Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007
Notification No. 94/2007 - Customs (N.T.)
1. Short title, commencement
and application.-
(1)These rules may be called the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007.
(2) They shall come into force on the 10th day of
October, 2007.
(3) They shall apply to imported goods.
2. Definitions.- (1) In
these rules, unless the context otherwise requires, -
(a) "computed
value" means the value of imported goods determined in
accordance with rule 8.
(b) "deductive value" means the value
determined in accordance with rule 7.
(c) "goods of the same class or kind", means
imported goods that are within a group or range
of imported goods produced by a particular industry or industrial
sector and includes identical goods or similar goods;
(d) "identical goods" means imported
goods -
(i) which
are same in all respects, including physical characteristics,
quality and reputation as the goods being valued except for minor
differences in appearance that do not affect the value of the
goods;
(ii) produced in the country in which the goods being valued were
produced; and
(iii) produced by the same
person who produced the goods, or where no such goods are
available, goods produced by a different person,
but shall not include imported goods where engineering,
development work, art work, design work, plan or sketch
undertaken in India were completed directly or indirectly by the
buyer on these imported goods free of charge or at a reduced cost
for use in connection with the production and sale for export of
these imported goods;
(e) "produced" includes grown,
manufactured and mined
(f) "similar goods" means imported goods -
(i) which
although not alike in all respects, have like characteristics and
like component materials which enable them to perform the same
functions and to be commercially interchangeable with the goods
being valued having regard to the quality, reputation and the
existence of trade mark;
(ii)
produced in the country in which the goods being valued were
produced; and
(iii) produced by the same person who produced the goods being
valued, or where no such goods are available, goods produced by a
different person,
but shall not include imported goods where engineering,
development work, art work, design work, plan or sketch
undertaken in India were completed directly or indirectly by the
buyer on these imported goods free of charge or at a reduced cost
for use in connection with the production and sale for export of
these imported goods;
(g) "transaction value" means the value referred
to in sub-section (1) of section 14 of the Customs Act, 1962;
(2)
For the purpose of these rules, persons shall be deemed to be
"related" only if -
(i) they are officers or directors of one
another"s businesses;
(ii) they are legally recognised partners in
business;
(iii) they are employer and employee;
(iv) any person
directly or indirectly owns, controls or holds five per cent or
more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls
the other;
(vi)
both of them are directly or indirectly controlled by a third
person;
(vii) together they directly
or indirectly control a third person; or
(viii) they are members of
the same family.
Explanation
I. - The term "person" also includes legal persons.
Explanation II. - Persons who are associated in the
business of one another in that one is the sole agent or sole
distributor or sole concessionaire, howsoever described, of the
other shall be deemed to be related for the purpose of these
rules, if they fall within the criteria of this sub-rule.
3. Determination
of the method of valuation.- (1) Subject to rule 12, the value
of imported goods shall be the transaction value adjusted in
accordance with provisions of rule 10;
(2)
Value of imported goods under sub-rule (1) shall be accepted:
Provided that -
(a) there are no
restrictions as to the disposition or use of the goods by the
buyer other than restrictions which -
(i) are imposed
or required by law or by the public authorities in India; or
(ii)
limit the geographical area in which the goods may be resold; or
(iii) do not substantially affect the value of
the goods;
(b) the sale or price
is not subject to some condition or
consideration for which a value cannot be determined in respect
of the goods being valued;
(c) no part of
the proceeds of any subsequent resale, disposal or use of the
goods by the buyer will accrue directly or indirectly to the
seller, unless an appropriate adjustment can be made in
accordance with the provisions of rule 10 of these rules; and
(d) the buyer
and seller are not related, or where the buyer and seller are
related, that transaction value is acceptable for customs
purposes under the provisions of sub-rule (3) below.
(3) (a) Where the
buyer and seller are related, the transaction value shall be
accepted provided that the examination of the circumstances of
the sale of the imported goods indicate that the relationship did
not influence the price.
(b) In a sale between
related persons, the transaction value shall be accepted,
whenever the importer demonstrates that the declared value of the
goods being valued, closely approximates to one of the following
values ascertained at or about the same time.
(i) the
transaction value of identical goods, or of similar goods, in
sales to unrelated buyers in India;
(ii) the
deductive value for identical goods or similar goods;
(iii) the
computed value for identical goods or similar goods:
Provided that in
applying the values used for
comparison,
due account shall be taken of demonstrated difference in
commercial levels, quantity levels, adjustments in accordance
with the provisions of rule 10 and cost incurred by the seller in
sales in which he and the buyer are not related;
(c)
substitute values shall not be established under the provisions
of clause (b) of this sub-rule.
(4) if the value cannot be determined under the
provisions of sub-rule (1), the value shall be determined by
proceeding sequentially through rule 4 to 9.
