Customs Notification No. 94/2007 (NT)
dated 13.9.2007
Makes Customs Valuation (Determination of Price of imported Goods) Rules, 2007
G.S.R. (E) In exercise of the powers conferred
by section 156 read with section 14 of the Customs Act, 1962 (52 of 1962), and
in supersession of the Customs Valuation (Determination of Price of Imported
goods) Rules, 1988 except as respects things done or omitted to be done before
such supersession, the Central Government hereby makes the following rules,
namely: -
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.
Sale quantity | Unit price | Number of sales | 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 sold | Unit price |
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.
[F.No.459/35/2007-Cus.V]
(ASEEM KUMAR)
UNDER SECRETARY TO THE GOVERNMENT OF INDIA
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