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Customs Valuation

What is Customs Valuation?

Customs Valuation is a means of determining a Customs Value for the purpose of levying ad valorem duties

How does Customs do that?

Legislation

Customs value of imported goods has to be determined in accordance with the national laws of the country.

PNG's laws for Customs Valuation is called the Customs (Ad Valorem Duties) Regulations 1987.

This legislation is based on the WTO instruments:

  • Article VII of the General Agreement on Tariffs and Trade (GATT) 1994
  • The Agreement on the Implementation of Article VII of the GATT 1994
  • The Uruguay Round Ministerial Decision Regarding Cases where Customs Administrations have Reason to Doubt the Truth or Accuracy of the Declared Value

The Principles of Customs Valuation

Article VII of GATT lays down the principles that the Customs Value must not be arbitrary, fictitious or based on value of indigenous goods in the importing country. It should be real and based on the actual import or like goods. It should be derived from an actual sale or offer of sale in normal competitive business conditions. And consistent with commercial business practices.

The Customs Value is based on the price paid or payable for the goods when sold for export to PNG. Simply, the transaction value of the goods on the market when sold to the importer in PNG.

But this transaction value must not be subject to any conditions or influences that effects that transaction value.

And this transaction value is also subject to certain adjustments that must be made in line with PNG Valuation legislation.

Determination of Customs Value

Transaction Value Method

The Transaction Value is the price paid or payable for the goods when sold for export to the country of importation. And needs to be adjusted according to certain factors contained in National legislation.

Other Methods

If the Customs Value is not ascertained under the Transaction Value Method, the Valuation Agreement provides provisions to determine a Customs Value using (5) other methods, that still has the Transaction value as the basis, in sequential order until a value is reached.

  1. Transaction Value of Identical Goods
  2. Transaction Value of Similar Goods
  3. Deductive Value Method
  4. Computed Value Method
  5. Fallback Method

Important Valuation Issues

There are certain provisos that are taken into consideration when determining Customs Value and when adjusting that Customs Value.

Customs must be satisfied with the truth and accuracy of declared values, compliance with valuation conditions and availability of objective and quantifiable data/evidence of the sale transaction. The following conditions must be satisfied:

  • The Customs Value in PNG is at CIF (terms of delivery/incoterms) level. This means that the Customs Value is the value of the goods plus the cost of overseas freight plus cost of insurance for transport of the goods to PNG.
  • There should be evidence of a sale for export to PNG. Evidence include such things as commercial invoice, sales contract, purchase order, bank payment documents.
  • The sale is not subject to any conditions or restrictions that has effected the value/price of the goods.
  • If there exists a relationship between the buyer and the seller, that relationship has not influenced the value/price of the goods, and the importer is able to demonstrate that.

Other Valuation Factors that are taken into account when adjusting a Customs Value are:

Dutiable Factors

  • Commissions and brokerage, except buying commission
  • Royalties and license fees
  • Proceeds of subsequent sale that accrues to the seller
  • Advance payments, deposits not reflected on invoice

Non-dutiable Factors

  • Discounts
  • Buying Commission
  • These charges provided they are separately shown on the invoice
    • interest charges
    • post-importation charges
    • duties and taxes payable in importing country

The dutiable factors are inclusions, and the non-dutiable factors are exclusions in the determination of a Customs Value.

These factors must be clearly shown and adequately described on the invoice, established prior to importation and are directly related to the goods being valued before they can be allowed in the determination of Customs Value.

For further information on valuation matters please contact the Tariff and Trade Branch.