CUSTOMS RULES
& REGULATIONS
CUSTOMS VALUATION (DETERMINATION OF PRICE OF IMPORTED GOODS) RULES, 1988
In exercise of the powers conferred by
Section 156 of the Customs Act, 1962 (52 of 1962), read with Section 22 of the
General Clauses Act, 1897 (10 of 1897), and in supersession of the Customs
Valuation Rules, 1963 except as respect things done or omitted to be done
before such supersession, the Central Government hereby makes the following
rules, namely :-
1. Short title,
commencement and application. --
(1)
These rules may be called the Customs
Valuation (Determination of Price of Imported Goods) Rules, 1988.
(2)
They shall come into force on the 16th
August, 1988.
(3)
They shall apply to imported goods where a
duty of customs is chargeable by reference to their value.
2. Definitions.-
(1)
In these rules, unless the context otherwise
requires, --
[(a)
"computed value" means the value of imported goods determined in
accordance with rule 7A of these rules;
(aa)
"deductive value" means the value determined in accordance with rule
7 of these rules;]
(b) ?"goods of the same class or kind",
means imported goods that are within a group or range of imported goods
produced by a particular industry or industrial sector and includes identical
goods or similar goods;
(c) ??"identical goods" means imported
goods --
(i)
which are same in all respects, including
physical characteristics, quality and reputation as the goods being valued
except for minor differences in appearance that do not affect the value of the goods;
(ii)
produced in the country in which the goods
being valued were produced; and
(iii)
produced by the same person who produced the
goods, or where no such goods are available, goods produced by a different
person, but shall not include imported goods where engineering, development
work, art work, design work, plan or sketch undertaken in India were completed
directly or indirectly by the buyer on these imported goods free of charge or
at a reduced cost for use in connection with the production and sale for export
of these imported goods;
(d) ??"produced" includes grown,
manufactured and mined;
(e)? ?"similar goods" means imported goods
--
(i)
which although not alike in all respects,
have like characteristics and like component materials which enable them to
perform the same functions and to be commercially interchangeable with the
goods being valued having regard to the quality, reputation and the existence
of trade mark;
(ii)
produced in the country in which the goods
being valued were produced; and
(iii)
produced by the same person who produced the
goods being valued, or where no such goods are available, goods produced by a
different person, ?but shall not include
imported goods where engineering, development work, art work, design work, plan
or sketch undertaken in India were completed directly or indirectly by the
buyer on these imported goods free of charge or at a reduced cost for use in
connection with the production and sale for export of these imported goods;
(f) ??"transaction value" means the value
determined in accordance with Rule 4 of these rules.
(2)
For the purpose of these rules, persons shall
be deemed to be "related" only if ?
(i)
they are officers or directors of one
another's businesses;
(ii)
they are legally recognised partners in
business;
(iii)
they are employer and employee;
(iv)
any person directly or indirectly owns,
controls or holds 5 per cent or more of the outstanding voting stock or shares
of both of them;
(v)
one of them directly or indirectly controls
the other;
(vi)
both of them are directly or indirectly
controlled by a third person;
(vii)
together they directly or indirectly control
a third person; or
(viii)
they are members of the same family
Explanation I. - The
term "person" also includes legal persons.
Explanation II. -
Persons who are associated in the business of one another in that one is the
sole agent or sole distributor or sole concessionaire, however described, of
the other shall be deemed to be related for the purpose of these rules, if they
fall within the criteria of this sub-rule.
[3. Determination of the method of valuation. -
For
the purposes of these rules, --
(i)
subject to rules 9 and 10A, the value of
imported goods shall be the transaction value;
(ii)
if the value cannot be determined under the
provisions of clause (i), the value shall be determined by proceeding
sequentially through rules 5 to 8 of these rules.]
4. Transaction
value. -
(1)
The transaction value of imported goods shall
be the price actually paid or payable for the goods when sold for export to
India, adjusted in accordance with the provisions of Rule 9 of these rules.
(2)
The transaction value of imported goods under
sub-rule (1) above shall be accepted :
Provided
that --
[(a)
the sale is in the ordinary course of trade under fully competitive conditions;
(b) ?the sale does not involve any abnormal
discount or reduction from the ordinary competitive price;
(c) ?the sale does not involve special discounts
limited to exclusive agents;
(d)
objective and quantifiable data exist with regard to the adjustments required
to be made, under the provisions of rule 9, to the transaction value;]
[(e)]
there are no restrictions as to the disposition or use of the goods by the
buyer other than restrictions which --
(i)
are imposed or required by law or by the
public authorities in India; or
(ii)
limit the geographical area in which the
goods may be resold; or (iii) do not substantially affect the value of the
goods;
[(f)]
the sale or price is not subject to same condition or consideration for which a
value cannot be determined in respect of the goods being valued;
[(g)
no part of the proceeds of any subsequent resale, disposal or use of the goods
by the buyer will accrue directly or indirectly to the seller, unless an
appropriate adjustment can be made in accordance with the provisions of Rule 9
of these rules; and
[(h)]
the buyer and seller are not related, or where the buyer and seller are
related, that transaction value is acceptable for customs purposes under the
provisions of sub-rule (3) below.
