World Customs Organization CUSTOMS VALUATION Tariff and Trade

World Customs Organization CUSTOMS VALUATION Tariff and Trade Affairs Directorate Knowledge Academy 2 – 3 July 2014

WHY CUSTOMS VALUATION? Taxable base for Customs duty revenue Compiling trade statistics Monitoring quantitative restrictions Administering preferential systems Collecting internal taxes on imports

WHY CUSTOMS VALUATION ? SPECIFIC DUTY Calculated on weight volume quantity Customs must weigh measure count Calculation is fixed rigid l AD VALOREM DUTY Calculated on value of the goods l Customs must appraise the value l Calculation varies with price, quality etc.

VALUATION CUSTOMS V/S COMMERCIAL VALUATION the process of thought which appreciates one thing in terms of the other CUSTOMS VALUATION: Methodology need for standard that must be one which can be applied equitably to all transactions.

DEFINITION OF VALUE Key element of any Customs valuation standard Notional vs Positive

EVOLUTION OF VALUATION SYSTEMS DIFFERENT AND UNSTABLE VALUATION SYSTEMS LEAGUE OF NATIONS 1950/1953 BDV 1980 GATT VALUATION AGREEMENT GATT 1947 - Article VII 1995 WTO VALUATION AGREEMENT 1947 EUROPEAN Customs UNION STUDY GROUP

WTO AGREEMENT ON CUSTOMS VALUATION PRINCIPLES OF VALUATION Customs valuation should provide greater uniformity, certainty, fairness and neutrality thus preclude use of arbitrary or fictitious Custom values Customs value should be based on, to the greatest extent possible, the transaction value. Customs value should be based on simple and equitable criteria consistent with commercial practices Valuation procedures should be of general application without distinction between sources of supply Valuation procedures should NOT be used to combat dumping

ECONOMIC RATIONAL OF THE AGREEMENT The effect of tariff concessions must not be derogated by non-tariff barriers, e. g. an arbitrary Customs valuation regime An arbitrary valuation system has the same trade restrictive effect as an increase in the tariff

WCO’S ROLE IN THE IMPLEMENTATION OF THE VALUATION AGREEMENT

MEMBERS’ CONCERNS Members’ concerns with regard to the consequences of implementing the Agreement relate to : • loss of fiscal revenue; • commercial fraud (under-valuation, double invoicing…); • price used between related persons in a commercial transaction, etc.

WCO’s ROLE • Service the Technical Committee on Customs Valuation (TCCV) • Provide technical assistance • Provide capacity building to Members 11

TECHNICAL COMMITTEE ON CUSTOMS VALUATION (TCCV) The function of this Committee is to ensure, at the technical level, uniformity in the interpretation and application of the Agreement. The TCCV meets twice a year and examines, inter alia, technical problems arising in the day-to-day administration of Members’ Customs valuation systems. 12

TECHNICAL COMMITTEE INSTRUMENTS COMMENTARIES (25) EXPLANATORY NOTES (6) STUDIES (2) ADVISORY OPINIONS (40) Total: 90 CASE STUDIES (17) 13

TECHNICAL ASSISTANCE PROVIDED BY THE WCO In the framework of the objectives identified in the WCO Strategic Plan, technical assistance comprises of : • organizing training courses, workshops and seminars at the national and regional levels; • formulating technical advices at the request of Members; and • developing practical tools. 14

WCO’s ROLE The WCO and the TCCV have Developed the Revenue Package Developed Guidelines on Post-Clearance Audit Been reviewing the Customs Valuation Control Handbook Partnered with other international Organizations ( WTO, OECD, ICC, etc) 15

ON GOING ISSUES Transfer pricing Royalties and licence fees Global Value Chain Payment for unlocking a function after importation

CONCLUSION The WCO will continue to : Provide the required technical assistance for Capacity Building to those Members who need it Encourage Members to submit to the TCCV and the WCO Secretariat practical valuation issues; Organize events on valuation issues involving interested Members and relevant international organizations as well as the private sector 17

Thank you