Chapter 7 the World Trade Organization Agreements (3) Agreement on Customs Valuation Agreement on Import Licensing
Review • ODCs • The positive standards • The STEs • Rules of origin • The WCO • Preferential treatment
Contents related to Customs Valuation • I. Background • II. The WTO Agreement • III. The six methods of valuation • IV. Special and differential treatment • V. Institutions
I. Background • 1. Ad valorem tariff (从价税) • It is a tax set as a percentage of value of imported goods. • e.g. A product valued at $100, it subject to a 10% ad valorem tariff, $10 would be due upon importation. • Specific tariff(从量税) • It is a charge per unit or quantity of goods. • $1.00 per ton • Mixed tariff (混合税) • It combines above two concepts. • 5 Yuan per Kg plus 10% of value
2. Short historical overview 1)permitted the use of widely differing methods; 2)'grandfather clauses' • Article VII GATT • Brussels definition of value • Tokyo Round Valuation Code 1) New and rare products were often not captured; 2) The USA never became part of the BVD. • 40 countries • the "transaction value"
II. The WTO Agreement • 1. The new Agreement • ----the WTO Agreement on Implementation of Article VII of the GATT 1994 • ---- the same as the Tokyo Round Valuation Code
2. Major principles of Customs valuation • (1) Customs valuation systems should be fair, uniform and neutral and the use of arbitrary or fictitious customs values should be precluded. • (2) The valuation procedures should not be used to combat dumping. • (3) The basis for valuation of goods for customs purposes should, to the greatest extent possible, be the transaction value of the goods;
III. The 6 methods of valuation • Hierarchy of Valuation • Method 1---Transaction value • Method 2---Transaction value of identical goods • Method 3---Transaction value of similar goods • Method 4---Deduction method • Method 5---Computed method • Method 6---Fall-back method
1. Method 1---Transaction value • 以进口货物的成交价格计算完税价格 • The price actually paid or payable is the total payment made or to be made for the imported goods, plus adjustments for certain elements listed in Article 8.
commercial invoices, contracts, purchase orders • Conditions to be fulfilled: • Evidence of sale • No restriction on the disposition or use by the buyer • Not subject to additional conditions • Buyer and seller not related e.g. the seller establishes the price of the imported goods on the condition that the buyer will also buy other goods in specified quantities e.g. officers or directors of one another's businesses; employer and employee
Method 2—transaction value of identical goods • 以相同货物的成交价格作为完税价格 • The same in all respects ( physical characteristics, quality, and reputation); • produced in same country by same producer. • Flexibility in Defining Identical Goods • -- produced by different producers in same country --Minor differences in appearance • For this method to be used, the goods must be sold for export to the same country of importation as the goods being valued. The goods must also be exported at or about the same time as the goods being valued.
Components and materials • Method 3---transaction value of similar goods • 以类似货物的成交价格确定的完税价格 • Conditions should be fulfilled: • --closely resemble the goods • --perform the same functions (commercially interchangeable) • -- produced in the same country by the same producer • -- sold to the same country of importation and exported at or about the same time
TV of Identical and Similar • Example #1 • A Corvette in decent condition is sold for import to your country. The buyer purchased the vehicle from his brother in the Netherlands for $2000 before driving it to your country. • The buyer is not able to supply any further information and Customs has no records of Corvettes being imported under Transaction Value. • A local database of vehicular values shows that the Corvette is worth at least $15,000. • How should you value the vehicle?
Example #2 • A new Cuban cigar manufacturer wishes to enter the your market. As such, they agree with a local distributor to ship the goods on consignment. The distributor shows that within the last 30 days he purchased the following same sized Cuban cigars appraised under TV: – Humidors - $25 a piece – Cohibas - $17 a piece – Romeo y Julietta - $10 a piece • You send a sample of the new cigar to the laboratory and find that the quality is most similar to the Cohiba cigar. • What value do you use?
Example #3 • A large local producer of wine purchases 50 Dell laptop computers, Model XYZ, from China for $750 a piece. As a part of the agreement, the Chinese seller agrees to buy 1,000 bottles of the importer’s wine. • Customs questions the value and the importer is able to present information that they recently purchased 10 Hewlett Packard computers from China with nearly identical features at $800 a piece. They also show that in the initial offer, a 10% discount would have been offered if they purchased more than 25 laptops. • What is the Customs value?
Example #4 • Same scenario as Example #3 • Dell Model XYZ, at $750 per unit sold under a condition of sale. • Import of similar Hewlett Packard laptops at $800 (with a 10% quantity discount) • The same day as you receive the response from the importer, you run across a declaration of Dell Computers from the same manufacturer in China, Model ABC, for $1,250 per unit acceptable under Transaction Value. • You research Dell computers on the internet and find that the only difference between ABC and XYZ is the weight and other minor features. • What is the Customs value?
