Customs & Excise Department Valuation Presentation PDF

Customs & Excise Department Valuation Presented by: Mr. Lorin Frazer O.I.C. Valuation Objectives By the end of this session, participants will be able to:​ ü Understand the importance of customs valuation​ ü Explain the background of Customs Va...

Customs & Excise Department Valuation Presented by: Mr. Lorin Frazer O.I.C. Valuation Objectives By the end of this session, participants will be able to:​ ü Understand the importance of customs valuation​ ü Explain the background of Customs Valuation​ ü Identify and explain the 6 methods of customs valuation in sequential order​ ü Identify adjustments to the transaction value​ ü Identify exclusions from the transaction value​ ü Understand the vehicle valuation process​ What is Customs Valuation? Procedure by which a monetary value is determined for imported goods Why is Customs Valuation Important? Most tariffs are ad valorem, so customs value affects the amount of duties owed Even if no duties are owed, other taxes and fees are based on value (e.g., Environmental Tax, GST) In part, eligibility for preferential trade programs  History of Customs Valuation In 1947 several European countries met to address the valuation of goods In the 1950’s customs duties were assessed by many countries according to the Brussels definition of value (BDV). How were values determined under this method?  A normal market price, defined as ‘the price that a commodity would fetch in an open market between the buyer and seller independent of each other,’ according to which the duty was assessed.  History of Customs Valuation The Tokyo Round valuation code or the agreement on the implementation of Article V11 of the GATT was concluded in 1979. This established the system of customs valuation based on the price actually paid or payable for the imported goods. The ‘transaction value’ was intended to provide a fair, uniform and neutral system for the valuation of goods. This was different than the notional value used in the Brussels Definition of Value History of Customs Valuation The Tokyo Round code was replaced by the WTO agreement on implementation of article V11 of the GATT 1994 WTO agreement applies to the valuation of imported goods for the purposes of levying ad valorem duties on such commodities. Evolution of Customs Valuation Systems Legal Framework The WTO Agreement on the Implementation of Article V11 of the GATT 1994 is the basis of our National Legislation Chapter 48 sec 5 Third Schedule of the Customs and Excise Act Revised Edition 2020 Six Methods of Valuation 1. transaction value - Article l 2. transaction value of identical goods - Article ll 3. transaction value of similar goods - Article lll 4. deductive method - Article V 5. computed method Article - Vl 6. fall-back method - Article Vll Transaction Value – Article I The customs value of imported goods shall be the transaction value, that is, the price actually paid or payable for the goods when sold for exportation to the country of importation Includes all payments made as a condition of sale of the imported goods by the buyer for the benefit of the seller Plus adjustments for certain elements listed in Article 8 Transaction Value – Article I Transaction value requires:  A Bonda Fide sale- transfer of title for consideration and A sale for exportation to the country of importation Price Actually Paid or Payable (PAPP) Total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods Payment may be made directly or indirectly Need not take form of transfer of money. May include letters of credit or negotiable instruments Note to Article I Price Actually Paid or Payable (PAPP) "Payment may be made directly or indirectly" Buyer agrees to cancel seller’s debt in exchange for the goods Buyer makes payments to a third party to satisfy the seller’s debt  PAPP "when sold for export to the country of importation" Where transactions do not involve the payment of a price, they cannot be regarded as sales under the Agreement o Gifts, samples, promotional items oGoods imported on consignment oGoods imported by intermediaries, who do not purchase the goods but sells them after oGoods imported under hire, lease, loan TCCV Advisory Opinion 1.1 Transaction Value – Article I The customs value is the transaction value if all the following conditions are fulfilled:  There should be evidence of sale – contracts, invoices, purchase orders, etc.  