(3) ?(a) Where the buyer and seller are related,
the transaction value shall be accepted provided that the examination of the
circumstances of the sale of the imported goods indicate that the relationship
did not influence the price.
(b) ?In a sale between related persons, the
transaction value shall be accepted, whenever the importer demonstrates that
the declared value of the goods being valued, closely approximates to one of
the following values ascertained at or about the same time -
(i)
the transaction value of identical goods, or
of similar goods, in sales to unrelated buyers in India;
(ii)
the deductive value for identical goods or
similar goods;
[(iii)
the computed value for identical goods or similar goods.]
Provided that in applying the values used for
comparison, due account shall be taken of demonstrated difference in commercial
levels, quantity levels, adjustments in accordance with the provisions of Rule
9 of these rules and cost incurred by the seller in sales in which he and the buyer
arc not related;
(c) ??substitute values shall not be established
under the provisions of clause (b) of this sub-rule.
5. Transaction
value of identical goods.-
(1)
(a) Subject to the provisions of Rule 3 of
these rules, the value of imported goods shall be the transaction value of
identical goods sold for export to India and imported at or about the same time
as the goods being valued.
(b) ?In applying this rule, the transaction value
of identical goods in a sale at the same commercial level and in substantially
the same quantity as the goods being valued shall be used to determine the
value of imported goods.
(c) ?Where no sale referred to in clause (b) of
sub-rule (1) of this rule, is found, the transaction value of identical goods
sold at a different commercial level or in different quantities or both,
adjusted to take account of the difference attributable to commercial level or
to the quantity or both, shall be used, provided that such adjustments shall be
made on the basis of demonstrated evidence which clearly establishes the
reasonableness and accuracy of the adjustments, whether such adjustment leads
to an increase or decrease in the value.
(2)
Where the costs and charges referred to in
sub-rule (2) of Rule 9 of these rules are included in the transaction value of
identical goods, an adjustment shall be made, if there are significant
differences in such costs and charges between the goods being valued and the
identical goods in question arising from differences in distances and means of
transport.
(3)
In applying this rule, if more than one
transaction value of identical goods is found; the lowest such value shall be
used to determine the value of imported goods.
6. Transaction
value of similar goods.-
(1)
Subject to the provisions of Rule 3 of these
rules, the value of imported goods shall be the transaction value of similar
goods sold for export to India and imported at or about the same time as the
goods being valued.
(2)
The provisions of clauses (b) and (c) of
sub-rule (1), sub-rule (2) and sub-rule (3), of Rule 5 of these rules shall,
mutatis mutandis, also apply in respect of similar goods.
[6A.
Determination of value when transaction value is not
available.--If the value of imported goods cannot be
determined under the provisions of rules 4, 5 and 6, the value shall be
determined under the provisions of rule 7 or, when the value cannot be
determined under that rule, under rule 7A : Provided that at the request of the
importer, and with the approval of the proper officer, the order of application
of rules 7 and 7A shall be reversed.]
7. Deductive
value.-
(1)
Subject to the provisions of Rule 3 of these
rules, if the goods being valued or identical or similar imported goods are
sold in India, in the condition as imported at or about the lime at which the
declaration for determination of value is presented, the value of imported
goods shall be based on the unit price at which the imported goods or identical
or similar imported goods are sold in the greatest aggregate quantity to
persons who are not related to the sellers in India, subject to the following
deductions : --
(i)
either the commission usually paid or agreed
to be paid or the additions usually made for profits and general expenses in
connection with sales in India of imported goods of the same class or kind;
(ii)
the usual costs of transport and insurance
and associated costs incurred within India;
(iii)
the customs duties and other taxes payable in
India by reason of importation or sole of the goods.
(2)
If neither the imported goods nor identical
nor similar imported goods are sold at or about the same lime of importation of
the goods being valued, the value of imported goods shall, subject otherwise to
the provisions of sub-rule (1) of this rule, be based on the unit price at
which the imported goods or identical Of similar imported goods are sold in
India, at the earliest date after importation but before the expiry of ninety
days after such importation.
(3)
?(a) If
neither the imported goods nor identical nor similar imported goods are sold in
India in the condition as imported, then, the value shall be based on the unit
price at which the Imported goods, after further processing, are sold in the
greatest aggregate quantity to persons who are not related to the seller in
India.
(b)? ?In such
determination, due allowance shall be made for the value added by processing
and the deductions provided for in items (i) to (iii) of sub-rule (1) of this
rule.
[7A.
