Central Valuation Directorate

Valuation Methods and related topics

The most common and the primary method of valuation is to use the transaction value , which is the price the importer actually paid or payable for the goods. A number of conditions must be met to use the transaction valuation method. For example, the buyer and seller are not related, where the buyer and seller are related, their relationship has not affected the price of the imported goods. The transaction value can involve deductions or additions such as commissions or royalties.

When the transaction value cannot be used, one of these alternative methods will be used to determine the Customs value:

  1. Transaction Value of Identical goods the price of identical goods sold for export to Sri Lanka.
  2. Transaction Value of Similar goods the price of similar goods sold for export to Sri Lanka.
  3. Deductive value he price in a sale in Sri Lanka of the imported goods, identical goods or similar goods. This price must be adjusted for costs etc incurred between the point of import and the sale in Sri Lanka.
  4. Computed value this is based on the price of producing the goods, general expenses, other costs and profits relating to the imported goods.
  5. Fall-back value where no other methods are suitable, Customs will determine the value by taking into account the above valuation methods and any other relevant information.

Does the Invoice shows the Transaction Value?

The common misconception is that the invoice shows the transaction value and therefore, Customs should accept the value appears on the invoice as the Customs value. It should be noted that the Aritcle 1 of Schedule E to the Customs Ordinance, which provides for the application of transaction value method, itself requires certain conditions to be met in order to resort to this method. In additions to the constraints imposed on the importer on his disposal of imported goods, the schedule E shows certain valuation factors that should be added to or deducted from the value appear on the invoice to arrive at the Customs value.

Valuation Factors

Valuation Factors are the various elements involved in a transaction which must be taken into account by addition to the extent these are not already included in the price actually paid or payable. These are called Dutiable Factors whereas those already included but do not form part of the price actually paid or payable are called Non-dutiable factors that should be deducted from the transaction value in determining the Customs Value for assessment purposes.

Dutiable Factors:

  • Commissions and brokerage, except buying commissions;
  • The cost of containers which are treated as being one for Customs purposes with the goods in question;
  • The cost of packing whether for labour or materials;
  • 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 the imported goods, to the extent that such value has not been included in the price actually paid or payable:-
    • material, components, parts and similar items incorporated in the imported goods;
    • tools, dies, moulds and similar items used in the production of the imported goods;
    • materials consumed in the imported goods;
    • engineering, developing, artwork, design work, and plans and sketches undertaken elsewhere than in the importing country and necessary for the production of imported goods;
  • Royalties and license fees related to goods being valued that the buyer must pay either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable;
  • The value of any part of the proceeds of any subsequent resale, disposal or use of the goods that accrues directly or indirectly to the seller;
  • Advance payments;
  • Insurance and Freight charges up to the place of importation;
  • Loading, unloading and handling charges associated with transporting the goods upto the point of import;

Non Dutiable Factors:

  • The following charges provided they are separately declared in the commercial invoice:-
    • Interest charges for deferred payment;
    • Post-importation charges (e.g. inland transportation charges, installation or erection charges, charges for training the staff of the importer etc.);
  • Duties and taxes payable in the importing country.

Cases where transaction value may be rejected:

The transaction value may not be accepted for customs valuation in the following categories of cases depicted in Article 1 of the Schedule E to the Customs Ordinance:-

  1. If there are restrictions on use or disposition of the goods by the buyer. However, the transaction value not to be rejected on this ground if restrictions:
    • are imposed by law or public authorities in Sri Lanka;
    • limit geographical area of resale;
    • do not affect the value of the goods substantially.
  2. If the sale or price is subject to a Condition or consideration for which a Value cannot be determined. However, conditions or considerations relating to production or marketing of the goods shall not result in rejection.
  3. If part of the proceeds of the subsequent resale, disposal or use of the goods accrues to the seller, unless an adjustment can be made using objective and quantifiable means
  4. Buyer and seller are related; unless it is established by the importer that
    • The relationship has not influenced the price;
    • The importer demonstrates that the price closely approximates one of the test values.

The transaction price declared can also be rejected in terms of Section 51A(1) of the Customs Ordinance, when a Customs officer has reasons to doubt the truth or accuracy of the value declared & if even after furnishing of further information, documents or other evidence, the officer is not satisfied and has reasonable doubts about the value declared. Once the transaction price is rejected the officer should decide the Customs value of the goods using other methods of valuation given in Schedule E to the Customs Ordinance.

Rights to Appeal

When the Customs authorities do not accept the declared value and determine the Customs value in accordance to the Customs Ordinance, the importer has a rith to appeal against the decision to the Director General of Customs in terms of Section 51A(6) of the Customs Ordinance, if he is dissatisfied of such decision. The appeals under this section should be made within 10 working days of the notice of valuation decision.

Provisional clearance of imported goods pending an appeal.

Section 51A(7) of the Customs Ordinance allows an importer to provisionally clear the imported goods from Customs pending final determination of value by furnishing a security for the payment of Customs duties and other levies that would become payable. However, this facility is not available to the importer, where a fraud is suspected.

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