4. Transaction
value of identical goods. - (1)(a)Subject to the provisions of
rule 3, the value of imported goods shall be the transaction
value of identical goods sold for export to India and imported at
or about the same time as the goods being valued;
Provided that such transaction
value shall not be the value of the goods provisionally assessed
under section 18 of the Customs Act, 1962.
(b) In applying this
rule, the transaction value of identical goods in a sale at the
same commercial level and in substantially the same quantity as
the goods being valued shall be used to determine the value of
imported goods.
(c) Where no sale
referred to in clause (b) of sub-rule (1), is found, the
transaction value of identical goods sold at a different
commercial level or in different quantities or both, adjusted to
take account of the difference attributable to commercial level
or to the quantity or both, shall be used, provided that such
adjustments shall be made on the basis of demonstrated evidence
which clearly establishes the reasonableness and accuracy of the
adjustments, whether such adjustment leads to an increase or
decrease in the value.
(2) Where the costs and charges referred to in
sub-rule (2) of rule 10 of these rules are included in the
transaction value of identical goods, an adjustment shall be
made, if there are significant differences in such costs and
charges between the goods being valued and the identical goods in
question arising from differences in distances and means of
transport.
(3) In applying
this rule, if more than one transaction value of identical goods
is found, the lowest such value shall be used to determine the
value of imported goods.
5. Transaction
value of similar goods.-(1)Subject to the provisions of rule
3, the value of imported goods shall be the transaction value of
similar goods sold for export to India and imported at or about
the same time as the goods being valued:
Provided that such transaction value
shall not be the value of the goods provisionally assessed under
section 18 of the Customs Act, 1962.
(2) The provisions of clauses (b) and (c) of sub-rule
(1), sub-rule (2) and sub-rule (3), of rule 4 shall, mutatis
mutandis, also apply in respect of similar goods.
6. Determination
of value where value can not be determined
under rules 3, 4 and 5.- If the value of imported goods cannot
be determined under the provisions of rules 3, 4 and 5, the value
shall be determined under the provisions of rule 7 or, when the
value cannot be determined under that rule, under rule 8.
Provided that at the request of
the importer, and with the approval of the proper officer, the
order of application of rules 7 and 8 shall be reversed.
7. Deductive value.-(1)
Subject to the provisions of rule 3, if the goods being valued or
identical or similar imported goods are sold in India, in the
condition as imported at or about the time at which the
declaration for determination of value is presented, the value of
imported goods shall be based on the unit price at which the
imported goods or identical or similar imported goods are sold in
the greatest aggregate quantity to persons who are not related to
the sellers in India, subject to the following deductions : -
(i) either the commission usually
paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of
imported goods of the same class or kind;
(ii) the
usual costs of transport and insurance and associated costs
incurred within India;
(iii) the customs
duties and other taxes payable in India by reason of importation
or sale of the goods.
(2)
If neither the imported goods nor identical nor similar imported
goods are sold at or about the same time of importation of the
goods being valued, the value of imported goods shall, subject
otherwise to the provisions of sub-rule (1), be based on the unit
price at which the imported goods or identical or similar
imported goods are sold in India, at the earliest date after
importation but before the expiry of ninety days after such
importation.
(3) (a) If neither the
imported goods nor identical nor similar imported goods are sold
in India in the condition as imported, then, the value shall be
based on the unit price at which the imported goods, after
further processing, are sold in the greatest aggregate quantity
to persons who are not related to the seller in India.
(b) In such determination, due allowance shall be made for
the value added by processing and the deductions provided for in
items (i) to (iii) of sub-rule (1).
8. Computed value.-
Subject to the provisions of rule 3, the value of imported goods
shall be based on a computed value, which shall consist of the
sum of:-
(a) the cost or value
of materials and fabrication or other processing employed in
producing the imported goods;
(b) an amount for
profit and general expenses equal to that usually reflected in
sales of goods of the same class or kind as the goods being
valued which are made by producers in the country of exportation
for export to India;
(c) the cost or value of all other expenses under sub-rule
(2) of rule 10.
9. Residual method.-(1) Subject
to the provisions of rule 3, where the value of imported goods
cannot be determined under the provisions of any of the preceding
rules, the value shall be determined using reasonable means
consistent with the principles and general provisions of these
rules and on the basis of data
available in India;
Provided that the
value so determined shall not exceed the price at which such or
like goods are ordinarily sold or offered for sale for delivery
at the time and place of importation in the course of
international trade, when the seller or buyer has no interest in
the business of other and price is the sole consideration for the
sale or offer for sale.
