Customs Value, Methods of Valuation for Customs29/07/2020
Methods of Valuation:
According to the Customs Valuation Rules, 1988, the Customs Value should normally be the “Transaction Value”, i.e., the price actually paid or payable after adjustment by Valuation Factors (see below) and subject to (a) Compliance with the Valuation Conditions (see below) and (b) Customs authorities being satisfied with the truth and accuracy of the Declared Value.
Rule 3(i) of the Customs Valuation Rules, 1988 states that the value of imported goods shall be the transaction value. Rule 4(i) thereof states that the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9.
The price actually paid or payable is the total payment made or to be made by the buyer to the seller or for the benefit of the seller for the imported goods. It includes all payments made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller.
If objective and quantifiable data do not exist with regard to the Valuation Factors, if the Valuation Conditions are not fulfilled, or if Customs authorities have doubts concerning the truth or accuracy of the declared value in terms of Rule 10A of the Customs Valuation Rules, valuation has to be carried out by another method in the following hierarchical order:
Comparative Value Method – Comparison with Transaction Value of Identical goods (Rule 5);
Comparative Value Method – Comparison with Transaction Value of Similar goods (Rule 6);
Deductive Value Method – Based on sale price in the importing country (Rule 7); Computed Value Method – Based on cost of materials, fabrication and profit in the country of production (Rule 7A);
Fallback Method – Based on previous methods with greater flexibility (Rule 8).
Valuation Factors are the various elements which must be taken into account by addition (Dutiable factors) to the extent these are shown to be not already included in the price actually paid or payable or deduction (Non-dutiable factors) from the total price incurred in determining the Customs Value, for assessment purposes.
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:
- Material, 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;
- Engineering, developing, artwork, design work, and plans and sketches undertaken elsewhere than in the importing country and necessary for the production of imported goods;
- Royalties and license 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;
- Advance payments;
- Freight charges up to the place of importation;
- Loading, unloading and handling charges associated with transporting the goods;
- The following charges provided they are separately declared in the commercial invoice:
- Interest charges for deferred payment;
- Post-importation charges (e.g. inland transportation charges, installation or erection charges, etc.);
- Duties and taxes payable in the importing country.
Cases where transaction value may be rejected:
The transaction value may not be accepted for customs valuation in the following categories of cases as provided in Rule 4(2):
If there are restrictions on use or disposition of the goods by the buyer. However, the transaction value not to be rejected on this ground if restrictions:
- Are imposed by law or public authorities in India;
- Limit geographical area of resale;
- Do not affect the value of the goods substantially.
If the sale or price is subject to a Condition or consideration for which a Value cannot be determined. However, conditions or considerations relating to production or marketing of the goods shall not result in rejection.
If part of the proceeds of the subsequent resale, disposal or use of the goods accrues to the seller, unless an adjustment can be made as per valuation factors.
Buyer and seller are related; unless it is established by the importer that:
- The relationship has not influenced the price;
- The importer demonstrates that the price closely approximates one of the test values.
The transaction price declared can also be rejected in terms of Rule 10A, when the proper customs officer has reasons to doubt the truth or accuracy of the value declared & if even after furnishing of further information/documents or other evidence produced, proper officer is not satisfied & has reasonable doubts about the value declared.