Customs Valuation

Customs duty, which is an ad valorem duty, is usually charged as a percentage of the value of the imported goods. Therefore, the amounts of customs duty payable depend on the customs value of the goods. Under the WTO Valuation Code, adopted by the most of the world’s nations, there are 6 methods of valuation which must be applied in strict hierarchical order; the only exception being that the importer may request that Methods 4 and 5 are reversed.

Method 1, often referred to as the “Transaction Value“, is the most common valuation method used. In fact, over 95% of all imports are valued under this method. The transaction value is the price paid, or payable for the goods by the buyer to the seller, after a number of additions and deductions have been made, unless they have already been excluded, or included in the price paid, or payable. If there is no sale you cannot use method 1 and you must try another method, starting from Method 2. If Method 2 is unsuitable you must go to Method 3, etc, etc.

Please note, that you may not be able to use Method 1 if you are related to the supplier and as a result of the relationship you get a reduced price, or if the sale is subject to any conditions which restrict your freedom to dispose of, or sell the goods as you wish.

It is possible to significantly reduce custom duty liabilities by the skilful application of a number of customs valuation planning techniques, such as the unbundling of buying commissions, certain royalties and discounts and the establishment of a separate sourcing company, etc. However, before you can exploit the above opportunities, it may be necessary to engage in complex negotiations with Customs. Therefore, we strongly recommend that our professional advice is sought before any action is taken.