Customs Valuation Quiz

Customs & Excise Department Valuation

• The presentation is about customs valuation in Belize.
• The presenter is Mr. Lorin Frazer, O.I.C. Valuation

Objectives

• Participants will understand the importance of customs valuation.
• They will learn the background of customs valuation.
• They will identify and understand the 6 methods of customs valuation in sequential order.
• They will identify adjustments to the transaction value.
• Participants will identify exclusions from transaction value.
• They will learn the vehicle valuation process.

What is Customs Valuation?

• It is the procedure used to determine the monetary value of imported goods.

Why is Customs Valuation Important?

• Most tariffs are ad valorem, meaning the amount of duty owed is based on the customs value.
• Other taxes and fees are also based on value.
• Customs value impacts eligibility for preferential trade programs.

History of Customs Valuation

• In 1947, several European countries met to discuss the valuation of goods.
• In the 1950s, many countries assessed customs duties based on the Brussels Definition of Value (BDV).
• The BDV was based on a normal market price, the price a commodity would fetch in an open market between buyer and seller, independent of each other.
• The Tokyo Round Valuation Code (1979) established a system based on the price actually paid or payable for the imported goods, using the transaction value concept.
• The transaction value is intended to produce a fair, uniform, and neutral system for valuing goods.
• This differed from the notional value in the Brussels Definition of Value.
• The Tokyo Round code was replaced by the WTO agreement on implementation of Article VII of the GATT in 1994.
• The WTO agreement applies to the valuation of imported goods, levied ad valorem duties.

Evolution of Customs Valuation Systems

• A timeline of events leading to a fair and neutral international system is shown.
• Key dates and milestones are included.

Legal Framework

• The WTO Agreement on the Implementation of Article VII of the GATT 1994 forms the basis for national legislation.
• Chapter 48, section 5, Third Schedule of the Customs and Excise Act (Revised Edition 2020) provides further details.

Six Methods of Valuation

• 1. Transaction Value (Article I)
• 2. Transaction Value of identical goods (Article II)
• 3. Transaction Value of similar goods (Article III)
• 4. Deductive method (Article V)
• 5. Computed method (Article VI)
• 6. Fall-back method (Article VII)

Transaction Value – Article I

• Customs value is the transaction value, meaning the price actually paid or payable for the goods.
• It includes all payments made by the buyer for the benefit of the seller, plus adjustments.
• A bona fide sale (transfer of title) and sale for export are required conditions.

Price Actually Paid or Payable (PAPP)

• It’s the total payment made directly or indirectly by the buyer for the imported goods.
• This may include letter of credit or negotiable instruments.

Exceptions to PAPP

• Transactions without payment (gifts, samples, promotional items, consignments, intermediaries).
• Items imported under hire, lease or loan

Transaction Value – Article I (continued)

• Requirements include evidence of sale (contracts, invoices, purchase orders), no restrictions on use, no conditions impacting price, and no resale proceeds accruing to the seller. Buyer and seller must be unrelated.

What is the transaction value? (Example)

• Example scenario is presented for calculation.

Exclusions from “Price”

• Charges for construction, erection, assembly, maintenance, and technical assistance after importation are excluded.
• Transportation costs after importation
• Import duties and taxes
• Dividends and payments not related to the imported goods are excluded.

Adjustments – Article VIII

• Added to the price paid or payable include commissions and brokerage (excluding buying commissions), cost of containers and packing costs. Included are values of goods and services provided free of charge, raw materials, manufacturing costs and expenses between export and import countries.
• Adjustments must be based on objective, quantifiable data.

Adjustments – Article VIII (continued)

• Includes royalties, licensing fees, resale proceeds, and similar values that accrue to the seller.

Which elements to include in customs value? (Example)

• Scenario describing a selling agent for imported cars is presented with questions about applicable value adjustments.

When is the Transaction Value Not Acceptable?

• If the price is distorted due to specific conditions.
• five alternative customs valuation methods are used sequentially.

