Central Valuation Division is responsible for the valuation of imported goods when advalorem duties are applicable. Valuation of abandoned and seized goods put up for tender sales also come under this Division. This Division administers the valuation principles in World Trade Organization’s Agreement of Customs Valuation (ACV) incorporated in Sections 51, 52 and Schedule E. This Division employs modern tools and research facilities to gather and compile Value data for the distribution among the functional units, while facilitating and fostering public-private partnership.
Valuation Division of Sri Lanka Customs is dedicated to facilitate and foster the legitimate international trade practices while ensuring due contribution to the state revenue.
- Primary objective of Valuation division of Sri Lanka Customs is to enhance efficiency and effectiveness through valuation tools and capacity building, thereby contribute to departmental goals.
- Foster public-private partnership
- Increase the level of compliance on valuation rules using best practice approaches
Head Office of Central Valuation Division is located at Rank Container Terminal in Orugodawatta. The Division comes under the Additional Director General (Corporate) and the Director of Central Valuation is responsible for overall supervision of the Division whereas the two Deputy Directors are the functional heads of the Division.
Operational Supervision comes under 6 Superintendents of Customs supported by 6 Appraisers (Deputy Superintendents of Customs). 3 more Deputy Superintendents and 16 Assistant Superintendents perform investigations, research, registrations, post-entry modification, payment verification and guarantee management functions.
Main functions of the Division
- Assisting the Valuation Committee in Policy matters concerning Customs Valuation;
- Developing valuation tools (including databases and periodical alerts) and best practices for the effective and uniform application of valuation law;
- Value verification of commodities.
- Foster Public-Private partnership in resolving valuation issues and invite public participation in Value Research;
- Monitoring valuation trends of sensitive commodities and taking corrective action;
- Carrying out valuation inspections/investigations to ensure that the valuation guidelines and procedures are being effectively applied and followed;
- Coordinating Customs valuation matters with relevant international organizations and other sources abroad.
- Conducting study and providing necessary inputs for issues pertaining to transfer pricing.
Introduction to Customs Valuation
Customs valuation dates back to thousands of years among different cultures, with evidence of their use in the Roman Empire and in the Indian sub-continent for collecting Customs Duties. In the contemporary international scenario on trade even after world war I, some valuation methods involved the use of arbitrary and totally fictitious values that are out of line with real prices prevailed in international trade. As a result, there was a pressure for action on the lack of equity of valuation methods used by certain nations. After World War II, General Agreement on Tariffs (GATT) was signed on 30.11.1947, which was to take effect from 1.1.1948. Article VII of the GATT has been set aside for speciffic customs valuation provisions titled as "Valuation for Customs" Purposes which directed that the "actual value" be the value used for Customs purposes.
The first international standard based on the GATT valuation principles, the Brussles Definition of Value (BDV), came into force with the auspices of the Customs Cooperation Council on 25.07.1953, became the method of Customs valuation for assessment of import duties in most countries including Sri Lanka during 1950's. Under this method, a normal market price, defined as,
"... the price that a good would fetch in an open market between a buyer and seller independent of each other .."
was determined for each product. However, during the span of time this 'notional' sytem of value proved to be somewhat far away from commercial realities prevailing in the international trade.
Meantime, between 1973 and 1979, the GATT multilateral trade negotiations known as the "Tokyo Round" took place in Genova where the Agreement on the Implementation of Article VII of the GATT, establishing a 'positive system of Customs valuation' based on the price actually paid or payable for the imported goods was adopted. It is intended to provide a fair, uniform, and neutral system of valuation of goods for Customs purposes, conforming to commercial realities and outlawing the use of arbitrary or fictitious Customs values.
The Uruguay Round of GATT Negotiations started in 1984 was finalized in December 1994. It did make several changes to the existing GATT and the Agreement on the implementation of Article VII, addressing certain concerns of the developing countries. It was during the 'Uruguay Rounds' the provision for 'Customs administrations to reject the Customs value when it has reasonable doubts on the truth and accuracy of the transaction value declared' which is also known as the 'decision on shifting the burden of proof'' (Decision 6.1 based on Article 17), was introduced.
The WTO/GATT Valuation Agreement has been incorporated into Customs Ordinance through the enactment of the Customs Amendment Act 2003, shifting from a 'notioanl system' to a 'positive system' of Customs Valuation.
Application of Customs Valuation
Customs Valuation plays a major role in the collection of revenue when Customs duties are levied on ad valorem basis. Therefore, it becomes essential to lay down in the law itself the broad guidelines for such valuation to avoid arbitrariness and ambiguities. Section 51, 52 and the Schedule E of the Customs Ordinance lay down the basis for valuation of import cargo in Sri Lanka. (Please see the Law and Regulations Page)
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:
- Transaction Value of Identical goods the price of identical goods sold for export to Sri Lanka.