Computed value.--Subject to the provisions of rule 3, the
value of imported goods shall be based on a computed value, which shall consist
of the sum of :-
(a)
the cost or value of materials and
fabrication or other processing employed in producing the imported goods;
(b)
an amount for profit and general expenses
equal to that usually reflected in sales of goods of the same class or kind as
the goods being valued which are made by producers in the country of
exportation for export to India;
(c)
the cost or value of all other expenses under
sub-rule (2) of rule 9 of these rules.]
8. Residual
method.-
(1)
Subject to the provisions of Rule 3 of these
rules, where the value of imported goods cannot be determined under the
provisions of any of the preceding rules, the value shall be determined using
reasonable means consistent with the principles and general provisions of these
rules and sub-section (1) of Section 14 of the Customs Act, 1962 (52 of 1962)
and on the basis of data available in India.
(2)
No value shall be determined under the
provisions of 8[this rule] on the basis of ?
(i)
the selling price in India of the goods
produced in India;
(ii)
a system which provides for the acceptance
for customs purposes of the highest of the two alternative values;
(iii)
the price of the goods on the domestic market
of the country of exportation;
[(iiia)
the cost of production other than computed values which have been determined
for identical or similar goods in accordance with the provisions of rule 7A.]
(iv)
the price of the goods for the export to a
country other than India;
(v)
minimum customs values; or
(vi)
arbitrary or fictitious values.
9. Cost and
services.-
(1)
In determining the transaction value, there
shall be added to the price actually paid or payable for the imported goods, --
(a)
the following cost and services, to the
extent they are incurred by the buyer but are not included in the price
actually paid or payable for the imported goods, namely : --
(i)
commissions and brokerage, except buying
commissions;
(ii)
the cost of containers which are treated as
being one for customs purposes with the goods in question;
(iii)
the cost of packing whether for labour or
materials;
(b)
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 imported goods, to the extent that such value has not been
included in the price actually paid or payable, namely :--
(i)
materials, components, parts and similar
items incorporated in the imported goods;
(ii)
tools, dies, moulds and similar items used in
the production of the imported goods;
(iii)
materials consumed in the production of the
imported goods;
(iv)
engineering, development, art work, design
work, and plans and sketches undertaken elsewhere than in India and necessary
for the production of the imported goods;
(c)
royalties and licence fees related to the
imported goods that the buyer is required to pay, directly or indirectly, as a
condition of the sale of ????????? the
goods being valued, to the extent that such royalties and fees are not included
in the price actually paid or payable.
(d)
the value of any part of the proceeds of any
subsequent resale, disposal or use of the imported goods that accrues, directly
or indirectly, to the seller;
(e)
all other payments actually made or to be
made as a condition of sale of the imported goods, by the buyer to the seller,
or by the buyer to a third party to satisfy an obligation of the seller to the
extent that such payments are not included in the price actually paid or
payable.
(2)
For the purposes of sub-section (1) and
sub-section (1A) of Section 14 of the Customs Act, 1962 (52 of 1962) and these
rules, the value of the imported goods shall be the value of such goods, for
delivery at the lime and place of importation and shall include ?
(a)
the cost of transport of the imported goods
lo the place of importation;
(b)
loading, unloading and handling charges
associated with the delivery of the imported goods at the place of importation;
and
(c)
the cost of insurance :
9[Provided
that --
(i)
where the cost of transport referred to in
clause (a) is not ascertainable, such cost shall be twenty per cent of the free
on board value of the goods;
(ii)
the charges referred to in clause (b) shall
be one per cent of the free on board value of the goods plus the cost of transport
referred to in clause (a) plus the cost of insurance referred to in clause (c);
(iii)
where the cost referred to in clause (c) is
not ascertainable, such cost shall be 1.125% of free on board value of the
goods;
Provided further that in the case of goods imported
by air, where the cost referred to in clause (a) is ascertainable, such cost
shall not exceed twenty per cent of free on board value of the goods:
Provided also that where the free on board
value of the goods is not ascertainable, the costs referred to in clause (a)
shall be twenty per cent of the free on board value of the goods plus cost of
insurance for clause (i) above and the cost referred to in clause (c) shall be
1.125% of the free on board value of the goods plus cost of transport for
clause (iii) above].
[provided
also that in case of goods imported by sea stuffed in a container for clearance
at an Inland Container Depot or Container Freight Station, the cost of freight
incurred in the movement of container from the port of entry to the Inland
Container Depot or Container freight Station shall not be included in the cost
of transport referred to in clause (a).]
(3)
Additions to the price actually paid or
payable shall be made under this rule on the basis of objective and quantifiable
data.
(4)
No addition shall be made to the price
actually paid or payable in determining the value of the imported goods except
as provided for in this rule.
