Q12.  What is the principal method of valuation under the ACV?

 

Ans: The principal method of valuation under the ACV is the transaction value method.

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Q13. What is transaction value?

 

Ans: Transaction value is the price actually paid or payable for the goods when sold for export to the country of importation. It needs to be adjusted by valuation factors, which are separately discussed below.

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Q14. What is meant by “price actually paid or payable”?       

 

Ans:  The “price actually paid or payable” repre­sents the total payment made or to be made by the buyer. The payment may be made not only in the form of transfer of money, but also by way of letters of credit or negotiable instruments. Payments may also be made directly or indirectly. An example of indirect payment is settlement by the buyer of a debt owed by the seller. A commercial invoice usually reflects the total payment made. However, if it understates or overstates the price, or if it is misleading or fraudulent, it cannot provide a valid basis for determining the transaction value.

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Q15. Are the customs officers bound to accept the value declared by the importer as the customs value in all cases?

 

Ans: The ACV requires that the customs value should be based on the transaction value to the greatest extent possible. However, application of the transaction value method is subject to:

 

●       customs authorities being satisfied with the truth and accuracy of the declared value;

●       compliance with the valuation conditions; and

●       availability of objective and quantifiable data with

 

regard to valuation factors for making adjustments to the price actually paid or payable.

 

In the event of the transaction value method not being applicable. Customs value has to be determined by another method in the hierarchical order as listed in answer to QIO.

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Q16. What procedure should be followed if the customs officer has reasons to doubt the truth or accuracy of the declared value?

 

Ans: When a declaration is made and the customs officer has reason to doubt the truth or accuracy of the particulars or of documents produced in support of this declaration, the customs officer may ask the importer to provide further explanation, including documents or other evidence, that the declared value represents the total amount actually paid or payable for the imported goods, adjusted by the valuation factors. If, after receiving further information, or in the absence of a response, the customs officer still has reasonable doubts about the truth or accuracy of the declared value. It may be deemed that the customs value of the imported goods cannot be determined by the transaction value method. Before taking a final decision, the customs officer shall communicate to the importer, in writing, if requested, the grounds for doubting the truth or accuracy of the particulars or documents produced and the importer shall be given a reasonable opportunity to respond. When a final decision is made, the customs officer shall communicate to the importer the decision and the grounds therefore in writing.

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Q17. What are the valuation conditions?

 

Ans: The transaction value method can be applied if the following valuation conditions are met:

 

(i)      There should be evidence of a sale for export to the importing country. Such evidence may be in the form of commercial invoices, sale contracts, purchase orders etc.

 

(ii)     There should not be restrictions on the disposition or use of the goods by the buyer other than restrictions which:

 

a)       are imposed or required by law or by public authorities in the importing country e.g. licence end-use etc.;

b)       limit the geographic area in which the goods may be resold; or

c)       do not substantially affect the value of the goods, e.g. restrictions on selling or exhibiting automobiles prior to a fixed date which represents the beginning of a model year.

 

(iii)    The sale or price should not be subject to conditions or considerations for which a value cannot be determined in respect of the goods being valued. For example, transaction value will not be accepted if the seller fixes the price of the imported goods subject to the buyer buying other goods in specified quantities. Similarly, transaction value will not be acceptable if the price of imported goods is dependent upon, the price at which the buyer sells other goods to the seller: Transaction value is also to be discarded if the price is established in the form of payment extraneous to the imported goods, such as where the seller provides semi-finished goods subject to the condition that he/she will receive a specified quantity of finished goods.

 

(iv)    No part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer should accrue directly or indirectly to the seller, unless an appropriate adjustment can be made. There should be sufficient information for making adjustment of such proceeds.

 

(v)     The buyer and the seller should not be related. The transaction value can still be accepted if the relationship has no influence on the price paid or payable; or

 

b)       the importer demonstrates that the transaction value closely approximates any of the test values (transaction value. deductive value or computed value of identical or similar goods) ascertained at or about the same time in respect of sale to unrelated buyers in the importing country.

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Q18. What are the valuation factors?

 

Ans: Valuation factors are the various elements, which must be taken into account in determining the customs value. The dutiable factors are to be added, whereas the non-dutiable factors are to be deducted to compute the customs value. These are listed below:

 

Dutiable Factors:

 

●             Commissions and brokerage. except buying commissions;

 

●    The cost of containers which are treated as being one for customs purposes with the goods in question;

 

●    The cost of packing whether for labour or materials;

 

●    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, to the extent that such value has not been included in the price actually paid or payable:

 

●             materials, components, parts and similar items incorporated in the imported goods;

 

●    tools, dies, moulds and similar items used in the production of the imported goods;

 

●             materials consumed in the imported goods; and

 

●             engineering, development, artwork, design work, and plans and sketches undertaken elsewhere than in the importing country and necessary for the production of imported goods;

 

●             Royalties and licence fees related to goods being valued that the buyer must pay either directly or indirectly, as a condition of sale of the goods being valued. to the extent that such royalties and fees are not included in the price actually paid or payable;

 

●    The value of any part of the proceeds of any subsequent resale, disposal or use of the goods that accrues directly or indirectly to the seller; and

 

●             Advance payments made earlier but not reflected in the invoice.

 

Non-dutiable Factors:

 

●    All discounts except retrospective discounts;

 

●    The following charges, provided they are separately declared in the commercial invoice:

 

●    interest charges for deferred payment;

 

●    post-importation charges such as inland transportation charges and charges for construction, erection, assembly etc., undertaken after importation; and

 

●    duties and taxes payable in the importing country.

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Q19. Should the customs value include charges towards freight, insurance, loading, unloading and delivery?

Ans: The importing country has the option under the ACV to provide in its national legislation for the inclusion in or the exclusion from the customs value the following:

 

●    Freight charges up to the place of importation;

 

●             Loading, unloading and handling charges associated with transport of the goods to the place of importation; and

 

●    The cost of insurance.

 

As such, inclusion or exclusion of these charges will depend on the law of each importing country. When these charges are included, customs value is based on the CIF (Cost; Insurance and Freight) price and when these charges are excluded, the customs value is based on the FOB (Free On Board) price. CIF and FOB are two of the thirteen INCOTERMS 2000 developed by the International Chamber of Commerce to accurately describe the responsibilities of the seller and the buyer in any international transaction.

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Q20. Should the customs value include charges for pre-shipment inspection?

 

Ans: Charges for pre-shipment inspection are normally incurred by the importer or by the government of the importing country. Such inspection may have been undertaken as per the importing country’s policy or as per the requirement of a donor agency financing such import or as per the importer’s own requirement. The charges are neither paid to the buyer nor paid for his benefit. As such, such charges should not be added to the customs value.

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Q21. Customs duty is often collected in the currency of the importing country, whereas the price of the imported goods may be invoiced in a foreign currency. ln such a case, how is the customs value to be calculated?

 

Ans: Article 9 of the ACV provides that where the conversion of currency is necessary for determination of customs value. The rate of exchange duly published by the competent authorities of the country of importation is to be used. The same is required to reflect as effectively as possible the current value of such currency in commercial transactions. It is also provided that the conversion rate should be as at the time of exportation or at the time of importation as specified by each importing country. The interpretative note to this Article further provides that the time of importation includes the time of entry for customs purposes.

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