Customs Officers have a responsibility to verify that the declared value is the correct value as lower values result in a loss of revenue.
The customs officer cannot rely solely on the importer to present correct values. He must be able to appraise the value submitted.
The customs officer must therefore have a clear understanding of the principles of valuation as contained in Valuation Schedule to S. 19 of the Customs Act.
The WTO Agreement
Originated as a result of multilateral trade negotiations in GATT in 1979 (Tokyo Round)
Adopted the end of the Uruguay Round (1986 -1994)
Intended to reduce or eliminate non tariff trade barriers by introducing a more flexible and uniform system of Valuation
Provides detailed valuation rules expanding and giving greater precision to the general principles established in the GATT.
Customs Valuation in Jamaica
Section 19 of the Customs Act and Paragraph 3 of the Schedule of Customs Act is based on the WTO Valuation Agreement.
The Schedule specifies the rules of valuation for imported goods including the methods and the manner in which they may be applied.
Rights & Obligations
Section 19 (2) of C.A – Customs right to doubt the truth or accuracy of information submitted for Customs valuation purposes
Section 19 (3) – Customs obligation to explain to Importer how Customs value was determined
Section 19(4) & 19 (5) – Appeals process; Customs must inform importer of the right to an appeal without penalty.
Section 19 (8) – Customs have two (2) years within which to change a previously accepted value due to new information gathered.
Please note: Importers obligated to cooperate with Customs during an investigation of values
The 6 Methods
- Method 1: Transaction Value
- Method 2: Transaction Value of identical goods
- Method 3: Transaction Value of similar goods
- Method 4: Deductive Method
- Method 5: Computed Method
- Method 6: Fall-back Method
Basic principle: Transaction Value
The Agreement stipulates that customs valuation shall, except in specified circumstances, be based on the actual price of the goods to be valued. This price, plus adjustments for certain elements listed in Article 8, equals the transaction value, which constitutes the first and most important method of valuation referred to in the Agreement.
Definition of Transaction Value
The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods, and includes all payments made as a condition of sale of the imported goods by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller.
Transaction Value – Method 1
Aspects that contribute to an acceptable transaction value:
- Price actually paid or payable
- Sold for export
- Can be adjusted in accordance with the provisions of Art. 8 (paragraph 8 of the schedule to C.A.)
Majority of commercial importations are valued under transaction value/open market price
Large number of personal importations also valued under transaction value.
Transaction Value – Method 1
Conditions to be fulfilled
- Evidence of sale
- No restriction on the disposition or use
- Not subject to additional conditions
- Sufficient information for adjustments
- Buyer and seller not related
Specific Adjustments - Article 8
Commissions and brokerage, except buying commission
- Packing and container costs and charges
- Royalties and license fees
- Subsequent proceeds
- The cost of transport, insurance and related charges up to the place of importation (CIF Value)
NB: Costs incurred after importation (duties, transport, construction or assembly are not to be include
Customs valuation based on the transaction value method is largely based on documentary input from the importer.
Customs administrations have the right to "satisfy themselves as to the truth or accuracy of any statement, document or declaration.”
In the event of doubt Customs must first request further explanations from the Importer and if not satisfied may consider the other valuation methods to determine the Customs value.
Factors affecting Transaction Value
Following classes of goods cannot be valued under transaction value:
- Goods invoiced no charge
- Consigned goods
- Leased goods
- Barter transactions
- Credits in respect of earlier transaction
- Interest for deferred payment
Requirement for use of transaction value is a “sale”. Must be a sale for export to the country of importation
The transaction value is calculated in the same manner on identical goods if the goods are:
- the same in all respects including physical characteristics, quality, and reputation;
- produced in the same country as the goods being valued;
- and produced by the producer of the goods being valued.
For this method to be used, the goods must be sold for export to the same country of importation as the goods being valued at or about the same time as the goods being valued.
Previously accepted Customs value under Method 1 accepted within 45 days before after the goods being valued.
Transaction Value of similar Goods
The transaction value is calculated in the same manner on similar goods if:
- goods closely resembling the goods being valued in terms of component materials and characteristics
- goods which are capable of performing the same functions and are commercially interchangeable with the goods being valued
- goods which are produced in the same country as and by the producer of the goods being valued.
- For this method to be used, the goods must be sold to the same country of importation as the goods being valued.
- The goods must be exported at or about the same time as the goods being valued.(Previously accepted under Method1 , 45 days before or after.
Method 4 - Deductive Value
When customs value cannot be determined using previous methods it will be determined on the basis of the unit price at which the imported goods or identical or similar goods are sold to an unrelated buyer in the greatest aggregate quantity * in the country of importation.
The starting point in calculating deductive value is the sale price in the country of importation with various deductions to reduce that price to the relevant customs value including:
- commissions usually paid or agreed to be paid,
- profits and general expenses
- transport cost
- customs duties and other national taxes payable in the country of importation
- value added by assembly or further processing, when applicable
Method 5 - Computed value
The customs value is determined on the basis of the cost of production of the goods being valued, plus an amount for profit and general expenses usually reflected in sales from the country of exportation to the country of importation of goods of the same class or kind.
Production cost = value of materials and fabrication
Profit and general expenses
Other expenses ( Transport, loading unloading and handling charges)
Method 6 - Fall-back Method
When the customs value cannot be determined under any of the previous methods, it may be determined using reasonable means consistent with the principles and general provisions of the Agreement, and on the basis of data available in the country of importation.
To the greatest extent possible, this method should be based on previously determined values and methods with a reasonable degree of flexibility in their application.
Prohibited Methods under Fallback
Selling Price in the country of importation (Jamaica) of goods produced in such country(Jamaica)
Higher of two alternate values
Price of goods in domestic market of country of export
Cost of Production other than computed value of identical or similar goods
Price of goods sold for export to a country other than the country of importation
Minimum Customs values
Arbitrary or fictitious values