- Transaction Value of Similar goods the price of similar goods sold for export to Sri Lanka.
- 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.
- Computed value this is based on the price of producing the goods, general expenses, other costs and profits relating to the imported goods.
- 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 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.
- 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:-
- 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.
- 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.
- 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
- 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.
Referring for Value Verification
- ASYCUDA is the main tool used
- Time to time, the Management of Customs Valuation Division selects the commodities that are sensitive in valuation aspect and pass the same to the ICT Divison for the purpose of feeding them to the Selectivity Module of ASYCUDA. The selectivity criteria will be fired on assessment of the CusDec and it will be rerouted by the re-routing unit of the Long Room in order to recover the duties while making an endorsement to indicate that the particular CusDec has been selected for value verification.
- In addition, unit appraisers, SCC and screening staff could select the CusDecs manually for valuation
- In addition to the CusDecs selected by the computer system, unit appraisers and SCC and also the screening unit could refer the CusDecs for value verification in case they doubt the values declared.
- Investigation Divisions also can refer the consignments for ascertaining the value to Central Valuation Division
- Investigation Divisions could refer the samples from the consignments they investigate along with the evidence they gathered on the values when they want to ascertain the values.
Verification at the Central Valuation Division
- Make copies of CusDec, VDF and the invoice and obtain a Value Verification Form (VVF, formerly known as VCF) from the registration counter.
When a CusDec is referred for value verification by a declaration processing office, the consignment cannot be released until the value is verified and amened where necessary, by the Valuation Division. It is necessary for a CHA to bring the copies of CusDec, VDF and the invoice that are required for the internal process at the Valuation Division. On the production of the copies they could obtain a Value Verification Form (VVF, formerly VCF) from the registration counter at Central Valuation Division.
- Have the VVF registered at the registration counter.
When the set of copies above are submitted along with the VVF, it will be registered by the officers at the registration counter and pass such registered VVF to the DC(Central Valuaiton)
- DC appoints it to a DDC/SC/Appraiser.
DC goes through the set of documents in VVF and also the orginals submitted by the CHA and assings the VVF to a DDC/SC/Appraiser, based on the commodity and the complexity of the documents while taking into other risk factors as well.
- DDC finalizes the VVF.
DDC and SCC can further assign the VVF to an appropriate officer for value verification. However, the final decision on the value lies on the DDC, who should make a necessary endorsement on the acceptance or on the requirement of further information.
If a Customs officer has any reasonable doubts as to the declared value the DDC should request the importer/agent to produce further information in proof of the declared value. Even when the further information are submitted the DDC could still reject the values if the documents so produced are insufficient to dispel the doubt Customs had. Another instance, the transaction value could be rejected is when the importer/agent informs that he could not submit additional information.
Payment of Additional Duties and Levies
- Fill the VRF(Value Revision Form) indicating revised values against each commodity, sign it and submit it to ASCC/ICC.
If the transaction value is rejected by Customs and Customs value is established using another method, additional duties should be paid on the revised value. Value Revision Form (VRF) is meant for this purpose and the importer/agent is required submit the duly filled and signed VRF along with the VVF to the IC and ASC for checking the accuracy of the same. In case, the number of rows in the VRF is insufficient, continuation sheet/s could be made use of.
- Once the VRF is authorized by the SC, the CusDec could be amended in the computer system
Once the VRF is checked both by IC and ASC, it should be passed to the SC who authorizes the VRF for the modification of the initial CusDec in the computer system. The ASC (Post Entry Modifications) should check the proper authorization from SC and should always retain the original of VRF with him in proof of the authorization for amendments.
- Obtain the printouts of assessment notice and amended CusDec.
Printouts of amended CusDec and the assessment notice should be handed over to the CHA, who should make required mumber of additional photocopies.
- Submit the assessment notice and amended CusDec to SC for satisfying.
The amended CusDec should be satisfied by the SC, before making additional payemnts agaist it. So, the CHA should submit the CusDec with necessary copies along with the assessment notice, VRF and VVF to the SC, for him to verify the documents before satisfying the amended CusDec.
- Make ePayment against the assessment notice and have the payment verified by the ASC.
When the CusDec is satisfied, the importer/agent should make payment agaist it via the ePayment facility provided by Bank of Ceylon. One computer with Internet connection is set aside by Customs at the Central Valuation Division for the purpose. Since accessing of Internet bank accounts involves the use of password the computer can be accessed by only one CHA at a time in order to prevent shoulder surfing user credentials.
Once the payments are made via the Internet bank's update message would come to the Customs Computer System within 3 minutes of the payment. The CHA should submit the CusDec to the ASC who verifies bank payments in the system, who make necessary endorsements on the CusDec and the assessment notice certifying the receipt of payments.