No restriction on the disposition or use of the goods  The sale or price is not subject to some condition or consideration for which a value cannot be determined  No proceeds from the resale of the goods must accrue to the seller  The buyer and the seller are not related What is the transaction value? Sale of toys​ Toys -- Price $2200.00 Debt-- $350.00 Price paid--- $1850.00 Transaction value-- $ Exclusions from "Price" If distinguished from price, the customs value shall not include the following: Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation... ; Cost of transportation after importation; Duties and taxes of the country of importation. Dividends and payments that do not relate to the imported goods Note to Article 1 What is the transaction value? $1000.00 USD for radiators​ $120.00 USD for transport by truck from Tampa to Port Everglades FL​ $300.00 USD for sea transport to Belize city​ $100.00 USD for transport by truck to San Ignacio​ What is the customs value ? Adjustments – Article VIII In determining the customs value, added to the price actually paid or payable are:  commissions and brokerage, except buying commissions q the cost of containers which are treated as being one for customs purposes with the goods in question  the cost of packing whether for labor or materials Adjustments – Article VIII q the value of goods and services supplied by the buyer free of charge or at reduced cost for use in the production of the imported goods: o material, components, parts and similar items o tools, dies, moulds and similar items o materials consumed in the production of the imported goods o Engineering, development, artwork, design work undertaken elsewhere than in the country of importation Adjustments – Article VIII  royalties and license fees related to the goods being valued that the buyer must pay  the value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller Adjustments – Article VIII Mr. Klang is a selling agent for the Alta Company which manufactures luxury cars in Germany. He presents himself to Customs with a consignment of 30 cars manufactured in Germany and imported into Belize. Which elements to be included in the customs value?  Mr. Klang's selling commission  Insurance costs for transporting the cars  Paintwork done on the cars, patented by a French company  Mr. Klang's travel expenses  Engineering work done by a Belizean company Adjustments – Article VIII The adjustments to the No additions shall be made price actually paid or to the price actually paid or payable shall be made only payable in determining the on the basis of objective customs value except as and quantifiable data provided in this article. When is the Transaction Value Not Acceptable? v The price has been distorted because of certain conditions v The agreement lays down five other methods of customs valuation to be applied v They are to be applied in sequential order If Reasonable Doubt Still Exists If the administration cannot determine according to the transaction value method. Before any decision is made, customs must communicate its reasoning to the importer In cases where the transaction value is not acceptable, the agreement / Customs regulations lays down five other methods of customs valuation to be applied. They are to be applied in the prescribed hierarchical order. Transaction Value of Identical Goods- Article II Transaction value is calculated in the manner on identical goods if the goods are:  the same in all respects including physical characteristics, quality, and reputation  produced in the same country as the goods being valued  produced by the producer of the goods being valued  goods must be sold for export to the same country of importation  exported at or about the same time as the goods being valued Transaction Value of Identical Goods- Article II EXCEPTIONS identical goods produced by a different producer in the same country of exportation may be taken into account minor differences is appearance would not preclude goods which otherwise conform to the definitions from being regarded as identical Is an adjustment necessary? An importer (Kaptoys) purchases 1,700 units of a children's toy at a unit price of $4. Kaptoys is a wholesaler and is related to the seller, Toy Factory. You have evidence of a transaction value of an identical toy previously declared at a unit price of $4.75, sold two weeks previously at the same commercial level, but in a quantity of 2,500 units. The identical product is sold from a price list which shows a price of $5 for purchases under 2,000 units and $4.75 for purchases of over 2,000 units. Transaction Value of Similar Goods- Article III The transaction value is calculated in the same manner on similar goods if: v goods closely resemble the goods being valued in terms of component materials and characteristics v goods which can perform the same functions and are commercially interchangeable with the goods being valued v sold to the same country of importation as the goods being valued Article IV At the request of the importer, the order of application of Articles 5 and 6 shall be reversed Deductive Method – Article V v deduction of value from the price of the greatest aggregate quantity sold v determination of the aggregate quantity sold v it will be determined based on the unit price at which the imported goods are sold to an unrelated buyer in the greatest quantity in the country of importation v if no sale took place at or about the time of importation, it is permitted to use up to 90 days after importation of the goods being valued. Deductive Method – Article V Determination of the Greatest Aggregate Quantity Sold v Is the price at which the greatest number of units is sold to unrelated persons at the first commercial level after importation at which such sales take place v To determine the greatest aggregate quantity all sales at a given price are taken together and the sum of all the units of goods sold