Method 4---deductive value • 扣除价格 • Deduction of value from the price of the greatest aggregate (sales up to 90 days after importation) • Deductions from the price: • Commissions or additions for profits and general expenses • Duties & taxes • Value of further processing The transport costs；Labor；Overhead & Utilities
Deductive Value • Example #1 • A shipment of Maglite flashlights do not qualify for TV or TV of Identical or Similar Goods. • The importer provides you with the following information: – The are sold to retailers at $5 a piece – The general expenses and profit of the importer averaged to 50 cents per Maglite sold. – The importer paid 25 cents per Maglite to label it in Yiwu. – The total duties and taxes on flashlights from China is 25% • What is the Customs value?
Deductive Value Example #1 continued • $5.00 – 50 cents GE&P – 25 cents labeling = $4.25 • Duties and taxes are 25% • X= Customs Value • X + (X * 0.25) = $4.25 • $4.25 / 1.25 = $3.40
Method 5---computed value • 以计算价格方法来确定的完税价格 • Computed value is the sum of the following elements: • Production cost=value of materials and fabrication(组件) • Profit and general expenses • Other expenses to be added
Computed Value • Example #1 • A local importer of furniture presents a declaration of 1,000 wooden chairs from a related seller. No other valuation method is acceptable. • The importer provides the following data directly from the manufacturer for computed value: – Wood, Brackets, and Screws = $3.00 – Cushioning = $1.00 – Assembly Cost = $1.00 – Designs provided by the Chinese importer = $1.00 – Manufacturer Production Expenses and Profit = $1.00 – Packing and Shipping = $1.00 • What is the computed value, if any?
Computed Value • Example #2 • Customs has determined that the deductive value of a declaration is ￥100.00. • The importer provides VALID information that the computed value of the declaration is ￥ 90.00 • The importer reminds Customs that Article 4 of the WTO agreement gives the importer the right to reverse Deductive and Computed Value. • Furthermore, the importer argues that using the higher of two values is also prohibited. • How should Customs determine the value?
Method 6—fall-back method • 按顺序类推的合理价格 • Customs value determination based on “reasonable means consistent with the principles and general provisions of the Agreement, Article VII GATT and on the basis of available data.”
Under the fall-back method, customs value shall NOT be determined by: • The selling price of goods in the country of importation • the higher of two alternative values • The price of goods on the domestic market of the country of exportation • The price of goods for export to a third country • Minimum customs valuation (except developing countries) • Arbitrary or fictions values
IV. Special and differential treatment • --Delay of application of the Agreement for 5 years for developing countries • --Delay of application of the computed value method for 3 years following the application of all other provisions of the Agreement • --Reservations to retain established minimum values • --Technical assistance Developed country Members shall furnish technical assistance; training of personnel, assistance in preparing implementation measures
Committee on Customs valuation ---composed of representatives from each of Members ---affords members the opportunity to consult Technical committee on customs values --established under the auspices of WCO --ensures uniformity in interpretation and application of the Agreement ---advises on specific technical matters V. Institutions
Contents related to import licensing • Definition • General provisions • Classification • Notification and adverse notification
I. Definition • Import licensing can be defined as administrative proceduresrequiring the submission of an application or other documentation (other than those required for customs purposes) to the relevant administrative body as a prior condition for importation of goods.
II. General provisions • Neutral application, fair and equitable administration • Publication of rules and procedures • Simple forms and procedures • Other principles: ---the security exception provisions, not disclose confidential information
III. Classification • Automatic import licensing • Non-automatic import licensing
Automatic import licensing: • ---licensing maintained to collect statistical and other factual information on imports • --- defined as import licensing where the approval of the application is granted in all cases.
Non-automatic import licensing • Used to administer trade restrictions such as quantitative restrictions which are justified within the WTO legal framework. • Time limits for processing application: • The period for processing application shall not be longer than 30 days if applications are considered as and when received, and not longer than 60 days if applications are considered simultaneously
Notification and adverse notification • Article 5 of Agreement on Import Licensing Procedures sets out that Members which institute licensing procedures or changes in these procedures shall notify the Committee on Import Licensing of such within 60 days of publication. • 《进口许可证》第五条规定，设立许可证程序或对这些程序作了改变的WTO成员应在其公布后的60天内通知进口许可委员会。
Any interested Member which considers that another Member has not notified the institution of a licensing procedure or changes therein may bring the matter to the attention of such other Member. If notification is not made promptly thereafter, such Member may itself notify the licensing procedure or changes therein, including all relevant and available information. • 任何WTO 成员若认为另一成员没有将设立的许可程序或其任何改变通知进口许可委员会，则它可提请另一成员对此加以注意。或此后仍未立即通知进口许可委员会，该成员可自行将许可程序及其变更通知进口许可委员会。
New words • arbitrary adj. （P57 ） • to make a decision or to do something without asking for others' opinions. • 武断的 • A system conforms to commercial realities, and outlaws the use of arbitrary or fictitious customs values.
Key terms • Automatic licensing • adverse notification • Non-automatic import licensing • the Tokyo Round Valuation Code • The 6 methods of valuation