10. Declaration
by the importer.-
[(1)
The importer or his agent shall furnish -
(a)
a declaration disclosing full and accurate
details relating to the value of imported goods; and
(b)
any other statement, information or document
including an invoice of the manufacturer or producer of the imported goods
where the goods are imported from or through a person other than the
manufacturer or producer, as considered necessary by the proper officer for
determination of the value of imported goods under these rules.]
(2) ?Nothing contained in these
rules shall be construed as restricting or calling into question the right of
the proper officer of customs to satisfy himself as to the truth or accuracy of
any statement, information, document or declaration presented for valuation
purposes.
(3) ?The provisions of the Customs
Act, 1962 (52 of 1962} relating to confiscation, penalty and prosecution shall
apply to cases where wrong declaration, information, statement or documents are
furnished under these rules.
[10A.
Rejection of declared value. -
(1)
When the proper officer has reason to doubt
the truth or accuracy of the value declared in relation to any imported goods,
he may ask the importer of such goods to furnish further information including
documents or other evidence and if, after receiving such further information,
or in the absence of a response of such importer, the proper officer still has
reasonable doubt about the truth or accuracy of the value so declared, it shall
be deemed that the value of such imported goods cannot be determined under the
provisions of sub-rule (1) of rule 4.
(2)
At the request of an importer, the proper
officer, shall intimate the importer in writing the grounds for doubting the
truth or accuracy of the value declared in relation to goods imported by such
importer and provide a reason able opportunity of being heard, before taking a final
decision under sub-rule (1).]
11. Settlement of
dispute.-
In case of dispute between the importer and
the proper officer of customs valuing the goods, the same shall be resolved
consistent with the provisions contained in sub-section (1) of Section 14 of
the Customs Act, 1962 (52 of 1962).
12. Interpretative
Notes. -
The interpretative notes specified in the
Schedule to these rules shall apply for the interpretation of these rules.
The
Schedule
(See
Rule 12)
INTERPRETATIVE NOTES
General
Note :
Use of
generally accepted accounting principles
1.
"Generally accepted accounting
principles" refers to the recognized consensus or substantial
authoritative support within a country at a particular time as to which
economic resources and obligations shall be recorded as assets and liabilities,
which changes in assets and liabilities should be recorded, how the assets and
liabilities and changes in them should be measured, what information should be
disclosed and how it should be disclosed and which financial statements should
be prepared. These standards may be broad guidelines of general application as
well as detailed practices and procedures.
Notes
to rules
Note to
Rule 2
In Rule 2(2)(v), for the purposes of these
rules, one person shall be deemed to control another when the former is legally
or operationally in a position to exercise restraint or direction over the
latter.
Note to
Rule 4
Price
actually paid or payable
The price actually paid or payable is the
total payment made or to be made by the buyer to or for the benefit of the
seller for the imported goods. The payment need not necessarily lake the form
of a transfer of money. Payment may be made by way of letters of credit or
negotiable instruments. Payment may be made directly or indirectly. An example
of an indirect payment would be the settlement by the buyer, whether in whole
or in part, of a debt owed by the seller.
Activities undertaken by the buyer on his own
account, other than those for which an adjustment is provided in Rule 9, are
not considered to be an indirect payment to the seller, even though they might
be regarded as of benefit to the seller. The costs of such activities shall
not, therefore, be added to the price actually paid or payable in determining
the value of imported goods.
The value of imported goods shall not include
the following charges or costs, provided that they are distinguished from the
price actually paid or payable for the imported goods :
(a)
Charges for construction, erection, assembly,
maintenance or technical assistance, undertaken after importation on imported
goods such as industrial plant, machinery or equipment;
(b)
The cost of transport after importation;
(c)
Duties and taxes in India.
The price actually paid or payable refers to
the price for the imported goods. Thus the flow of dividends or other payments
from the buyer to the seller that do not relate to the imported goods are not
part of the customs value.
[Rule
4(2)(e)(iii))]
Among restrictions which would not render a
price actually paid or payable unacceptable are restrictions which do not
substantially affect the value of the goods. An example of such restrictions
would be the case where a seller requires a buyer of automobiles not to sell or
exhibit them prior to a fixed date which represents the beginning of a model
year.
[Rule
4(2)(f)]
If the sale or price is subject to some
condition or consideration for which a value cannot be determined with respect
to the goods being valued, the transaction value shall not be acceptable for
customs purposes. Some examples of this include:
(a)
The seller establishes the price of the
imported goods on condition that the buyer will also buy other goods in
specified quantities;
(b)
the price of the imported goods is dependent
upon the price or prices at which the buyer of the imported goods sells other
goods to the seller of the imported goods;
(c)
the price is established on the basis of a
form of payment extraneous to the imported goods, such as where the imported
goods are semi finished goods which have been provided by the seller on
condition that he will receive a specified quantity of the finished goods.