(2) No value shall be determined under the
provisions of" this rule on the basis of -
(i) the selling price in India of the
goods produced in India;
(ii)
a system which provides for the acceptance for customs purposes
of the highest of the two alternative values;
(iii) the price of the goods on the domestic
market of the country of exportation;
(iv) the
cost of production other than computed values which have been
determined for identical or similar goods in accordance with the
provisions of rule 8;
(v)
the price of the goods for the export to a country other than
India;
(vi) minimum customs
values; or
(vii) arbitrary or
fictitious values.
10.Cost and services. -(1)In determining the
transaction value, there shall be added to the price actually
paid or payable for the imported goods, -
(a) the following to the
extent they are incurred by the buyer but are not included in the
price actually paid or payable for the imported goods, namely:-
(i) commissions and
brokerage, except buying commissions;
(ii) the
cost of containers which are treated as being one for customs
purposes with the goods in question;
(iii) the cost of packing
whether for labour or materials;
(b) The value, apportioned
as appropriate, of the following goods and services where
supplied directly or indirectly by the buyer free of charge or at
reduced cost for use in connection with the production and sale
for export of imported goods, to the extent that such value has
not been included in the price actually paid or payable, namely:-
(i) materials,
components, parts and similar items incorporated in the imported
goods;
(ii)
tools, dies, moulds and similar items used in the production of
the Imported goods;
(iii) materials consumed in
the production of the imported goods;
(iv) engineering,
development, art work, design work, and plans and sketches
undertaken elsewhere than in India and necessary for the
production of the imported goods;
(c) royalties and
licence fees related to the imported goods that the buyer is
required to pay, directly or indirectly, as a condition of the
sale of the goods being valued, to the extent that such royalties
and fees are not included in the price actually paid or payable;
(d) 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;
(e) all other payments actually made or to be
made as a condition of sale of the imported goods, by the buyer
to the seller, or by the buyer to a third party to satisfy an
obligation of the seller to the extent that such payments are not
included in the price actually paid or payable.
Explanation.- Where the royalty, licence fee or any other
payment for a process, whether patented or otherwise, is
includible referred to in clauses (c) and (e), such charges shall
be added to the price actually paid or payable for the imported
goods, notwithstanding the fact that such goods may be subjected
to the said process after importation of such goods.
(2) For
the purposes of sub-section (1) of section 14 of the Customs Act,
1962 (52 of 1962) and these rules, the value of the imported
goods shall be the value of such goods, for delivery at the time
and place of importation and shall include -
(a) the cost of transport of
the imported goods to the place of importation;
(b) loading, unloading
and handling charges associated with the delivery of the imported
goods at the place of importation; and
(c) the cost of insurance :
Provided that -
(i) where the cost of
transport referred to in clause (a) is not ascertainable, such
cost shall be twenty per cent of the free on board value of the
goods;
(ii) the charges
referred to in clause (b) shall be one per cent of the free on
board value of the goods plus the cost of transport referred to
in clause (a) plus the cost of insurance referred to in clause
(c);
(iii) where the cost
referred to in clause (c) is not ascertainable, such cost shall
be 1.125% of free on board value of the goods;
Provided further that in the case of
goods imported by air, where the cost referred to in clause (a)
is ascertainable, such cost shall not exceed twenty per cent of
free on board value of the goods:
Provided also that where the free
on board value of the goods is not ascertainable, the costs
referred to in clause (a) shall be twenty per cent of the free on
board value of the goods plus cost of insurance for clause (i)
above and the cost referred to in clause (c) shall be 1.125% of
the free on board value of the goods plus cost of transport for
clause (iii).
Provided also that in case of
goods imported by sea stuffed in a container for clearance at an
Inland Container Depot or Container Freight Station, the cost of
freight incurred in the movement of container from the port of
entry to the Inland Container Depot or Container Freight Station
shall not be included in the cost of transport referred to in
clause (a).
Explanation.- The cost of transport of the imported goods
referred to in clause (a) includes the ship demurrage
charges on charted vessels, lighterage or barge charges.
(3) Additions to the price actually paid or
payable shall be made under this rule on the basis of objective
and quantifiable data.
(4) No addition
shall be made to the price actually paid or payable in
determining the value of the imported goods except as provided
for in this rule.
11. Declaration
by the importer. - (1)The importer or his agent shall furnish -
(a) a
declaration disclosing full and accurate details relating to the
value of imported goods; and
(b) any other
statement, information or document including an invoice of the
manufacturer or producer of the imported goods where the goods
are imported from or through a person other than the manufacturer
or producer, as considered necessary by the proper officer for
determination of the value of imported goods under these rules.
(2) Nothing
contained in these rules shall be construed as restricting or
calling into question the right of the proper officer of customs
to satisfy himself as to the truth or accuracy of any statement,
information, document or declaration presented for valuation
purposes.
(3)
The provisions of the Customs Act, 1962 (52 of 1962) relating to
confiscation, penalty and prosecution shall apply to cases where
wrong declaration, information, statement or documents are
furnished under these rules.