If Reasonable Doubt Still Exists

• If valuation cannot be made according to transaction value, customs must explain to the importer.
• Five alternative methods are then applied.

Transaction Value of Identical Goods- Article II

• Identical goods (same characteristics, quality, reputation) must come from the same country, produced by the same producer, exported around the same time, and sold for export to the same country. Exemptions may include different producers.

Transaction Value of Similar Goods- Article III

• Similar goods closely resemble the goods being valued.
• They perform similar functions and are commercially interchangeable
• They are sold to the same country of importation

###Article IV

• Allows the order of Articles 5 and 6 to be reversed, at the request of the importer

Deductive Method – Article V

• Deduction of value from price of greatest aggregate sold to unrelated buyer.
• Finding the price for the greatest quantity of identical goods, sold, at the first commercial trade level.
• If sales didn't happen around time of importation, the period can be up to 90 days after.

Deductive Method – Article V(Continued)

• Determining greatest quantity sold by comparing units sold at different prices.

Computed Method – Article VI

• Most difficult and rarely used method.
• Customs Valuation is based on the goods’ production cost.
• Costs include materials, labor, assembly, and other indirect costs.
• Also includes profit and expenses from export to import countries.

Fallback Method - Article VII

• Only used if all other methods fail to determine customs value.
• Based on a value from a previous method, with necessary adjustments.

Valuation of New Motor Vehicles

• A proper invoice is needed from the seller, including addresses, price, delivery terms, payment, and vehicle specifics (make, model, year, VIN, engine number, color, doors, seating capacity, GVWR, and engine size).

Valuation of Used Motor Vehicles

• Importer provides bill of sale, title, and bill of lading.
• Officer verifies the Bill of Sale for authenticity.
• If vehicle was modified, costs of the work are included.
• Duties and Taxes based on transaction value plus freight charges.

Valuation of Used Motor Vehicles (Continued)

• If transaction value can't be determined using Article 1 guidelines, then other valuation approaches are exhausted.
• J.D. Power Used Car Guide data is used, as a departmental policy.

Residual Method

• The required documentation when using the residual method is the title, bill of lading, mileage, GVWR, and engine size

Valuation of Motor Vehicles (Post Importation)

• Vehicle appraisal forms and registration numbers are handled after import under conditional exemptions.

Invoice Requisite

• The importer must provide the following information on the invoice:
  • Country of Origin
  • Sales Terms
  • Currency
  • Marks and Numbers
  • Description of Goods
  • Gross Weight
  • Cube.
  • Number and kind of Package
  • Specification of Commodities ( Code and/or full description)
  • Net weight in kilograms
  • Seller details
  • Consignee details
  • Port of loading
  • Destination Country
  • Shipping method (air/sea, etc.)
  • Additional transport information
  • Invoice date and invoice number
  • Quantity of goods shipped
  • Unit price of the goods
  • Total amount of the goods
  • Any packing, freight, and other charges (including specific insurance costs).
  • Total Invoice amount
  • Certification and signature.

Submitting Invoices for Approval

• Documents to be submitted to customs for pre-clearance verification include invoices, bills of lading/airway bills, proof of payment (for prepayment transactions), inland freight invoices (if applicable).
• Scanned invoices are emailed to [email protected]

Accuracy of the Declared Value

• Customs valuation depends on the importer's declared value, supported by documentary evidence.
• Customs has the right to verify the accuracy of the declaration.
• Importers may be requested to provide further explanation if there are uncertainties about the accuracy of the declared value.

Supporting Documents

• Detailed examples of supporting documents such as proforma, purchase order, and bank documents are shown

Warranty: Supporting Documents

• Warranty documents/agreement, proof of initial and export importation, and warranty invoices.

Thank You/Contact Information/Visit Us

• Contact information and website for the Belize Customs and Excise Department are provided.

Test your knowledge on customs valuation and its importance in international trade. This quiz covers key concepts such as the WTO Agreement on Article VII, transaction value, and conditions affecting customs value. Challenge yourself to understand the intricacies of customs regulations.