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The Agreement on Customs Valuation

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The World Trade Organization: Legal, Economic and Political Analysis

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Abstract

Customs officials assess the amount of duties to be levied on imported products in light of the economic origin of the products, their nature or classification and, normally, their value.1 Origin for preferential purposes is governed by fairly stringent criteria.2 Classification offers some limited opportunity for the exercise of discretion.3 Valuation is the most plastic of the three determinations and the one most prone to fraud, administrative arbitrariness and prolonged error.

Duty is normally calculated on an ad valorem basis, as a percentage of the dutiable value. For a minority of products, duty is based on quantity or weight (e.g., two cents per pound), rather than value, when it is known as a specific rate duty.

See Chapter 15 of this book.

See Chapter 36 of this book.

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References

  1. Vinod Rege, Customs Valuation and Customs Reform, in Development, Trade Andwto. A Handbook 128 (Bernard Hoekman, Aaditya Mattoo, and Philip English eds. 2002); Edmond Mcgovern, International Trade Regulation. Gatt, The United States and the European Community 150–151 (1986); Saul L. Sherman and Hinrich Glasshoff, Commentary on the Gatt Customs Valuation Code 54 (1998).

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  8. The Tokyo Round Agreements or “Codes” were open to all GATT contracting parties, but a GATT contracting party was not required to become a signatory to any of these agreements as a condition of continued GATT membership. At the same time, unless a contracting party became a Code signatory, it could not benefit from any of the Code provisions. The Tokyo Round Codes were not core GATT obligations applicable to all GATT contracting parties, but rather were stand-alone legal instruments negotiated under GATT auspices and existing side by side, but not fully integrated into GATT. See Raj Bhala and Kevin Kennedy, World Trade Law 3–4 (1998).

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  17. In a 1962 case against Canada, the United States argued that Canada’s “value for duty” on imported potatoes was “arbitrary or fictitious” in contravention of Article VII:2 (a). In effect, Canada applied an anti-dumping duty to the amount by which the actual export price fell below a notional “value for duty”, the average value of potatoes imported into-Canada during the previous 36 months. The Canadian regime almost guaranteed the levying of anti-dumping duty whenever prices went below their notional average price. The GATT panel’s report found that “value for duty” was a concept different from valuation for customs purposes. Canada’s anti-dumping technique did not meet GATT anti-dumping standards. Report of the GATT Panel (adopted), Exports of Potatoes to Canada, BISD, 11th Supp., at 88 (1963). See Bhala and Kennedy, supra note 16, at 317–318.

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  18. All TCCV instruments are contained in a compendium published by the World Customs Organization, Customs Valuation-Wto Agreement and Texts of the Technical Committee on Customs Valuation, 2ND Edition, (1997) (Loose-Leaf Publication Amending Supplements. Last Supplement was Published on September 2000).

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  22. Id., ¶¶ 80–81 (emphasis in original).

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  23. A special situation may arise with regard to computer software, which may be of immense value not because of the physical characteristics of the imported goods, but because of what is electronically recorded thereon. Such electronic material could be transmitted by telephone, cable or satellite and recorded on the medium. How to value such items was decided by the decision on the valuation of carrier media bearing software for data processing equipment (VAL/8) adopted by the GATT Committee on Customs Valuation on September 24, 1984. It recommends that [...] “in determining the customs value of imported carrier media bearing data or instructions (software), only the cost or value of the carrier medium itself shall be taken into account. The customs value shall not, therefore, include the cost or value of the data or instructions, provided that this is distinguished from the cost or the value of the carrier medium. For the purpose of this Decision, the expression “carrier medium” shall not be taken to include integrated circuits, semiconductors and similar devices or articles incorporating such circuits or devices; the expression ‘data or instructions’ shall not be taken to include sound, cinematic or video recordings.” The rationale for this decision is that it is essentially the carrier media itself (i.e. the magnetic disk), which is liable for duty under the customs tariff. See Sherman and Glasshoff, supra Saul L. Sherman and Hinrich Glasshoff, Commentary on the Gatt Customs Valuation Code 54 (1998) note 6, at 86.

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  26. SeeCVAArticle 17, Annex III:6 to the Agreement and the Uruguay Round Ministerial Decision, Regarding Cases Where Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value. The powers of customs authorities are discussed in Part V.B of this Chapter.

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  31. For example, Article 147 of the implementing EC Customs Code Regulation (Regulation 2454/93, as amended) provides that when the customs declarant wants to rely on an earlier sale to establish the TV, it must demonstrate to the satisfaction of the customs authorities that the sale in question took place contemplating export into the EU. See Hans-Joachim Priess and André Fiebig, Determining the Customs Value of Goods Subject to Successive Sales: Recent Developments in EU Customs Law, [1995] 4 International Trade Regulation, at 137.