12. Rejection of declared value. - (1)
When the proper officer has reason to doubt the truth or accuracy
of the value declared in relation to any imported goods, he may
ask the importer of such goods to furnish further information
including documents or other evidence and if, after receiving
such further information, or in the absence of a response of such
importer, the proper officer still has reasonable doubt about the
truth or accuracy of the value so declared, it shall be deemed
that the transaction value of such imported goods cannot be
determined under the provisions of sub-rule (1) of rule 3.
(2) At the request of an importer, the proper
officer, shall intimate the importer in writing the grounds for
doubting the truth or accuracy of the value declared in relation
to goods imported by such importer and provide a reasonable
opportunity of being heard, before taking a final decision under
sub-rule (1).
Explanation.-(1) For the removal of doubts, it is hereby
declared that:-
(i) This rule by itself does not provide a method for
determination of value, it provides a mechanism and procedure for
rejection of declared value in cases where there is reasonable
doubt that the declared value does not represent the transaction
value; where the declared value is rejected, the value shall be
determined by proceeding sequentially in accordance with rules 4
to 9.
(ii) The declared value shall be accepted where the proper
officer is satisfied about the truth and accuracy of the declared
value after the said enquiry in consultation with the importers.
(iii) The proper officer shall have the powers to raise doubts on
the truth or accuracy of the declared value based on certain
reasons which may include -
(a) the significantly higher value at which
identical or similar goods imported at or about the same time in
comparable quantities in a comparable commercial transaction were
assessed;
(b) the sale involves an abnormal discount or
abnormal reduction from the ordinary competitive price;
(c) the sale involves special discounts
limited to exclusive agents;
(d) the misdeclaration of goods in
parameters such as description, quality, quantity, country of
origin, year of manufacture or production;
(e) the non declaration of
parameters such as brand, grade, specifications that have
relevance to value;
(f) the fraudulent or manipulated
documents.
13. Interpretative
notes.- The interpretative notes specified in the Schedule to
these rules shall apply for the interpretation of these rules.
The Schedule
(See rule 13)
Interpretative Notes
General Note:
Use of generally accepted accounting principles
1. "Generally accepted accounting
principles" refers to the recognized consensus or
substantial authoritative support within a country at a
particular time as to which economic resources and obligations
shall be recorded as assets and liabilities, which changes in
assets and liabilities should be recorded, how the assets and
liabilities and changes in them should be measured, what
information should be disclosed and how it should be disclosed
and which financial statements should be prepared. These
standards may be broad guidelines of general application as well
as detailed practices and procedures.
Notes to rules
Note to rule 2
In rule 2(2)(v), for the purposes of these rules, one
person shall be deemed to control another when the former is
legally or operationally in a position to exercise restraint or
direction over the latter.
Note to rule 3
Price actually paid or payable
The price actually paid or payable is the total payment
made or to be made by the buyer to or for the benefit of the
seller for the imported goods. The payment need not necessarily
take the form of a transfer of money. Payment may be made by way
of letters of credit or negotiable instruments. Payment
may be made directly or indirectly. An example of an indirect
payment would be the settlement by the buyer, whether in whole or
in part, of a debt owed by the seller.
Activities undertaken by the buyer on his own account,
other than those for which an adjustment is provided in rule 10,
are not considered to be an indirect payment to the seller, even
though they might be regarded as of benefit to the seller. The
costs of such activities shall not, therefore, be added to the
price actually paid or payable in determining the value of
imported goods.
The value of imported goods shall not include the following
charges or costs, provided that they are distinguished from the
price actually paid or payable for the imported goods:
(a) Charges for construction,
erection, assembly, maintenance or technical assistance,
undertaken after importation on imported goods such as industrial
plant, machinery or equipment;
(b) The cost of
transport after importation;
(c) Duties and taxes
in India.
The price actually paid or payable refers to the price for
the imported goods. Thus the flow of dividends or other payments
from the buyer to the seller that do not relate to the imported
goods are not part of the customs value.
Rule 3(2)(a) (iii)
Among restrictions which would not render a price actually
paid or payable unacceptable are restrictions which do not
substantially affect the value of the goods. An example of such
restrictions would be the case where a seller requires a buyer of
automobiles not to sell or exhibit them prior to a fixed date
which represents the beginning of a model year.
Rule 3(2)(b)
If the sale or price is subject to some condition or
consideration for which a value cannot be determined with respect
to the goods being valued, the transaction value shall not be
acceptable for customs purposes. Some examples of this include-
(a) The seller establishes the price of the imported goods on
condition that the buyer will also buy other goods in specified
quantities;
(b) the price of the
imported goods is dependent upon the price or prices at which the
buyer of the imported goods sells other goods to the seller of
the imported goods;
(c) the price is established
on the basis of a form of payment extraneous to the imported
goods, such as where the imported goods are semifinished goods
which have been provided by the seller on condition that he will
receive a specified quantity of the finished goods.
