Transcript Recent Changes in Customs Valuation System

Adoption of WTO (Then GATT)
Valuation code in 1988

Inherent contradictions between
‘Deemed Value’ concept of Section
14 and ‘Transaction Value’ concept
of Valuation Rules.

Reconciliation by Tribunal decisions
and Supreme Court judgment in
Eicher Tractor case.
Two Supreme Court Judgments in 2006
& 2007

Ispat Industries relating to Barge charges

J.K. Corporation relating to Royalty

Effect of the two Judgments
– ‘Deemed Value’ concept of the Act will
prevail over ‘Transaction Value’ concept
of the Rules.
– International Commitment at stake

Thus arose the need for amending Section
14.
Main features of amended Section 14

Complete alignment with Transaction
Value concept of the Rules.

Important elements of Valuation
Rules conceptually captured in the
Section.

Mandates framing of Export Valuation
Rules.

Covers non-dutiable goods as well.
Main features of amended
Valuation Rules

Erstwhile Rules 3 & 4 merged.

Renumbering of the Rules and
change of certain titles.

Amendment in the proviso to the
Residual Method of Rule 8
– embargo not to go beyond the
deemed value.
Main features of
amended Rules

(Contd..)
Two Explanations added in erstwhile Rule 9
– One regarding Royalty related to post importation process
– Other regarding Cost of Transportation
relating to barge charges, ship
demurrage charges etc.

Explanation added to erstwhile Rule 10A.
Main features of amended
Rules
(Contd..)

Main elements in Explanation to Rule 10A
– Not a method of determination of value.
– Illustrative reasons which might lead to
doubts.
– Positive assertion to accept value,
when satisfied.
Export Valuation Rules

Controversies about valuation of export
goods
– Whether erstwhile Sec. 14 applicable for duty
free export goods.
– Contradictory judicial pronouncements.

Amended Sec 14 – No clause regarding
dutiable goods

It also provides for framing rules for
valuation of export goods.
Main features of Export Valuation
Rules
(Contd..)

Format similar to that of import
valuation rules

Rule 2 provides definition for ‘Goods
of like kind and quality’ ‘Transaction
Value’ and ‘ Related Persons.

Rule 3 – Transaction Value Method
subject to Rule 8 (Rejection of
Declared Value)
Main features of Export Valuation
Rules
(Contd..)

Rule 4, 5 & 6 are alternative methods of valuation.

Rule 4 - Comparison Method - Main Elements.
– Comparison with ‘Transaction Value’ of goods of
like kind and quality.
– Exported at or about the same time.
– To other buyer in same destination country.
– To other buyer in another destination subject to
certain adjustments.
Main features of Export Valuation
Rules
(Contd..)

Rule 5 - Computed Value Method – Main
Elements
– Cost of Production / processing.
– Charge for the Design or Brand
– Profit

Rule 6 - Residual Method
– Importance of Proviso ‘Local Market
Price may not be the only basis’.
Main features of Export Valuation
Rules
(Contd..)

Rule 7 - Format of Declaration.

Rule 8 - Rejection of Declared Value.
– Counterpart of Rule 10A.
– Clarification through Explanation

Not a method of valuation.

Illustrative Reasons which could lead to doubts.

Positive assertion to accept declared value, if
satisfied.
Board’s Circulars on Both Import and
Export
Highlights of clarifications on Import Rules

Proviso to Rule 4 & 5 keeping value of
provisionally assessed goods outside the
purview of comparison

Clarification regarding explanations
relating to Royalty and certain
Transportation Costs.

Clarification regarding explanation to
Rule 12 (erstwhile Rule 10A)
Highlights of Board’s Clarifications on
Export Valuation Rules

Transaction Value to be accepted even when
buyer and seller are related, provided price is
not influenced.

During the course of enquiry arising out of
doubt about declared value, export to be
allowed normally.

In case of serious violation, goods to be
detained only after Commissioner’s approval.
Highlights of Clarifications on
Export Rules
(Contd..)

Procedure for applying Rule 8 elaborated at Para 7.

Decision to initiate investigation on value at the level of
Joint / Addl. Commissioner only.

Instructions regarding application of Rule 4
(Comparison Method) detailed at Para8.

While applying Rule 5 (Computed Method), due
consideration for cost certificates by Cost Accountant /
Chartered Accountant.

Purpose of introducing Export Valuation Rules
explained at Para 10.
Concluding Remarks

Customs Valuation System working well
in India.

Recent changes likely to reduce litigation.

Amended provisions being applied well
without any difficulty.
Thanks
for your
Attention