Customs valuation is the process of determining the value of the merchandise for the purpose of assessing the amount of duty upon its importation. Customs Valuation is a set of rules that allow customs offices within the World Trade Organization (WTO) system to estimate the value of imported goods. Customs authorities use complex sets of valuation rules to ensure that the same value is determined in each country, and at each port or airport within a country.
The customs offices determine the value of the imported goods in a number of ways, depending upon the type of product being imported. Some of the methods used are:
1. Transaction Value: This is the price that is actually paid or payable for the goods being imported. This is the primary method that is relied on for customs valuation.
2. Deductive Value: This is a method of determining the value of imported goods by deducting the cost of manufacturing from the selling price charged for the goods.
3. Computed Value: This is a method that is used when the transaction value cannot be established. It is determined by adding the cost of materials and fabrication, in addition to the profit obtained by the manufacturer and the selling costs incurred to market the imported product.
4. Fall-back Value: This approach is used when the transaction value cannot be established and the customs authorities cannot calculate a computed value. It is determined by basing the value on that of similar goods that have already been imported.
Once the customs office has established the value of the imported goods, the taxes and duties are determined. Customs Tariffs are often based on the value of the goods, as this determines the rate of taxation imposed. The Customs Valuation System is an important element of the world trading system and allows companies to ensure that their imports are accurately valued.
It is important to note that customs authorities may use other methods and procedures to determine the customs value of an imported item. These methods include, but are not limited to, product or import specialist determination, laboratory tests, product quality assessments, and so on. All competent authorities must work together to ensure that the correct customs value is established for every imported product.
The Customs Valuation System is an important tool for governments and organizations to ensure that taxes and duties are applied fairly, and that companies are not able to reduce their tax burden by artificially inflating or deflating the value of the imported item. The Code of Conduct on Mutual Administrative Assistance in Customs Matters (MACM) provides a framework that ensures that customs valuation is conducted in a consistent and reliable manner, and that the taxpayer is treated in a transparent and fair manner. In essence, the MACM creates an environment in which customs and tax authorities can share information and cooperate on customs valuation matters.