However, conditions or considerations relating to the
production or marketing of the imported goods shall not result in
rejection of the transaction value. For example, the fact that
the buyer furnishes the seller with engineering and plans
undertaken in India shall not result in rejection of the
transaction value for the purposes of rule 3. Likewise, if the
buyer undertakes on his own account, even though by agreement
with the seller, activities relating to the marketing of the
imported goods, the value of these activities is not part of the
value of imported goods nor shall such activities result in
rejection of the transaction value.
Rule 3(3)
1. Rule 3(3)(a)
and rule 3(3)(b) provide different means of establishing the
acceptability of a transaction value.
2. Rule 3(3)(a)
provides that where the buyer and the seller are related, the
circumstances surrounding the sale shall be examined and the
transaction value shall be accepted as the value of imported
goods provided that the relationship did not influence the price.
It is not intended that there should be an examination of the
circumstances in all cases where the buyer and the seller are
related. Such examination will only be required where there are
doubts about the acceptability of the price. Where the proper
officer of customs has no doubts about the acceptability of the
price, it should be accepted without requesting further
information from the importer. For example, the proper officer of
customs may have previously examined the relationship, or he may
already have detailed information concerning the buyer and the
seller, and may already be satisfied from such examination or
information that the relationship did not influence the price.
3. Where the
proper officer of customs is unable to accept the transaction
value without further inquiry, he should give the importer an
opportunity to supply such further detailed information as may be
necessary to enable him to examine the circumstances surrounding
the sale. In this context, the proper officer of customs should
be prepared to examine relevant aspects of the transaction,
including the way in which the buyer and seller organize their
commercial relations and the way in which the price in question
was arrived at, in order to determine whether the relationship
influenced the price. Where it can be shown that the buyer and
seller, although related under the provisions of rule 2(2), buy
from and sell to each other as if they were not related, this
would demonstrate that the price had not been influenced by the
relationship. As an example of this, if the price had been
settled in a manner consistent with the normal pricing practices
of the industry in question or with the way the seller settles
prices for sales to buyers who are not related to him, this would
demonstrate that the price had not been influenced by the
relationship. As a further example, where it is shown that the
price is adequate to ensure recovery of all costs plus a profit
which is representative of the firm"s overall profit realized
over a representative period of time (e.g. on an annual basis) in
sales of goods of the same class or kind, this would demonstrate
that the price had not been influenced.
4. Rule 3(3)(b)
provides an opportunity for the importer to demonstrate that the
transaction value closely approximates to a "test"
value previously accepted by the proper officer of customs and is
therefore acceptable under the provisions of rule 3. Where a test
under rule 3(3)(b) is met, it is not necessary to examine the
question of influence under rule 3(3)(a). If the proper officer
of customs has already sufficient information to be satisfied,
without further detailed inquiries, that one of the tests
provided in rule 3(3)(b) has been met, there is no reason for him
to require the importer to demonstrate that the test can be met.
In rule 3(3)(b) the term "unrelated buyers" means
buyers who are not related to the seller in any particular case.
Rule 3(3)(b)
A number of factors must be taken into consideration in
determining whether one value "closely approximates" to
another value. These factors include the nature of the imported
goods, the nature of the industry itself, the season in which the
goods are imported, and whether the difference in values is
commercially significant. Since these factors may vary from case
to case, it would be impossible to apply a uniform standard such
as a fixed percentage, in each case. For example, a small
difference in value in a case involving one type of goods could
be unacceptable while a large difference in a case involving
another type of goods might be acceptable in determining whether
the transaction value closely approximates to the
"test" values set forth in rule 3(3)(b).
Notes to rule 4
1. In applying
rule 4, the proper officer of customs shall, wherever possible,
use a sale of identical goods at the same commercial level and in
substantially the same quantities as the goods being valued.
Where no such sale is found, a sale of identical goods that takes
place under any one of the following three conditions may be
used:
(a) a sale at the same commercial level but in
different quantities; or
(b) a sale at a
different commercial level but in substantially the same
quantities; or
(c) a sale
at a different commercial level and in different quantities.
2. Having found
a sale under any one of these three conditions adjustments will
then be made, as the case may be, for :
(a) quantity factors only;
(b) commercial level factors only; or
(c) both commercial level and quantity
factors.
3. For the
purposes of rule 4, the transaction value of identical imported
goods means a value, adjusted as provided for in rule 4(l)(b) and
(c) and rule 4(2) which has already been accepted under rule 3.
