A fair, uniform, and impartial mechanism for assessing the value of imported products on which customs authorities impose charges are laid out in the Customs Valuation Agreement of the WTO. The use of false or arbitrary customs values is prohibited by this system. The Uruguay Round of Multilateral Trade Negotiations, which ended in April 1994, was when the Agreement was negotiated. It clarifies and expands upon Article VII of the GATT’s Multilateral Agreement on Trade in Goods (1947). This Agreement, which went into effect on January 1, 1995, and has no set end date, is a contract between all WTO members
Benefits of the agreement
The Agreement aims to establish a single, impartial, fair system for the valuation of imported goods for customs purposes that complies with market realities and prohibits the use of arbitrary Customs values. The Agreement recognizes that customs valuation should be based on the actual price of the goods to be valued. This is made possible by its positive concept of value. The Agreement increases trade’s predictability, stability, and transparency because the majority of global commerce is priced using the transaction value technique. According to the Agreement, the costs associated with conveying the products to another location for importation, loading, unloading, and handling, as well as the cost of insurance, may be included in or excluded from customs value.
Transaction value
The transaction value of the product is the price paid or due when the items are sold for export. According to the Agreement, it should serve as the principal basis for determining the customs value of imported goods. Both direct and indirect payments are possible. The buyer’s payment of a debt to the seller would be an illustration of indirect payment. According to the Agreement, customs officials are only permitted to include the following in the transaction value of a good:
- expenses such as commissions, brokerage fees, container prices, and packaging expenses
- the value of specific goods and services that the buyer provides at a lower cost than what is stated in the pricing
- as a condition of the sale, the buyer must pay license costs associated with the items being appraised
- the money gained by the seller from any later sales, disposals, or uses of the imported goods
Exceptions
Following the Agreement, there are some circumstances where the transaction value of imported products is insufficient for customs purposes. These occur when the buyer is restricted from disposing or using the goods. It also occurs when the sale or price of the goods is contingent upon a condition or consideration for which a value cannot be determined. An exception is equally made when a portion of the proceeds from the buyer’s use of the goods in the future accrues to the seller or when the buyer and seller are related. Related, such as when they work together or are an employer, employee, officer, or director of each other’s company.
Additional customs valuation techniques
The Agreement stipulates alternative techniques of valuation in situations where it is impossible to identify the transaction value of imported items. The first option is to base the customs value on the transaction value of identical items that have been sold for exportation to the same nation. The transaction value of comparable items sold for export to the same country will be used by the customs authorities if there are no equivalent goods available. The worth of identical or similar items when sold in the importing country may be used if they are not sold for export to the same country. Alternately, a computed value may be utilized; the Agreement outlines how to compute this value. If all else fails, customs officials must determine the value of the imported goods by reasonable procedures consistent with the principles and general requirements of the Agreement.
Transparency and the right to appeal
According to the Agreement, each WTO member country’s customs legislation must grant importers the opportunity to appeal a decision without incurring a fee. This is to be made first to the country’s customs agency or another independent body and subsequently to a judicial authority. All laws, rules, judgments, and administrative decisions implementing the Agreement must be made public.
Committee
A Committee on Customs Valuation, made up of representatives from each WTO member nation, was established under the Agreement. This Committee offers members the chance to consult on issues connected to the management of the customs valuation system at least once a year during meetings. The Agreement also established a Technical Committee on Customs Valuation under the supervision of the World Customs Institution, whose mission is to advance global collaboration on customs-related issues. Examining specific technical issues that arise in the day-to-day administration of the Agreement and offering advisory opinions on customs valuation are among the duties of the Technical Committee. The committee meets at least twice a year.