at the price is compared to the sum of all the units of goods at any other price. vThe greatest number of units sold at one price represents the greatest aggregate quantity. Computed Method – Article VI v The computed value method is the most difficult and rarely used method v determines the customs value based on the cost of production of the goods being valued v the profits v expenses ( usually reflected in the sales from the country of exportation to the country of importation) Computed Method – Article VI v The cost or value of materials and fabrication or other processing employed in producing the imported goods. v Materials include raw materials, such as lumber, steel, lead, clay textiles v Fabrication would include: the cost of labor, any cost of assembly, and indirect cost Fallback Method – Article VII  Only used if all previous methods in hierarchy cannot be applied  Customs value will be based on a value derived from one of the previous methods, reasonably adjusted as necessary Valuation of New Motor Vehicles A proper invoice detailing the seller and full address, consignee and full address, price paid or payable, terms of delivery and payment, and the full description of the vehicle is to be furnished. The description should include the following: o The Make o The Model o The Year o The V.I.N. o Engine Number (optional) o Color o Number of Doors o Seating capacity o GVWR (optional) o Engine size Valuation of Used Motor Vehicles Transaction Value 1.The importer presents the Bill of Sale, Title, and Bill of Lading to the Officer in Charge of the Valuation Unit. 2.The officer verifies the authenticity of the Bill of Sale. Once the Bill of Sale has been verified the transaction value will be approved (stamped and signed) by OIC Valuation Unit. 4.If the vehicle has been modified, reconditioned, or refurbished prior to importation, the costs of the additional work form part of the transaction value. 5.The duties and taxes will be paid based on the transaction value plus the freight charges as stated on the Bill of Lading and any other cost incurred to import the vehicle. Valuation of Used Motor Vehicles v Where the transaction value cannot be established under the provisions of Article 1, all subsequent principles are to be exhausted to establish the customs value. For used motor vehicles, the applicable valuation principle would be the Fall- Back Method. v J. D. Power Used Car Guide is used as the basis in establishing the customs value (Departmental policy). Residual Method Required: o Title o Bill of Lading o Mileage o GVWR o Engine Size Valuation of Motor Vehicles Post Importation v Motor vehicles entered under conditional exemptions i.e., customs tariff and trade classification (List of Conditional Duty Exemptions), Ministry of Finance, Qualified Retired Incentive Program and Agreements between the Government of Belize and any Organization or Statutory Bodies​ v A VEHICLE APPRAISAL FORM, labeled Post Importation, is to be completed. In this form the registration number of the SINGLE ADMINSTRATIVE DOCUMENT (preceding document) along with the date on which the motor vehicle was first entered. Valuation of Motor Vehicles Post Importation Required:​ o Preceding Entry o Registration o Mileage​ Invoice Requisite The Comptroller may refuse to permit the entering of any goods until the information required by Regulation 3 has been furnished. The invoice referred to in Section 5 (3) of the Act shall contain: Country of Origin of the Goods Terms and Conditions of Delivery and Payment Currency of Sale Marks and Numbers Description of Goods Gross Weight kg Cube m3 Invoice Requisite Number and kind of packages Specification of commodities (in code AND/OR in full) Net Weight kg Seller (name, full address, country) Consignee (name, full address, country) Port of Loading Country of final destination Ship/air etc. Other transport information Invoice Requisite Invoice date and no. Quantity Unit price Amount Packing, freight, other costs (SPECIFIC), insurance Total invoice amount Certification, signature Submitting Invoices for Approval Pre-clearance verification Documents to be submitted:  Invoice  Bill of lading/ airway bill  Proof of payment for prepayment transactions  Inland freight invoice (where applicable)  Proforma invoice v Invoices should be properly scanned and emailed to: [email protected] Submitting Invoices for Approval Accuracy of the Declared Value v Customs valuation is based on the transaction value method based on documentary input from the importer v Customs administrations have the right to satisfy themselves as to the accuracy of any declaration v Customs may ask the importer to provide further explanation that the declared value represents the total amount actually paid or payable Supporting Documents Supporting Documents  Warranty: Supporting Documents Warranty Agreement or Supplier’s Warranty Policy detailing warranty coverage i.e. repairs and replacement, parts only, servicing, labour only … Proof of initial importation (Import Entry) Proof of Exportation (Export Entry and Shipping Documents) Warranty Invoice  Thank you Any questions? Email us: Visit us: [email protected] www.customs.gov.bz