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CUSTOMS VALUATION
AGREEMENT

SHAFIQ SHAHZAD
Specific and ad valorem 2
customs duties
 Customs duties can be either specific or ad valorem or mix of
the two.
 For a specific duty, a concrete sum is charged for a
quantitative description of the good, i.e. USD 1 per unit.
 Customs value of the good need not be determined, as the
duty is not based on the value of the good but on other
criteria.
 In this case, no rules on customs valuation are needed and
the Valuation Agreement does not apply.
 In contrast, an ad valorem duty depends on the value of a
good.
 Hence, need for a Valuation agreement
 Market Access
(Goods)
 Extent to which a good can compete with locally-
made products in another market:
 Tariffs and non-tariff measures

 Non-tariff measures slowing trade:

 Pre-shipment inspection
 Customs valuation
 Rules of origin
 Import licensing
 (Investment measures...)

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Purpose of the Agreement
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 Article VII of the GATT

• General principle: the value for Customs purposes
based on the actual value of the imported merchandise
(or of like merchandise), not on the value of
merchandise of national origin or on arbitrary or
fictitious values

 Brussels Definition of Value (1950s onwards) - BVD

• “normal market price” (theoretical price defined by
Customs)

 adopt a more flexible and uniform valuation

method
Historical background
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 1979 (Tokyo Round Valuation Code)

 positive system of Customs valuation
(“transaction value”)
 Plurilateral agreement

 1986-1993 (Uruguay Round)

 “multilateralization”(few changes in
relation to the Tokyo Round Code)
 implemented for the purpose of
levying ad valorem duties
Basic principles 6

 6 Customs valuation methods

 method 1: Transaction value

 method 2: Transaction value of identical goods
 method 3: Transaction value of similar goods
 method 4: Deductive value
 method 5: Computed value
 method 6: Fall-back method
 1: Transaction value 7

 Price actually paid

 Conditions to be fulfilled:
• evidence of sale
• no restriction on the disposition or use
• not subject to additional conditions
• buyer and seller not related, related parties (Art.15)
 Doubts as to the truth or
accuracy of the declared
value (Art.17)
 Committee decision
2: Transaction value of identical goods 8

 Calculated in the same manner as 1

 goods which are the same in all
respects (physical characteristics,
quality, reputation...)
 produced in the same country

 produced by the same producer

 Exceptions
 identicalgoods produced by a different
producer (in the same country)
 minor differences
3: Transaction value of similar goods 9

 Calculated in the same manner as 1

 goods closely resembling the goods being
valued (in terms of component materials and
characteristics)

 goods which are capable of performing the

same functions (commercially interchangeable)

 goods which are produced in the same country

and by the same producer and imported at the
same time
 4: Deductive value 10
 Deductionof value from the price of the
greatest aggregate quantity sold
 unitprice at which the imported goods or
identical or similar imported goods are sold in
the greatest aggregate Q to an unrelated
buyer in the country of importation

 Sales price less:

• commissions
• transport and insurance costs (country of
importation)
• Customs duties and taxes
• value added by assembly or further processing,
when applicable
 5: Computed value 11

 Production cost + profits + expenses

 production cost (value of materials

and fabrication)

 profit and general expenses

 other expenses
• transport (to place of importation)
• loading, unloading and handling charges
• cost of insurance
6: Fall-back method
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 Reasonable means consistent with Article
VII of the GATT (available data)

 Valuation criteria not to be used:

• selling price of goods in the country of importation
• higher of two alternative values
• price of goods in the country of exportation (= anti-
dumping)
• cost of production
• price of goods for export to a third country
• minimum customs value (except in certain cases
for developing countries)
• arbitrary or fictitious values