custom valuation procedure

7/28/2019 Custom Valuation Procedure

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GATT Valuation System Policy, Planning & Strategy

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CUSTOMS VALUATION

PROCEDUREFOR IMPORTERS

GATT Valuation System

Transaction Valuation System


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GATT VALUATION SYSTEM

Transaction Value System (TVS)

Requirements of TVS

Dynamics of TVS Calculation of Customs Value Deductions to price paid

Additions to price paid

Limitations of TVS

INTRODUCTION OF GATTVALUATION SYSTEM


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INTRODUCTION OF GATT VALUATION SYSTEM

Pakistan has adopted a new system of valuing imported goods based on an internationally approved setof rules, under the General Agreement on Tariffs and Trade [GATT], referred to as the CustomsValuation Code. Almost all the trading partners of Pakistan apply the same basic rules for valuation of

goods. Section 25 of the Customs Act has been revised to conform to the Customs Valuation Codewhich provides for a fair, uniform, and neutral system which determines the value of imported goods inaccordance with commercial realities and in which arbitrary or fictitious Customs values are prohibited.

TRANSACTION VALUE SYSTEM (TVS)

The transaction value system stipulates that the transaction value method must be used wherever possible.This method bases the customs value on the price you pay for the imported goods. Certain amounts notincluded in the price such as transportation, insurance, packing charges, royalties and license fees, assists, otherpayments etc. may have to be added to arrive at the precise customs value.

REQUIREMENTS OF TVS:

There are 3 requirements, which must be met in order to use the transaction value method. They are :1. The goods must be subject to a sale;2. The sale must be for export to Pakistan; and3. The price paid or payable must be determinable.

DYNAMICS OF TVS:

TheTransaction Value System includes the determination ofCustoms Valueand various deductionsand additions to thePrice Paid. The details are given below:

CUSTOMS VALUE

Besides the price you are paying for the goods, what other expenses are you incurring in relation to the goodswhich are not included in the price. The amount you pay to the supplier may not include amounts on which youhave to pay duty. The price actually paid or payable is defined as the total payment made or to be made by

the buyer to or for the benefit of the seller for the imported goods. It is important to understand that theinvoice amount is not necessarily the price actually paid or payable as that term is defined.

It is, therefore, important that you include in the price actually paid or payable all elements of it. For example ifyour purchase contract for goods involves paying a certain price to the seller plus an amount to a third party tosettle a debt of the sellers to that third party, the invoice from the seller will not necessarily reflect the full price

actually paid or payable as it may not include the debt paid to the third party. Nevertheless the debt paid on thesellers behalf should, in fact, be included in the price actually paid or payable calculation.

It is essential that you carefully review the price you pay to the seller / supplier so as to add other charges,commissions etc. not included in the price to arrive at the correct transaction value for levy of duty.


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DEDUCTIONS FROM THE PRICE PAID

The price, for the purpose of value for duty, is the importers net price at the time of importation. The buyingcommission ( or discount ) shown on the invoice is excluded and the net amount payable is the purchase priceand the value for customs purposes. On the other hand, if the commission or discount is in the form of rebatepayable at a later date if certain conditions are met, it will be included in the transaction value.

ADDITIONS TO THE PRICE PAID

There are a number of charges which must be added to the price actually paid or payable and thus will be

included in the customs value of the goods even though they are not part of the invoice price of the importedgoods and are normally charged separately under a different contract.These charges are as follows:

Cost of transport, excluding inland freight.

Loading, unloading, and handling charges at the place of shipment.

Cost of insurance.

Commissions including indenting commissions and brokerage.

Cost of containers. Cost of packing, labour and material.

Royalties and License Fees paid by you that are related to the goods as a condition of sale, no matterwhen or whom.

Goods or services, commonly referred to as assists provided free or at a reduced cost by the buyerdirectly or indirectly to the seller. Examples of assists are moulds, tools, dies, raw materials, designs etc.

Any additional payment based on the resale, use or disposal of the goods that is made to the seller directlyor indirectly by the buyer.

LIMITATIONS OF TVS:

There are four limitations on the use of transaction value. The transaction value method cannot be used if:

1. There are restrictions on the disposition or use of the goods by the buyer other than(a) those imposed or required by law,(b) those that limit the geographical area in which the goods may be resold, or(c) those that do not affect the value of the goods.

2. The sale or price of goods is subject to a condition or consideration for which a value cannot bedetermined with respect to the goods being valued.

3. There are any subsequent payments to the seller by the buyer unless an appropriate adjustment can bemade under sub-section 2(e).

4. If the buyer and seller are related. This limitation will not be applicable if the importer can demonstratethat the declared customs value approximates a test value under sub-section 3(b) of section 25 , ordemonstrates to Customs satisfaction that the price has not been influenced by the relationship.

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