4. A condition
for adjustment because of different commercial levels or
different quantities is that such adjustment, whether it leads to
an increase or a decrease in the value, be made only on the basis
of demonstrated evidence that clearly establishes the
reasonableness and accuracy of the adjustment, e.g. valid price
lists containing prices referring to different levels or
different quantities. As an example of this, if the imported
goods being valued consist of a shipment of 10 units and the only
identical imported goods for which a transaction value exists
involved a sale of 500 units, and it is recognised that the
seller grants quantity discounts, the required adjustment may be
accomplished by resorting to the seller"s price list and using
that price applicable to a sale of 10 units. This does not
require that a sale had to have been made in quantities of 10 as
long as the price list has been established as being bona fide
through sales at other quantities. In the absence of such an
objective measure, however, the determination of a value under
the provisions of rule 4 is not appropriate.
Note to rule 5
1. In applying
rule 5, the proper officer of customs shall, wherever possible,
use a sale of similar goods at the same commercial level and in
substantially the same quantities as the goods being valued. For
the purpose of rule 5, the transaction value of similar imported
goods means the value of imported goods, adjusted as provided for
in rule 5(2) which has already been accepted under rule 3.
2. All other
provisions contained in note to rule 4 shall mutatis
mutandis also apply in respect of similar goods.
Note to rule 7
1. The term
"unit/price at which goods are sold in the greatest
aggregate quantity" means the price at which the greatest
number of units is sold in sales to persons who are not related
to the persons from whom they buy such goods at the first
commercial level after importation at which such sales take
place.
2. As an example
of this, goods are sold from a price list which grants favourable
unit prices for purchases made in larger quantities.
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Number of sales
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Total quantity sold at each price
|
|
1-10 units
|
100
|
10 sales of 5 units,
5 sales of 3 units
|
65
|
|
11-25 units
|
95
|
5 sales of 11 units
|
55
|
|
Over 25 units
|
90
|
1 sale of 30 units,
1 sale of 50
units
|
80
|
The greatest number of units sold at a price is 80,
therefore, the unit price in the greatest aggregate quantity is
90.
3. As
another example of this, two sales occur. In the first sale 500
units are sold at a price of 95 currency units each. In the
second sale 400 units are sold at a price of 90 currency units
each. in this example, the greatest number of units sold at a
particular price is 500, therefore, the unit price in the
greatest aggregate quantity is 95.
4. A third
example would be the following situation where various quantities
are sold at various prices.
(a) Sales
Sale quantity
Unit price
40
units 100
30
units
90
15
units
100
50
units
95
25
units
105
35
units
90
5
units
100
(b) Totals
Total quantity
Unit price
sold
65
90
50
95
60
100
25
105
In this example, the greatest number of units sold at a
particular price is 65, therefore, the unit price in the greatest
aggregate quantity is 90.
5. Any sale in India, as described in paragraph 1
above to a person who supplies directly or indirectly free of
charge or at reduced cost for use in connection with the
production and sale for export of the imported goods any of the
elements specified in rule10(l)(b), should not be taken into
account in establishing the unit price for the purposes of rule
7.
6. It should be noted that "profit and general
expenses" referred to in rule 7(1) should be taken as a
whole. The figure for the purposes of this deduction should be
determined on the basis of information supplied by or on behalf
of the importer unless his figures are inconsistent with those
obtaining in sales in India, of imported goods of the same class
or kind. Where the importer"s figures are inconsistent with such
figures, the amount for profit and general expenses may be based
upon relevant information other than that supplied by or on
behalf of the importer.
7. The "general expenses" include the
direct and indirect costs of marketing the goods in question.
8. Local taxes payable by reason of the sale of the
goods for which a deduction is not made under the provisions of
rule 7(l)(iii) shall be deducted under the provisions of rule
7(l)(i).
9. In determining either the commissions or the usual
profits and general expenses under the provisions of rule 7(1),
the question whether certain goods are "of the same class or
kind" as other goods must be determined on a case-by-case
basis by reference to the circumstances involved. Sales in India,
of the narrowest group or range of imported goods of the same
class or kind, which includes the goods being valued, for which
the necessary information can be provided, should be examined.
For the purposes of rule 7 goods of the same class or kind"
includes goods imported from the same country as the goods being
valued as well as goods imported from other countries.
10. For the
purposes of rule 7(2) the "earliest date" shall be the
date by which sales of the imported goods or of identical or
similar imported, goods are made in sufficient quantity to
establish the unit price.
11. Where the
method in rule 7(3) is used, deductions made for the value added
by further processing shall be based on objective and
quantifiable data relating to the cost of such work. Accepted
industry formulas, recipes, methods of construction, and other
industry practices would form the basis of the calculations.