However,
conditions or considerations relating to the production or marketing of the
imported goods shall not result in rejection of the transaction value. For
example, the fact that the buyer furnishes the seller with engineering and
plans undertaken in India shall not result in rejection of the transaction
value for the purposes of Rule 4. Likewise, if the buyer undertakes on his own
account, even though by agreement with the seller, activities relating to the
marketing of the imported goods, the value of these activities is not part of
the value of imported goods nor shall such activities result in rejection of
the transaction value.
Rule
4(3)
1.
Rule 4(3)(a) and Rule 4(3)(b) provide
different means of establishing the acceptability of a transaction value.
2.
Rule 4(3)(a) provides that where the buyer
and the seller are related, the circumstances surrounding the sale shall be
examined and the transaction value shall be accepted as the value of imported
goods provided that the relationship did not influence the price. It is not
intended that there should be an examination of the circumstances in all cases
where the buyer and the seller are related. Such examination will only be
required where there are doubts about the acceptability of the price. Where the
proper officer of customs has no doubts about the acceptability of the price,
it should be accepted without requesting further information from the importer.
For example, the proper officer of customs may have previously examined the
relationship, or he may already have detailed information concerning the buyer
and the seller, and may already be satisfied from such examination or
information that the relationship did not influence the price.
3.
Where the proper officer of customs is unable
to accept the transaction value without further inquiry, he should give the
importer an opportunity to supply such further detailed information as may be
necessary to enable him to examine the circumstances surrounding the sale. In
this context, the proper officer of customs should be prepared to examine
relevant aspects of the transaction, including the way in which the buyer and
seller organize their commercial relations and the way in which the price in
question was arrived at, in order to determine whether the relationship
influenced the price. Where it can be shown that the buyer and seller, although
related under the provisions of Rule 2(2), buy from and sell to each other as
if they were not related, this would demonstrate that the price had not been
influenced by the relationship. As an example of this, "if the price had
been settled in a manner consistent with the normal pricing practices of the
industry in question or with the way the seller settles prices for sales to
buyers who are not related to him, this would demonstrate that the price had
not been influenced by the relationship. As a further example, where it is
shown that the price is adequate to ensure recovery of all costs plus a profit
which is representative of the firm's overall profit realized over a
representative period of time (e.g., on ah annual basis) in sales of goods of
the same class or kind, this would demonstrate that the price had not been
influenced,
4.
Rule 4(3)(b) provides an opportunity for the
importer to demonstrate that the transaction value closely approximates to a
"test" value previously accepted by the proper officer of customs and
is therefore acceptable under the provisions of rule 4. Where a test under rule
4(3)(b) is met, it is not necessary to examine the question of influence under [Rule
4(3)(a)]. If the proper officer of customs has already sufficient information
to be satisfied, without further detailed inquiries, that one of the tests
provided in rule 4(3)(b) has been met, there is no reason for him to require
the importer to demonstrate that the test can be met. In rule 4(3)(b) the term
"unrelated buyers" means buyers who are not related to the seller in
any particular case.
Rule 4(3)(b)
A number of factors must be taken into
consideration in determining whether one value "closely approximates"
to another value. These factors include the nature of the imported goods, the
nature of the industry itself, the season in which the goods are imported, and
whether the difference in values is commercially significant. Since these
factors may vary from case to case, it would be impossible to apply a uniform
standard such as a fixed percentage, in each case. For example, a small
difference in value in a case involving one type of goods could be unacceptable
while a large difference in a case involving another type of goods might be
acceptable in determining whether the transaction value closely approximates to
the "test" values set forth in rule 4(3)(b).
Notes to
Rule 5
1.
In applying rule 5, the proper officer of
customs shall, wherever possible, use a sale of identical goods at the same
commercial level and in substantially the same quantities as the goods being
valued. Where no such sale is found, a sale of identical goods that takes place
under any one of the following three conditions may be used :
(a)
a sale at the same commercial level but in
different quantities;
(b)
a sale at a different commercial level but in
substantially the same quantities; or
(c)
a sale at a different commercial level and in
different quantities.
2.
Having found a sale under any one of these
three conditions adjustments will then be made, as the case may be, for :
(a)
quantity factors only;
(b)
commercial level factors only; or
(c)
both commercial level and quantity factors.
3.
For the purposes of rule 5, the transaction
value of identical imported goods means a value, adjusted as provided for in
rule 5(l)(b) and (c) and rule 5(2), which has already been accepted under rule
4.
4.
