTERISTICS

Example

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100% SILK

DIOR

BRAND X

EXAMPLE

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Soft wood Desk

Wood File Cabinet

Metal file Cabinet

Mahogany Walnut Desk

EXAMPLE

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X

X

EXAMPLE

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Toyota

X

Article 15.2

• Goods are not identical or similar if they incorporate or reflect an assist under article 8.1 (b)(iv).

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• Must have been produced in the same country as the goods being valued.

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• Goods from a different person are used only where there are no identical or similar goods produced by the same person as the goods being valued.

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If more than one transaction value of identical goods

is found, the lowest should be used. (Article 3.3)

Export Country 1

Export Country 2

Importing Country

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Goods shall not be regarded as identical or similar unless they were

produced in the same country as the goods being valued. (Art 15.2.d)

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Producing

Producing

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Goods produced by a different person shall be taken into account only

where there are no identical goods or similar goods, as the case may be,

produced by the same person as the goods being valued. (Art 15.2.e)

Producing Country 1

Producing Country 2

Importing Country

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25

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Goods shall not be regarded as identical or similar unless they were produced in the same country as the goods being valued. (Art 15.2.d)

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X

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ID

ID

M1

M1

M3

M2

M1

M4

X

X

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THE METHODS

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1. Transaction Value

2. Transaction Value of identical goods

3. Transaction Value of similar goods

4. Deductive method

Each method must be tried in sequential order

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DEDUCTIVE VALUE

THE FOURTH METHOD

The Deductive Method�(Method 4)

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• If the customs value of goods cannot be determined under Article 1, 2 and 3.
• The customs value shall be determined under the provisions of Article 5.

Deductive Method Cont…

• The customs value is based on the unit selling price in country of importation,
• Of the imported goods or identical or similar goods,
• Sold in the greatest aggregate quantity,
• At or about the time of the importation of the goods being valued.

Deductive Value

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DEDUCTED FROM THE SELLING PRICE AFTER IMPORTATION

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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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Selecting The Price

Looking for sales of:

• The imported goods

or

• Identical goods or similar goods
• Occurring “at or about the time of the importation”
• in the condition as imported

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Deductive Value

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EITHER COMMISSIONS OR

PROFIT & GENERAL EXPENSES

COST OF TRANSPORT AND

INSURANCE AFTER IMPORT

COSTS INCLUDED UNDER ARTICLE 8.2

CUSTOMS DUTIES AND TAXES

Time Line

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At or about the time of the importation

Date of Importation

Maximum of 90 days after

Importation

EXAMPLE

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EXAMPLE

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EXAMPLE

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Importer’s Cost

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‘sold in the greatest aggregate quantity’

at or about the time of the importation of the goods.

Example

1000 units imported

Sold as follows

100 at $90

35 at $95

400 at $85

200 at $90

30 at $95

35 at $95

200 at $90

100 at $95

500 at $90

400 at $85

Valued at $90 per unit.

1000

Total value = $90000 before deductions

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THE METHODS

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1. Transaction Value

2. Transaction Value of identical goods

3. Transaction Value of similar goods

4. Deductive Value method

5. Computed Value method

Each method must be tried in sequential order

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COMPUTED VALUE

METHOD 5

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�Computed Value �

• If customs value cannot be based on any of the valuation methods under Article 1 to 5, then computed value method under Article 6 is considered as alternative method of valuation
• Is limited to cases where buyer and seller are related
• Producer is prepared to supply necessary costing and facilities

Computed Value Cont…

The basis of customs value is;

• the cost of production of the goods being valued,
• plus Any amount of profit;
• and general expenses;
• usually reflected in sales of goods of the same class or kind from the country of exportation to country of importation

Computed Value Cont…

Goods of the same class or kind:

• Means goods which fall within the group or range of goods produced by a particular industry or sector and include the identical or similar goods

Elements to be considered�THE SUM OF

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A

B

C

Cost or Value

of Materials

and

Fabrication

General

Expenses

and Profit

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Cost or Value

of Expenses

under

Article 8.2

Cost of Materials

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Raw Materials

Subassemblies

Transport of Materials

Prefabricated Components

Fabrication Costs

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DIRECT

LABOUR

ASSEMBLY

COST

MACHINES

USED

TO

PRODUCE

INDIRECT

COSTS

Materials & Fabrication will Also Include Costs of :

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Containers

ARTICLE 8.1 (a) (ii)

PACKING

ARTICLE 8.1 (a) (iii)

ASSISTS

ARTICLE 8.1 (b)

THE METHODS

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1. Transaction Value

2. Transaction Value of identical goods

3. Transaction Value of similar goods

4. Deductive Value method

5. Computed Value method

6. Fallback method

Each method must be tried in sequential order

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FALLBACK METHOD

METHOD 6

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Fallback Method

If the customs value of the imported

goods cannot be determined on the

basis of Article 1 through 6

Inclusive (Method 1-5),

Fallback Method Cont…

The customs value can be determined

based on one of the five previous

methods reasonably adjusted as

necessary.

Fallback Method Cont…

The determined value should be based to

the greatest extent possible on previously

determined values only on the data

available in the country of importation.

Structure of Article 7

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(Para ) Reasonable Means

• Consistent with the principles and general provisions of this Agreement and of Article VII of GATT 1994
• Data available in the country of importation

(Para 2) Prohibited Methods

(Para 3) Decision in Writing

Principles of the Agreement

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GREATEST RELIANCE ON