12. It is
recognized that the method of valuation provided for in rule 7(3)
would normally not be applicable when, as a result of the further
processing, the imported goods lose their identity. However there
can be instances where, although the identity of the imported
goods is lost, the value added by the processing can be
determined accurately without unreasonable difficulty. On the
other hand, there can also be instances where the imported goods
maintain their identity but form such a minor element in the
goods sold in the country of importation that the use of this
valuation method would be unjustified. In view of the above, each
situation of this type must be considered on a case-by-case
basis.
Note to rule 8
1. As a general rule, value of imported
goods is determined under these rules on the basis of information
readily available in India. In order to determine a computed
value, however, it may be necessary to examine the costs of
producing the goods being valued and other information which has
to be obtained from outside India. Furthermore, in most cases,
the producer of the goods will be outside the jurisdiction of the
proper officer. The use of the computed value method will
generally be limited to those cases where the buyer and seller
are related, and the producer is prepared to supply to the proper
officer the necessary costings and to provide facilities for any
subsequent verification which may be necessary.
2. The "cost or value" referred
to in clause (a) of rule 8 is to be determined on the basis of
information relating to the production of the goods being valued
supplied by or on behalf of the producer. It is to be based upon
the commercial accounts of the producer, provided that such
accounts are consistent with the generally accepted accounting
principles applied in the country where the goods are produced.
3. The "cost or value" shall include
the cost of elements specified in clauses (1)(a)(ii) and
(1)(a)(iii) of rule 10. It shall also include the value,
apportioned as appropriate under the provisions of the relevant
note to rule 10, of any element specified in rule 10(l)(b)
which has been supplied directly or indirectly by the buyer for
use in connection with the production of the imported goods. The
value of the elements specified in rule 10(l)(b)(iv) which are
undertaken in India shall be included only to the extent that
such elements are charged to the producer. It is to be understood
that no cost or value of the elements referred to in this
paragraph shall be counted twice in determining the computed
value.
4. The "amount for profit and
general expenses" referred to in clause(b) of rule 8 is to
be determined on the basis of information supplied by or on
behalf of the producer unless the producer"s figures are
inconsistent with those usually reflected in sales of goods of
the same class or kind as the goods being valued which are made
by producers in the country of exportation for export to India.
5. It should be noted in this context
that the "amount for profit and general expenses" has
to be taken as a whole. It follows that if, in any particular
case, producer's profit figure is low and his general
expenses are high, the producer's profit and general expenses
taken together may nevertheless be consistent with that usually
reflected in sales of goods of the same class or kind. Such a
situation might occur, for example, if a product were being
launched in India and the producer accepted a nil or low profit
to offset high general expenses associated with the launch. Where
the producer can demonstrate a low profit on his sales of the
imported goods because of particular commercial circumstances,
his actual profit figures should be taken into account provided
that he has valid commercial reasons to justify them and his
pricing policy reflects usual pricing policies in the branch of
industry concerned. Such a situation might occur for example,
where producers have been forced to lower prices temporarily
because of an unforeseeable drop in demand, or where they sell
goods to complement a range of goods being produced in India and
accept a low profit to maintain competitivity. Where the
producer"s own figures for profit and general expenses are not
consistent with those usually reflected in sales of goods of the
same class or kind as the goods being valued which are made by
producers in the country of exportation for export to India, the
amount for profit and general expenses may be based upon relevant
information other than that supplied by or on behalf of the
producer of the goods.
6. The "general expenses" referred to in
clause (b) of rule 8 covers the direct and indirect costs of
producing and selling the goods for export which are not included
under clause (a) of rule 8.
7. Whether certain goods are "of the same class
or kind" as other goods must be determined on a case-by-case
basis with reference to the circumstances involved. In
determining the usual profits and general expenses under the
provisions of rule 8, sales for export to India of the narrowest
group or range of goods, which includes the goods being valued,
for which the necessary information can be provided, should be
examined. For the purposes of rule 8 "goods of the same
class or kind" must be from the same country as the goods
being valued.
Note to rule 9
1. Value of
imported goods determined under the provisions of rule 9 should
to the greatest extent possible, be based on previously
determined customs values.
2. The methods
of valuation to be employed under rule 9 may be those laid down
in rules 3 to 8, inclusive, but a reasonable flexibility in the
application of such methods would be in conformity with the aims
and provisions of rule 9.
3. Some examples
of reasonable flexibility are as follows:
(a) Identical goods. - The
requirement that the identical goods should be imported at or
about the same time as the goods being valued could be flexibly
interpreted; identical imported goods produced in a country other
than the country of exportation of the goods being valued could
be the basis for customs valuation; customs values of identical
imported goods already determined under the provisions of rules 7
and 8 could be used.
(b) Similar goods. - The requirement that the similar goods
should be imported at or about the same time as the goods being
valued could be flexibly interpreted; similar imported goods
produced in a country other than the country of exportation of
the goods being valued could be the basis for customs valuation;
customs values of similar imported goods already determined under
the provisions of rules 7 and 8 could be used.
