Most importers, at one time or the other, find their transaction value rejected and goods assessed on the basis of contemporaneous imports - that is, the price at which identical goods of the same origin were imported at the same time and place. The customs resort to their database and come up with a reference price for contemporaneous imports and collect duty on that basis. Our courts have upheld determination of value on the basis of contemporaneous imports, with certain caveats that the customs usually ignore. Now, the International Chamber of Commerce (ICC), in a policy statement, has expressed deep concern about the misuse of customs valuation databases to set reference or minimum prices.
The customs valuation law prohibits the use of a number of valuation methods such as the selling price of goods produced in the country of importation, a system which provides for the acceptance of higher of two alternative values; the price of goods in the domestic market of the country of exportation; the cost of production other than computed values, which have been determined for identical or similar goods in accordance with the prescribed provisions; the price of goods for export to a country other than the country of importation; and minimum customs values, among others.
The term that is used most often to refer to any or all of the above deviations is 'reference pricing' although 'indicative pricing' and 'criterion pricing' are among the terms that are also employed. Although reference pricing is prohibited, it frequently manifests itself in the form of a valuation database that may be defined as a compilation of prices extraneous to the import transaction, often organised on a discrete tariff classification basis.
The customs valuation law permits the assessing officers to satisfy themselves as to the truth and accuracy of any statement, document or declaration presented for valuation purposes. The Technical Committee on Customs Valuation (TCCV) of the World Customs Organization, in its 'guidelines on the development and use of a national valuation database as a risk assessment tool', says application of an appropriate risk assessment and management procedure enables Customs to exercise this right in a pragmatic manner.
Such procedures may use a valuation database, but may not determine the customs value of imported goods, either as a substitute value or as a mechanism to establish minimum values, reject the declared value solely on the basis of a difference between the declared value and the database values, disregard the release of goods on sufficient guarantee in order to use a database or use a database as a substitute for other techniques, such as post-importation audits, to assess the truth or accuracy of the declared value.
The ICC policy statement details many different ways in which various countries misuse databases to arrive at a reference price for assessment with a view to rejecting transaction value, gives many examples of various commercial pricing practices applied by cross-border traders that may result in a lower declared value than indicated by the customs valuation databases and suggests the way forward. The Central Board of Excise and Customs should take cognizance of the TCCV guidelines and ICC policy statement and if necessary, review the laws and its instructions suitably. Predictability and transparency of customs procedures are vital for smooth cross-border trade flows and for investment.
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