One of the main challenges that arises in the customs sector when processing merchandise resulting from an import is determining the customs value or the value of the transaction.
The proper application of this evaluation procedure allows promoting both the fluidity of trade, as well as the transparency of operations and the economic growth of the country.
Who is responsible for evaluating or determining the value of a merchandise?
The authority in charge of determining this is basically the Technical Committee for Customs Valuation of each country, which is made based on a number of regulations and procedures, the customs value of each merchandise.
The methodology to establish said customs value for imported merchandise subject to tax rates is established in the Agreement Relating to the Application of Article VII of the General Agreement on Tariffs and Trade of 1994.
Every country member of the
have an obligation to implement the Agreement and apply this methodology. Those who are not members also choose to adopt it making it applicable to most international trade.
The same is established according to the sum of three fundamental elements:
1- The value of the merchandise
2- Amount of insurance.
3- The cost of freight.
For what purpose is this measure applied?
Regarding international trade, guidelines or mechanisms have been developed to promote the principle of free competition using international standards of cooperation between companies and tax authorities that allows establishing the profit margins of most companies worldwide.
The customs value of imported goods is used for the following reasons:
• As a basis to determine the customs tax obligation for imported goods when ad valorem taxes apply.
• The classification of customs duties and the preferential origin are other key elements necessary to establish the tax obligation.
• Valuation, classification and origin are also vital for international trade statistics.
Currently, the World Customs Organization is working together with the Organization for Economic Co-operation and Development and the World Bank Group to encourage Customs and tax administrations to establish bilateral lines of communication in order to exchange knowledge, practices and data, when possible, which would help to ensure that each authority has the widest possible vision of a business, its compliance record so they can make informed decisions on the correct tax liability.
Establishing the value of imported merchandise is a starting point of what the final price of the product will be to the consumer from which the profit margins of the company that performs said import operation and consequently its tax responsibilities will derived; that is the reason why it is important that governments and companies are able to adhere to the regulatory frameworks established in this matter.