Customs Valuation Code

Summary of Customs Valuation Code

A uniform system for valuing imports for the application of customs duties. The agreement is a product of the Tokyo Round of multilateral trade negotiations. It provides for five methods of valuing imported merchandise. Transaction value is the price actually paid or payable for the goods, with adjustments allowable for packing costs, buying and selling commissions, and certain costs borne by the buyer and not included in the sale price.

Transaction value is the primary mode of valuation under the agreement, and it is expected that it will be used in most cases. A notable exception to this rule is the valuation of sales between related parties. In those cases where it can be determined that the relationship between buyer and seller affects the price, the value for customs purposes may be adjusted to reflect this factor. In those cases where the relationship between buyer and seller does not distort the price of the merchandise, the transaction value would be employed.

In those cases where the transaction value cannot be used to ascertain value for customs purposes, alternative valuation methods may be employed. The transaction value of identical merchandise is the primary alternative method. For a given shipment of merchandise, the transaction value of identical merchandise shipped from the same country of origin is employed. When the previously cited methods cannot be used, the transaction value of similar goods sold from the same country of origin is used. The deductive value method is used if all previous methods are inappropriate. Under this method, value for customs is determined by using the first sale price of the goods in the country of importation, and deducting from that price certain costs incurred after importation. This method is not normally used on goods that have been further manufactured after importation. It is employed on such reprocessed merchandise only when the importer so requests; in such cases, an allowance is made for the value added during such processing. Finally, in the computed value method, a value is constructed based upon costs of production and imputed profit and overhead. The computed method is employed normally only when all other methods are deemed unsuitable; however, the importer may request that the computed value method be employed by customs authorities in lieu of the deductive value method being applied to the transaction.

In the event that all the foregoing methods prove unsuitable, the customs authorities may use any reasonable method of valuation consistent with Article V11 of the General Agreement on Tariffs and Trade.

Under the terms of the Customs Valuation Agreement, any adhering nation may apply duties on either the C.I.F. or F.O.B. value of the imported merchandise. The United States applies duties on the F.O.B. basis, and it appears that other adherents

will continue to employ the C.I.F. basis. U.S. adoption of the agreement was effected by the Trade Agreements Act of 1979.

(Main Author: William J. Miller)

Customs Valuation Code and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Customs Valuation Code: Formally known as the Agreement on Implementation of Article VII of the GA TT. A GAIT Code establishing rules for the determination of value for customs purposes, designed to provide a fair, uniform, and neutral system of valuation, and to preclude use of arbitrary or fictitious values as a disguised form of protectionism. The cornerstone of the Code is the presumption that the actual sale price – -or transaction value –will be used whenever possible for valuation purposes; the deductive value or the computed value methods may be used in cases where the transaction value cannot be determined. Signatories include Argentina, Australia, Austria, Brazil, Canada, Cyprus, Czech Republic, the European Community, Finland, Hong Kong, Hungary, India, Japan, Korea, Lesotho, Malawi, Mexico, New Zealand, Norway, Poland, Romania, Slovakia, South Africa, Sweden, Switzerland, Turkey, the United Kingdom, the United States, and Zimbabwe.