A condition for adjustment because of
different commercial levels or different quantities is that such adjustment,
whether it leads to an increase or a decrease in the value, be made only on the
basis of demonstrated evidence that clearly establishes the reasonableness and
accuracy of the adjustment, e.g. valid price lists containing prices referring
to different levels or different quantities. As an example of this, if the
imported goods being valued consist of a shipment of 10 units and the only
identical imported goods for which a transaction value exists involved a sale
of 500 units, and it is recognised that the seller grants quantity discounts,
the required adjustment may be accomplished by resorting to the seller's price
list and using that price applicable to a sale of 10 units. This does not
require that a sale had to have been made in quantities of 10 as long as the
price list has been established as being bona fide through sales at other
quantities. In the absence of such an objective measure, however, the
determination of a value under the provisions of rule 5 is not appropriate.
Note to
Rule 6
1.
In applying rule 6, the proper officer of
customs shall, wherever possible, use a sale of similar goods at the same
commercial level and in substantially the same quantities as the goods being
valued. For the purpose of rule 6, the transaction value of similar imported
goods means the value of imported goods, adjusted as provided for in rule 6(2)
which has already been accepted under rule 4.
2.
All other provisions contained in note to
rule 5 shall mutatis mutandis also apply in respect of similar goods.
Note to
Rule 7
1. The
term "unit/price at which goods are sold in the greatest aggregate
quantity" means the price at which the greatest number of units is sold in
sales to persons who are not related to the persons from whom they buy such
goods at the first commercial level after importation at which such sales take
place.
2.
As
an example of this, goods are sold from a price list which grants favourable
unit prices for purchases made in larger quantities.
|
Sale quantity
|
Unit
Price
|
Number of sales
|
Total quantity sold at each
Price
|
|
1-10 units
|
100
|
10 stiles of 5 units, 5 sales of 3 units
|
65
|
|
11-25 units
|
95
|
5 sales of 11 units
|
55
|
|
Over 25 units
|
90
|
1 sale of 30 units, 1 sale of 50 units
|
80
|
The greatest number of units sold at a price
is 80, therefore, the unit price in the greatest aggregate quantity is 90.
3.
As another example of this, two sales occur.
In the first sale 500 units are sold at a price of 95 currency units each. In the
second sale 400 units are sold at a price of 90 currency units each. In this
example, the greatest number of units sold at a particular price is 500,
therefore, the unit price in the greatest aggregate quantity is 95.
4.
A third example would be the following
situation where various quantities are sold at various prices.
(a)
Sales
|
????????? Sales
quantity
|
Unit price
|
|
????????? 40
units
|
100
|
|
????????? 30
units
|
90
|
|
????????? 15
units
|
100
|
|
????????? 50
units
|
95
|
|
????????? 25
units
|
105
|
|
????????? 35
units
|
90
|
|
????????? 5
units
|
100
|
|
????????? (b)
Totals
|
|
|
????????? Total
quantity sold
|
Unit price
|
|
????????? 65
|
90
|
|
????????? 50
|
95
|
|
????????? 60
|
100
|
|
????????? 25
|
105
|
In this example, the greatest number of units
sold at a particular price is 65, therefore, the unit price in the greatest
aggregate quantity is 90.
5.
Any sale in India, as described in paragraph
1 above to a person who supplies directly or indirectly free of charge or at
reduced cost for use in connection with the production and sale for export of
the imported goods any of the elements specified in rule 9(1)(b), should not be
taken into account in establishing the unit price for the purposes of rule 7.
6.
It should be noted that "profit and
general expenses" referred to in rule 7(1) should be taken as a whole. The
figure for the purposes of this deduction should be determined on the basis of
information supplied by or on behalf of the importer unless his figures are
inconsistent with those obtaining in sales in India, of imported goods of the
same class or kind. Whore the importer's figures are inconsistent with such
figures, the amount for profit and general expenses may be based upon relevant
information other than that supplied by or on behalf of the importer.
7.
The "general expenses" include the
direct and indirect costs of marketing the goods in question.
8.
Local taxes payable by reason of the sale of
the goods for which a deduction is not made under the provisions of rule
7(1)(iii) shall be deducted under the provisions of rule 7(1)(i).
9.
In determining either the commissions or the
usual profits and general expenses under the provisions of rule 7(1), the
question whether certain goods are "of the same class or kind" as
other goods must be determined on a case-by-case basis by reference to the
circumstances involved. Sales in India, of the narrowest group or range of
imported goods of the same class or kind, which includes the goods being
valued, for which the necessary information can be provided, should be
examined. For the purposes of rule 7 "goods of the same class or
kind" includes goods imported from the same country as the goods being
valued as well as goods imported from other countries.
10.
For the purposes of rule 7(2) the
"earliest date" shall be the date by which sales of the imported
goods or of identical or similar imported, goods are made in sufficient
quantity to establish the unit price.
11.
Where the method in rule 7(3) is used,
deductions made for the value added by further processing shall be based on
objective and quantifiable data relating to the cost of such work. Accepted
industry formulas, recipes, methods of construction, and other industry practices
would form the basis of the calculations.
12.