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  34. A confirming commission is a fee charged by a bank acting for or on behalf of the seller in a transaction, in return for its guaranteeing payment of a letter of credit in the event the buyer’s bank is unable to fulfill the commitment. See Sherman and Glasshoff, supra HINRICH GLASSHOFF, Commentary on the Gatt Customs Valuation Code 54(1998) note 6, at 110. See also TCCV Explanatory Note 5.1 on “Confirming Commissions.”

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  35. Commercial containers are modes of transport which may be taken into account as an element in transportation costs in CIF countries. See Sherman and Glasshoff, supra, HINRICH GLASSHOFF, Commentary on the Gatt Customs Valuation Code 54(1998) note 6, at 111.

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  36. Decision on the Meaning of the Word “Undertaken” in Article 8:1 (b) (iv) of the English text of the Agreement, adopted by the Tokyo Round Committee on March 3 1983 (VAL/M/6, paragraph 18). See WTO

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  41. Id. at 173.

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  42. For a complete account of the relative advantages and disadvantages of the CIF and FOB basis for customs valuation, see comparative table in Lux, Guide to Community Customs Legislation 200–202 (2002).

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  54. Id. at 335. See also Interpretative Note to CVA Article 5 for examples of unit price at which goods are sold in the greatest aggregate quantity.

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  55. Interpretative Note to CVA Article 5, ¶ 12.

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  60. Id. at 236–237.

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  64. The Decision and Checklist are contained in Decisions Concerning the Interpretation and Administration of the Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation), WTO Doc. G/VAL/5 (1995), a compendium issued by the WTO Committee on Customs Valuation of decisions originally made by the Tokyo Round Committee on Customs Valuation and adopted by the WTO Committee.

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  65. These questions are contained in Decisions, supra note 153.

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  67. Annex III:1. According to the Report (2002) of the Committee on Customs Valuation to the Council for Trade in Goods, during the period under review (i.e. 2002), one Member (Sri Lanka) maintained an extension of the delay in accordance with the provisions of Annex III:1. At the time of writing three requests for extensions were still pending approval by Members. See Doc. G/L/590, November 12, 2002.

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  69. Annex III:2. According to the Report (2002) of the Committee on Customs Valuation to the Council for Trade in Goods (WTO Doc. G/L/590, November 12, 2002), during the period under review (i.e. 2002), six Members maintained reservations granted under Annex III:2 for minimum values (Colombia, Gabon, Guatemala, Honduras, Nicaragua and Jamaica).

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  70. Fifty-six Members (of which one has an Article IX waiver from its obligations under the Agreement and three have requested extensions of the Article 20.1 delays) have not yet made any notification. Report (2002) of the Committee on Customs Valuation to the Council for Trade in Goods, Doc. G/L/590, November 12, 2002.

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  71. WT/MIN(01)/17, November 14, 2001.

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  72. The Doha Ministerial Declaration contains the “work program” for the Doha Development Round. WT/MIN/(01)/DEC/1, November 14, 2001. Paragraph 12 of the Declaration contains the mandate to the relevant WTO councils and committees to negotiate a list of outstanding implementation issues as a “matter of priority,” and to report on their progress to the Trade Negotiations Committee by the end of 2002 for “appropriate action.” The WTO document, Compilation of Outstanding Implementation Issues Raised by Members, JOB (01)/152/Rev.1, October 27, 2001, identifies these implementation-related issues.

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  73. Report of the Committee on Customs on Customs Valuation to the Trade Negotiations Committee on the Implementation-related Issues in Accordance with Paragraph 12 of the Ministerial Declaration, G/VAL/49, November 25, 2002, ¶¶ 10–13.

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Authors and Affiliations

  1. University of Glasgow, Glasgow

    Ian Forrester Q.C. (Visiting Professor in european Law and partner)

  2. White & Case, LLP, Brussels

    Ian Forrester Q.C. (Visiting Professor in european Law and partner)

  3. White & Case, LLP, Geneva

    Omar E. Odarda (Argentine lawyer)

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  1. Ian Forrester Q.C.
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Editors and Affiliations

  1. International Trade Law Center, International Law Institute, Washington, D.C.

    Patrick F. J. Macrory (Director) (Director)

  2. White & Case, Geneva

    Arthur E. Appleton (Counsel) (Counsel)

  3. SAIS-Bologna, Johns Hopkins University, Bologna

    Michael G. Plummer (Professor of International Economics) (Professor of International Economics)

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Forrester, I., Odarda, O.E. (2005). The Agreement on Customs Valuation. In: Macrory, P.F.J., Appleton, A.E., Plummer, M.G. (eds) The World Trade Organization: Legal, Economic and Political Analysis. Springer, Boston, MA. https://doi.org/10.1007/0-387-22688-5_12

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