Customs Valuation is the process where customs authorities assign a monetary value to a good or service for the purposes of import or export. Generally, authorities engage in this process as a means of protecting tariff

Tariff

A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

 concessions, collecting revenue for the governing authority, implementing trade policy, and protecting public health and safety. Custom duties, and the need for customs valuation, have existed for thousands of years among different cultures, with evidence of their use in the Roman Empire

Roman Empire

The Roman Empire was the post-Republican period of the ancient Roman civilization, characterised by an autocratic form of government and large territorial holdings in Europe and around the Mediterranean....

, the Han Dynasty

Han Dynasty

The Han Dynasty was the second imperial dynasty of China, preceded by the Qin Dynasty and succeeded by the Three Kingdoms . It was founded by the rebel leader Liu Bang, known posthumously as Emperor Gaozu of Han. It was briefly interrupted by the Xin Dynasty of the former regent Wang Mang...

 and the Indian sub-continent. The first recorded customs tariff was from 336 in Palmyra

Palmyra

Palmyra was an ancient city in Syria. In the age of antiquity, it was an important city of central Syria, located in an oasis 215 km northeast of Damascus and 180 km southwest of the Euphrates at Deir ez-Zor. It had long been a vital caravan city for travellers crossing the Syrian desert...

, an oasis city in the Syrian desert. Beginning near the end of the 20th century, the procedures used throughout most of the world for customs valuation were codified in the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade

General Agreement on Tariffs and Trade

The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...

 (GATT) 1994.

Agreement on Implementation of Article VII of GATT

Article VII of the GATT outlines the requirements for Valuation for Customs Purposes, and is applicable to all members of the World Trade Organization

World Trade Organization

The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

. The Agreement on Implementation of Article VII (known as the WTO Agreement on Customs Valuation or the “Valuation Agreement”) ensures that determinations of the customs value for the application of duty rates to imported goods are conducted in a neutral and uniform manner, precluding the use of arbitrary or fictitious customs values.

The Agreement was negotiated during the Tokyo Round, but at that time its acceptance was voluntary. Adherence to the Agreement became mandatory as part of membership in the WTO subsequent to the Uruguay Round

Uruguay Round

The Uruguay Round was the 8th round of Multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade , spanning from 1986-1994 and embracing 123 countries as “contracting parties”. The Round transformed the GATT into the World Trade Organization...

. The Agreement is administered by the WTO Committee on Customs Valuation, which holds two formal meetings a year. The Agreement also established a Technical Committee on Customs Valuation, which operates under the auspices of the World Customs Organization

World Customs Organization

The World Customs Organization is an intergovernmental organization headquartered in Brussels, Belgium. With its worldwide membership, the WCO is recognized as the voice of the global customs community...

 (WCO), with a view to ensuring, at the technical level, uniformity in interpretation and application of the Agreement. The Technical Committee also meets twice a year.

The Agreement has four major parts in addition to a preamble and three annexes. Part I sets out substantive rules of customs valuation. Part II provides for the international administration of the Agreement and for dispute resolution. Part III provides for special and differential treatment for developing countries, and Part IV contains the so-called final provisions dealing with matters such as acceptance and accession of the Agreement, reservations, and servicing of the Agreement.

The agreement gives customs administrations the right to request further information of importers where they have reason to doubt the accuracy of the declared value of imported goods. If the administration maintains a reasonable doubt, despite any additional information, it may be deemed that the customs value of the imported goods cannot be determined on the basis of the declared value, and customs would need to establish the value taking into account the provisions of the Agreement.

Transaction value

The primary basis for customs valuation under the Agreement is “transaction value” as defined in Article 1. Article 1 defines transaction value as “the price actually paid or payable for the goods when sold for export to the country of importation.” Article I must be read together with Article 8, which lets Customs authorities make adjustments to the transaction value in cases where certain specific parts of the good - considered to be a part of the value for customs purposes - are incurred by the buyer but are not actually included in the price paid or payable for the imported goods. Article 8 also allows for the inclusion in transaction value of exchanges ("considerations") between the buyer and seller in forms other than money. Articles 2 through 7 provide methods of determining the customs value whenever it cannot be determined under the provisions of Article 1.

The methods of customs valuation, in descending order of precedence, are:

1. Transaction Value of Merchandise in Question - price actually paid or payable for the goods sold. (Art. 1)
2. Transaction Value of Identical Merchandise (Art. 2)
3. Transaction Value of Similar Merchandise (Art. 3)
4. Deductive Value (Art. 5)
5. Computed Value (Art. 6)
6. Derivative Method (Art. 7)

This hierarchy is codified in domestic legislation.

See also

• Customs Modernization Act
  Customs Modernization Act
  The Customs Modernization Act , formally Title VI of the North American Free Trade Agreement Implementation Act, commonly known as the "Mod Act", amended the Tariff Act of 1930 and related laws. The Mod Act has been described as the most sweeping regulatory reform legislation since the U.S...
  
  
• Uruguay Round Agreements
  Uruguay Round
  The Uruguay Round was the 8th round of Multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade , spanning from 1986-1994 and embracing 123 countries as “contracting parties”. The Round transformed the GATT into the World Trade Organization...
  
  
• WTO Agreements
• General Agreement on Tariffs and Trade
  General Agreement on Tariffs and Trade
  The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...
  
  
• World Customs Organization
  World Customs Organization
  The World Customs Organization is an intergovernmental organization headquartered in Brussels, Belgium. With its worldwide membership, the WCO is recognized as the voice of the global customs community...
  
  

External links

• WTO Customs Valuation Gateway, http://www.wto.org/english/tratop_E/cusval_e/cusval_e.htm