It is recognized that the method of valuation
provided for in rule 7(3) would normally not be applicable when, as a result of
the further processing, the imported goods lose their identity. However there
can be instances where, although the identity of the imported goods is lost,
the value added by the processing can be determined accurately without
unreasonable difficulty. On the other hand, there can also be instances where
the imported goods maintain their identity but form such a minor element in the
goods sold in the country of importation that the use of this valuation method
would be unjustified. In view of the above, each situation of this type must be
considered on a case-by-case basis.
7[Note
to Rule 7A
1.
As
a general rule, value of imported goods is determined under these rules on the
basis of information readily available in India. In order to determine a
computed value, however, it may be necessary to examine the costs of producing
the goods being valued and other information which has to be obtained from
outside India. Furthermore, in most cases, the producer of the goods will be
outside the jurisdiction of the proper officer. The use of the computed value
method will generally be limited to those cases where the buyer and seller are
related, and the producer is prepared to supply to the proper officer the
necessary costings and lo provide facilities for any subsequent verification
which may be necessary.
2.
The "cost or value" referred lo in
clause (a) of rule 7A is to be determined on the basis of information relating
to the production of the goods being valued supplied by or on behalf of the
producer. It is to be based upon the commercial accounts of the producer,
provided that such accounts are consistent with the generally accepted
accounting principles applied in the country where the goods are produced.
3.
The "cost or value" shall include
the cost of elements specified in clauses (1)(a)(ii) and (1)(a)(iii) of rule 9.
It shall also include the value, apportioned as appropriate under the
provisions of the relevant note to rule 9, of any element specified in rule
9(1)(b) which has been supplied directly or indirectly by the buyer for use in
connection with the production of the imported goods. The value of the elements
specified in rule 9(1)(b)(iv) which are undertaken in India shall be included
only to the extent that such elements are charged to the producer. It is to be
understood that no cost or value of the elements referred to in this paragraph
shall be counted twice in determining the computed value.
4.
The "amount for profit and general
expenses" referred to in clause (b) of rule 7A is to be determined on the
basis of information supplied by or on behalf of the producer unless the
producer's figures are inconsistent with those usually reflected in sales of
goods of the same class or kind as the goods being valued which are made by
producers in the country of exportation for export to India.
5.
It should be noted in this context that the
"amount for profit and general expenses" has to be taken as a whole.
It follows that if, in any particular case, the producer's profit figure is low
and his general expenses are high, the producer's profit and general expenses
taken together may nevertheless be consistent with that usually reflected in
sales of goods of the same class or kind. Such a situation might occur, for example,
if a product were being launched in India and the producer accepted a nil or
low profit to offset high general expenses associated with the launch. Where
the producer can demonstrate a low profit on his sales of the imported goods
because of particular commercial circumstances, his actual profit figures
should be taken into account provided that he has valid commercial reasons to
justify them and his pricing policy reflects usual pricing policies in the
branch of industry concerned. Such a situation might occur for example, where
producers have been forced to lower prices temporarily because of an
unforeseeable drop in demand, or where they sell goods to complement a range of
goods being produced in India and accept a low profit to maintain competitivity.
Where the producer's own figures for profit and general expenses are not
consistent with those usually reflected in sales of goods of the same class or
kind as the goods being valued which are made by producers in the country of
exportation for export to India, the amount for profit and general expenses may
be based upon relevant information other than that supplied by or on behalf of
the producer of the goods.
6.
The "general expenses" referred to
in clause (b) of rule 7A covers the direct and indirect costs of producing and
selling the goods for export which are not included under clause (a) of rule
7A.
7.
Whether certain goods are "of the same
class or kind" as other goods must be determined on a case-by-case basis
with reference to the circumstances involved. In determining the usual profits
and general expenses under the provisions of rule 7A, sales for export to India
of the narrowest group or range of goods, which includes the goods being
valued, for which the necessary information can be provided, should be
examined. For the purposes of rule 7A "goods of the same class or
kind" must be from the same country as the goods being valued.]
Note to
Rule 8
1.
Value of imported goods determined under the
provisions of rule 8 should to the greatest extent possible, be based on
previously determined customs values.
2.
The methods of valuation to be employed under
rule 8 may be those laid down in 14[rules 4 to 7A], inclusive, but a
reasonable flexibility in the application of such methods would be in conformity
with the aims and provisions of rule 8.
3.
Some examples of reasonable flexibility are
as follows :
(a)
Identical goods. - The
requirement that the identical goods should be imported at or about the same
time as the goods being valued could be flexibly interpreted; identical
imported goods produced in a country other than the country of exportation of
the goods being valued could be the basis for customs valuation; customs values
of identical imported goods already determined under the provisions of 14[rules
7 and 7A] could be used.
(b)
Similar goods. - The
requirement that the similar goods should be imported at or about the same time
as the goods being valued could be flexibly interpreted; similar imported goods
produced in a country other than the country of exportation of the goods being
valued could be the basis for customs valuation; customs values of similar
imported goods already determined under the provisions of [rules
7 and 7A] could be used.