- Obtain necessary endorsements and obtain DDC's approval for the release.
When the necessary endorsements are obtained against the proper receipt of the payments, the papers should be submitted to the ICC for updating the registers and make necessary endorsements on it. Thereafter, the papers could be submitted to DDC for obtaining the release order for the consignment.
Download - Value Revision Form
Download - Value Declaration Form
Download - Value Verification Form
Customs Ordinance - Section 51
51. In all cases when the duties imposed upon the importation of articles are charged according to the value thereof, the respective value of each such article shall be stated in the entry together with the description and quantity of the same, and duly affirmed by a declaration made by the importer or his agent on a form of such size and colour as ma be specified by the Director-General by notification published in the Gazette, and such value shall be determined in accordance with the provision of Schedule E and duties shall be paid on a value so determined.
51A. (1) (a) Whenever an officer of customs has reason to doubt the truth or accuracy of any particulars contained in a bill of entry or a declaration made under section 51 or the documents presented to him in support of a bill of entry under section 47, the officer of customs may require the importer or his agent or any other party connected with the importation of goods, to furnish, such other information, including documentary or other evidence in proof of the fact that the declared customs value represents the total amount actually paid or is payable for the imported goods as adjusted in accordance with Article 8 of Schedule E.
(b) After the receipt of further information or in the absence of any response, if the officer of customs still has reasonable doubt as to the truth or accuracy of the declared customs value, it shall be deemed that the customs value of the imported goods in question cannot be determined under the provisions of Article 1 of Schedule E and the importer if so requests, shall be informed by the officer in writing of the grounds for such doubt and be afforded and opportunity to be heard.
(C) The officer of customs may thereafter proceed to determine the customs value in accordance with the other provisions of Schedule E and amend the value as appropriate.
(2) If an officer of customs is satisfied as a result of an examination or investigation, or an audit carried out under section 128A, at any time prior to or after the clearance of the goods that the value declared by the importer or his agent under an Article of schedule E under which the value was initially accepted, is not appropriate the officer of customs may amend the value in accordance with the appropriate Article of Schedule E.
(3) For the purpose of this Ordinance, the customs value shall be the amended value under sub-section (1) or (2).
(4) Upon a written request, an explanation shall be given in writing to the importer, on how the customs value of the importer's goods was determined under subsection (2).
(5) Subsection (2) shall apply to goods whether or not such goods have been released from the control of the customs or any duty assessed on them has been paid.
(6) An importer who is dissatisfied with a decision of the officer, under this section may, within ten working days after the date on which notice of the decision is given, appeal to the Director General against that decision. The right of appeal shall be available to an importer whether or not the imported goods have been released to him and whether or not any part of the Customs duty has been paid. The decision of the Director General on the appeal and the reasons for such a decision shall be in writing.
(7) Where the importer desires to clear the goods pending the determination of his appeal the Director General may, except in case where fraud is suspected, allow the clearance of the goods upon furnishing security for the payment of the customs duties and other levies for which the goods may be liable.
51B. (1) Every Importer, agent or others concerned in the importation, movement and storage of importation, movement and storage of imported goods shall keep or cause to be kept in Sri Lanka such records for a period of three years from the date of importation as may be prescribed.
(2) Every such person shall whenever required by an officer of Customs.
(a) make the records available to such of ficer;
(b) provide copies of the records as required:
(c) answer any questions relating to matters arising under the Ordinance.
51C. All information which are confidential in nature or are provided in confidence for the purpose of Customs valuation shall be so treated by the officer of Customs and shall not be disclosed without the written permission of the persons or government providing such information, except to the extent that it may be required to b e disclosed in the course of judicial proceeding.
Customs Ordinance - Section 52
52. Where it shall appear to the officers of the customs that the value declared in respect of any goods, according to section 51 is a false declaration the goods in respect of which such declaration has been made shall be forfeited together with the package in which they are contained. Whether such goods are not recoverable, the person making such false declaration shall forfeit either treble the value of such goods or be liable to a penalty of one hundred thousand rupees at the election of the Director General.
52A. Every person who in contravention of the previsions of the Ordinance, fails to keep records which are required to be kept under section 51B or destroys, alters or conceals any book register, record or other document required to be kept under this Ordinance or sends of attempts to send out of Sri Lanka any such book, register, record or document commits an offence and shall be liable to a penalty not exceeding five hundred thousand rupees.
Director of Customs - +94 11 4625472
Deputy Director of Customs - +94 11 4625473
Deputy Director of Customs - +94 11 4625474
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Superintendent of Customs - +94 11 4625476
Superintendent of Customs - +94 11 4625477
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