(c) Deductive method. - The requirement that the
goods shall have been sold in the "condition as
imported" in rule 7(1) could be flexibly interpreted; the
ninety days requirement could be administered flexibly.
Note to rule 10
In rule 10(l)(a)(i), the term "buying
commissions" means fees paid by an importer to his agent for
the service of representing him abroad in the purchase of the
goods being valued.
Rule 10(l)(b)(ii)
1. There are two
factors involved in the apportionment of the elements specified
in rule 10(l)(b)(ii) to the imported goods - the value of the
element itself and the way in which that value is to be
apportioned to the imported goods. The apportionment of these
elements should be made in a reasonable manner appropriate to the
circumstances and in accordance with generally accepted
accounting principles.
2. Concerning the value of the
element, if the importer acquires the element from a seller not
related to him at a given cost, the value of the element is that
cost. If the element was produced by the importer or by a person
related to him, its value would be the cost of producing it. If
the element had been previously used by the importer, regardless
of whether it had been acquired or produced by such importer, the
original cost of acquisition or production would have to be
adjusted downward to reflect its use in order to arrive at the
value of the element.
3. Once a value
has been determined for the element it is necessary to apportion
that value to the imported goods. Various possibilities exist.
For example, the value might be apportioned to the first shipment
if the importer wishes to pay duty on the entire value at one
time. As another example, the importer may request that the value
be apportioned over the number of units produced up to the time
of the first shipment. As a further example, he may request that
the value be apportioned over the entire anticipated production
where contracts or firm commitments exist for that production.
The method of apportionment used will depend upon the
documentation provided by the importer.
4. As an
illustration of the above, an importer provides the producer with
a mould to be used in the production of the imported goods and
contracts with him to buy 10000 units. By the time of arrival of
the first shipment of 1000 units, the producer has already
produced 4,000 units. The importer may request the proper officer
of customs to apportion the value of the mould over 1,000 units,
4,000 units or 10,000 units.
Rule 10(l)(b)(iv)
1. Additions for the elements
specified in rule 10(l)(b)(iv) should be based on objective and
quantifiable data. In order to minimise the burden for both the
importer and proper officer of customs in determining the values
to be added, data readily available in the buyer"s commercial
record system should be used in so far as possible.
2. For those
elements supplied by the buyer which were purchased or leased by
the buyer, the addition would be the cost of the purchase or the
lease. No addition shall be made for those elements available in
the public domain, other than the cost of obtaining copies of
them.
3. The case with
which it may be possible to calculate the values to be added will
depend on a particular firm"s structure and management practice,
as well as its accounting methods.
4. For example,
it is possible that a firm which imports a variety of products
from several countries maintains the records of its design centre
outside the country of importation in such a way as to show
accurately the costs attributable to a given product. In such
cases, a direct adjustment may appropriately be made under the
provisions of rule 10.
5. In another
case, a firm may carry the cost of the design centre outside the
country of importation as a general overhead expense without
allocation to specific products. In this instance, an appropriate
adjustment could be made under the provisions of rule 10 with
respect to the imported goods by apportioning total design centre
costs over total production benefiting from the design centre and
adding such apportioned cost on a unit basis to imports.
6. Variations in the above
circumstances will, of course, require different factors to be
considered in determining the proper method of allocation.
7. In cases
where the production of the element in question involves a number
of countries and over a period of time, the adjustment should be
limited to the value actually added to that element outside the
country of importation.
Rule 10(l)(c)
1. The royalties
and licence fees referred to in rule 10(l)(c) may include among
other things, payments in respect to patents, trademarks and
copyrights. However, the charges for the right to reproduce the
imported goods in the country of importation shall not be added
to the price actually paid or payable for the imported goods in
determining the customs value.
2. Payments made by the buyer for
the right to distribute or resell the imported goods shall not be
added to the price actually paid or payable for the imported
goods if such payments are not a condition of the sale for export
to the country of importation of the imported goods.
Rule 10(3)
Where objective and quantifiable data do not exist with
regard to the additions required to be made under the provisions
of rule 10, the transaction value cannot be determined under the
provisions of rule 3. As an illustration of this, a royalty is
paid on the basis of the price in a sale in the importing country
of a litre of a particular product that was imported by the
kilogram and made up into a solution after importation. If the
royalty is based partially on the imported goods and partially on
other factors, which have nothing to do with the imported goods
(such as when the imported goods are mixed with domestic
ingredients and are no longer separately identifiable, or when
the royalty cannot be distinguished from special financial
arrangements between the buyer and the seller), it would be
inappropriate to attempt to make an addition for the royalty.
However, if the amount of this royalty is based only on the
imported goods and can be readily quantified, an addition to the
price actually paid or payable can be made.
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