(c)
Deductive method. - The
requirement that the goods shall have been sold in the "condition as
imported" in rule 7(1) could be flexibly interpreted; the ninety days
requirement could be administered flexibly.
Note to
Rule 9
In rule 9(1)(a)(i), the term "buying
commissions" means fees paid by an importer to his agent for the service
of representing him abroad in the purchase of the goods being valued.
Rule 9(1)(b)(ii)
1.
There are two factors involved in the
apportionment of the elements specified in rule 9(1)(b)(ii) to the imported
goods - the value of the element itself and the way in which mat value is to be
apportioned to the imported goods. The apportionment of these elements should
be made in a reasonable manner appropriate to the circumstances and in
accordance with generally accepted accounting principles.
2.
Concerning the value of the element, if the importer
acquires the element from a seller not related to him at a given cost, the
value of the element is that cost. If the element was produced by the importer
or by a person, related to him, its value would be the cost of producing it. If
the element had been previously used by the importer, regardless of whether it
had been acquired or produced by such importer, the original cost of
acquisition or production would have to be adjusted downward to reflect its use
in order to arrive at the value of the element.
3.
Once a value has been determined for the
element it is necessary to apportion that value to the imported goods. Various
possibilities exist. For example, the value might be apportioned to the first
shipment if the importer wishes to pay duty on the entire value at one time. As
another example, the importer may request that the value be apportioned over
the number of units produced up to the time of the first shipment. As a further
example, he may request that the value be apportioned over the entire anticipated
production where contracts or firm commitments exist for that production. The
method of apportionment used will depend upon the documentation provided by the
importer.
4.
As an illustration of the above, an importer
provides the producer with a mould to be used in the production of the imported
goods and contracts with him to buy 10,000 units. By the time of arrival of the
first shipment of 1,000 units, the producer has already produced 4,000 units.
The importer may request the proper officer of customs to apportion the value
of the mould over 1,000 units, 4,000 units or 10,000 units.
Rule 9(1)(b)(iv)
1.
Additions for the elements specified in rule
9(1)(b)(iv) should be based on objective and quantifiable data. In order to
minimise the burden for both the importer and proper officer of customs in
determining the values to be added, data readily available in the buyer's
commercial record system should be used in so far as possible.
2.
For those elements supplied by the buyer
which were purchased or leased by the buyer, the addition would be the cost of
the purchase or the lease. No addition shall be made for those elements
available in the public domain, other than the cost of obtaining copies of
them.
3.
The case with which it may be possible to
calculate the values to be added will depend on a particular firm's structure
and management practice, as well as its accounting methods.
4.
For example, it is possible that a firm which
imports a variety of products from several countries maintains the records of
its design centre outside the country of importation in such a way as to show
accurately the costs attributable to a given product. In such cases, a direct
adjustment may appropriately be made under the provisions of rule 9.
5.
In another case, a firm may carry the cost of
the design centre outside the country of importation as a general overhead
expense without allocation to specific products. In this instance, an
appropriate adjustment could be made under the provisions of rule 9 with
respect to the imported goods by apportioning total design centre costs over
total production benefiting from the design centre and adding such apportioned
cost on a unit basis to imports.
6.
Variations in the above circumstances will,
of course, require different factors to be considered in determining the proper
method of allocation.
7.
In cases where the production of the element
in question involves a number of countries and over a period of time, the
adjustment should be limited to the value actually added to that element
outside the country of importation."
Rule 9(1)(c)
1.
The royalties and licence fees referred to in
rule 9(1)(c) may include among other things, payments in respect to patents,
trademarks and copyrights. However, the charges for the right to reproduce the
imported goods in the country of importation shall not be added to the price
actually paid or payable for the imported goods in determining the customs
value.
2.
Payments made by the buyer for the right to
distribute or resell the imported goods shall not be added to the price
actually paid or payable for the imported goods if such payments are not a condition
of the sale for export to the country of importation of the imported goods.
Rule 9(3)
Where objective and quantifiable data do not
exist with regard to the additions required to be made under the provisions of
rule 9, the transaction value cannot be determined under the provisions of rule
4. As an illustration of this, a royalty is paid on the basis of the price in a
sale in the importing country of a litre of a particular product that was
imported by the kilogram and made up into a solution after importation. If the
royalty is based partially on the imported goods and partially on other
factors, which have nothing to do with the imported goods (such as when the
imported goods are mixed with domestic ingredients and are no longer separately
identifiable, or when the royalty cannot be distinguished from special
financial arrangements between the buyer and the seller), it would be
inappropriate to attempt to make an addition for the royalty. However, if the
amount of this royalty is based only on the imported goods and can be readily
quantified, an addition to the price actually paid or payable can be made.