Customs value in international trade and its importance

Determining the value of a merchandise is considered one of the main points of great importance in trading. Therefore, the Customs value is required on a mandatory basis in order to calculate the duty payable on the imported product within the international conversion rules.

What is Customs Valuation?

According to the World Trade Organization it is defined as the customs procedure applied to determine the customs value of imported goods.

Background on Customs Value

Since 1950, many countries have performed their calculations based on the value established by Brussels by a product value method in a free market settled by both buyer-seller parties. Nonetheless, this practice led to deviations in the declarations that affected the customs offices.

Thus, a positive valuation system was established named ¨Code of Valuation of the Tokyo Round¨ based on the real price paid for the merchandise. This was later replaced by the current WTO agreement that basically is essentially the same as the Code of Tokyo and applies only to the valuation of goods for the purpose of applying ad valorem duties on imports.

This WTO Agreement on Customs Valuation establishes a system that is reliable because it adjusts the current realities of foreign trade and prohibit the use of arbitrary or fictitious values.

“Valuation at customs must be based, except in certain cases, on the actual price of the goods being valued, which is generally indicated on the invoice. This price, plus the adjustments corresponding to certain elements listed in Article 8, is equivalent to the transaction value, which constitutes the first and main method referred to in the Agreement¨.

Methods applied to determine the Customs Value according to the WHO

• Transaction value

• Transaction value of identical goods

• Transaction value of similar goods

• Deductive method

• Reconstructed value method

• Last resort method

Institutions in charge of the Application of the Customs Value Agreement

• Committee on Customs Valuation

• Technical Committee on Customs Valuation

Importance of Customs Value

All the regulations that establishes the Customs Value of a merchandise have the main objective of maintaining an equitable, uniform and neutral valuation system that allows the customs authorities of each country to obtain the real costs of each product and in turn establish tariffs and payments and set the export taxes or import activity.