Post-import expenses excluded for determining Customs value: Expert

We have finalised an order for import of machinery. We have made the supplier responsible for erecting the machinery and training our people to run it. We are not sure whether the costs of erection and training will get added for payment of customs duty. We are confused because we are told that any amount paid as a condition of the sale of the imported goods must be loaded for determining the assessable value. Please advise the correct position.

The relevant part of Interpretative Note to Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, says that the value of imported goods shall not include the charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment, provided that they are distinguished from the price actually paid or payable for the imported goods. So, these charges are not to be loaded. Please note that in this case, you, as the buyer, are imposing the conditions of erection and training, and not the seller. The seller does not say that unless you buy the erection and training services, he will not sell the machine. Thus, so long as it emerges clearly from the contract that this is a condition of purchase and not a condition of sale of the imported goods, the charges for erection and training will not be included in the assessable value of the imported goods.

Our customer abroad insists on EXW (ex-works), where we have to hand over the cargo to the freight forwarder nominated by him. Our laws require the shipping bill to be filed under our IEC and we need proper documents, as per our requirement. We are apprehensive that the forwarder will not take any instructions from us, as we do not appoint him. How to protect our interests?

Under EXW, your obligation is to make the goods available at the named place within the agreed period and serve a notice to the buyer or his agent (in this case, the freight forwarder). Till that stage, you bear all the costs and risks. You must obtain proof of delivery from the buyer or his agent. Once you deliver the goods in accordance with EXW, you can claim payment from the buyer. After delivery of the goods in accordance with EXW, the possession of goods and all the costs and risks pass on to the buyer. If you want the buyer or his agent to carry out certain other tasks after delivery of the cargo, such as filing the shipping bill in your name and IEC, you must include such terms in your contract.

Our one-star export house certificate expired on March 31, 2020. Is there any public notice from DGFT extending its validity?

Yes. The validity is extended till March 31, 2021. Please refer to point no. 6 in the DGFT Public Notice no. 67/2015-20 dated March 31, 2020.