Customs Duty Valuation
Customs duties are usually charged ad valorem, that is value-based. Common customs tariff duties are based on a valuation of the goods. The rate is specified by the code in the tariff. EU Regulations encompassing the Code sets out the rules on valuation. They accord with the General Agreement on Trade and Tariffs rules for valuation.
The value of imported goods for VAT purposes is the value for customs purposes, increased by the amount of any duty or other tax, but not including VAT or Vehicle Registration Tax payable in relation to their importation; and any transport, handling and insurance costs between the place of introduction into the EU / State and onward transport cost if known at the time of importation to the final destination within the EU.
The primary method of valuation is the invoice price. Where the value is based on the invoice price, certain deductions are allowed, provided that they are clearly distinguished in the documents. Cash trade and quantity discounts are generally allowed by way of reduction.
Customs clearance charges, whether included in the price or otherwise charged to the importer, are included in the value for custom duty purposes to the extent that they relate to pre-importation expenses.
There are six methods of valuation applicable to all goods:
- transaction value method;
- transaction value of identical goods;
- transaction value of similar goods;
- deductive method;
- computed method;
- residual value method.
Importers may opt for the reversal of the order of application of the fourth and fifth categories.
It is only where the transaction value cannot be used, that other methods are considered. In such cases, the customs value is determined by proceeding sequentially through the methods. An earlier listed method should be used, if possible.
Transaction Value I
The transaction value is the price actually paid or payable for the goods being imported when they are sold in the customs territory of the EU. This is subject to adjustments below. It is provided that there are no restrictions as to disposal or use of the goods by the buyer, other than
- restrictions which were imposed by law or by the terms of licences or public authority requirements;
- restrictions which limit the geographical area in which they may be resold; or
- restrictions which did not substantially affect the value of the goods.
It is assumed that no part of the proceeds for subsequent resale, disposal or use of the goods will accrue directly or indirectly to the seller. It is assumed that the buyers and sellers are not related.
Transaction Value II
It is assumed that the sale or price is not subject to some condition or consideration for which a value cannot be determined with respect to the goods being valued. Where the value of the condition or consideration can be determined, it is regarded as an indirect payment by the buyer to the seller (or vice versa) and is part of the price actually paid or payable.
The price actually paid or payable is the total amount made or to be made by the buyer to, or for the benefit of, the seller for the goods. It includes payments made or to be made as a condition of the sale of the goods by the buyer to the seller. It includes payments made to third parties to satisfy an obligation of the seller.
Where there is doubt regarding the amounts submitted as the price actually paid or payable for goods when sold into the EU, the transaction value need not be used. Where Revenue determines not to use the transaction value, it should notify the importer in writing, who should be given an opportunity to respond. The final decision of the Revenue may be appealed.
The buyer and seller are deemed related only if
- they are partners;
- they are members of the same family;
- they are employer and employee;
- they have certain shareholding connections;
- one directly or indirectly controls the other;
- both are indirectly or directly controlled by a third entity;
Persons, whether natural or legal, may be associated in business with one another. They will be deemed related only if they fit in one of the above categories. The fact that parties are related is not in itself a ground for deeming the value to be unacceptable. It is where the relationship has influenced the price, that the transactional method of value may not be used.
In a sale between related parties, the transaction value may be accepted where the importer demonstrates that the value closely approximates to a transaction occurring at or about the time of importation between non-related buyers in respect of identical or similar goods, which has been determined under a deductive or computed method.
The valuation system makes additions to the price actually paid or payable where that basis is accepted for customs valuation. The additions must be on the basis of objective and quantifiable data. Commissions and brokerage, except buying commissions are added.
The cost of containers which are treated as being one, for customs purposes with the goods in question are added. This would include, specific cases designed and commonly used with the goods. The containers are those in which the goods are contained at the time of importation and in which goods will be sold in the normal course of trade.
The value of containers which are shown to be returnable may be excluded. However, any charges in respect of their use must be included. Where the container itself is liable to a customs charge, the value of the container is to be determined in accordance with normal valuation provisions.
The value of packing and packing material is to be included in the value for customs purposes.
The costs of packing include both the cost of labour and materials. Packing means any external or internal containers, holders, wrappings or supports other than transport devices, tarpaulins, tackle or ancillary transport equipment.
Items known as assists may be supplied, directly, indirectly, free or at a reduced cost, by the buyer for use for protection in the sale of goods. The assists are not included in the value of the goods.
The value of the following, apportioned as appropriate, is to be included:
- materials, components, parts and similar items incorporated in the goods;
- tool, dyes, moulds and similar items used in the production of imported goods;
- materials consumed in the production of imported goods;
- engineering, development, artwork, design work, plans and sketches other than research and preliminary design sketches carried out elsewhere in the EU and necessary for the production of the imported goods.
The cost of making the tools required for use in the protection of goods may be included in the value of the imported goods for customs purpose. This may be done where the costs have not been incorporated into the price paid.
The apportionment of charges should be made in a fair and reasonable manner appropriate to the circumstances.
Royalties and licence fees payable relating to the goods being valued, that the buyer must pay either directly or indirectly, as a condition of sale are to be added, where they are not already included in the price actually paid or payable. Royalties and licences should not be added, where they represent charges for the right to reproduce the imported goods or payments made by the buyer for the right to distribute or resell the imported goods if such payments are not a condition of the sale for export to the EU of the goods.
There is also to be added to the value, any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly to the seller.
There is added, the cost of transport and insurance of the imported goods and the loading and handling charges associated with the transport of the imported goods to the place of introduction of the goods into the customs territory of the EU.
Most importations are valued under the transaction value method. Where the goods are re-imported for rental and no price is paid or payable, this cannot be used.
Identical Goods Value
If the valuation method cannot be used, then the following methods of valuation are to be used in sequence.
The identical goods method values by reference to the transaction value of identical goods sold for export to the EU and exported at or around the time of the goods being valued. The sale is to be at the same commercial level and in substantially the same quantity. Where there is no such sale, a sale at a different commercial level and/or different quantities may be used subject to adjustments to take account of the difference.
In establishing the customs value under this method, precedence should be given to a transaction value for goods produced by the same person. If there is no such comparison, then a value for goods produced by a different person may be used. If more than one transaction value of identical goods is found, the lowest should be used.
If there are no identical comparators available, the transaction value for similar goods sold for export to the EU, at or around the same time, should be used. The above provisions also apply, save that the goods are not identical.
Deductive and Computed Methods
The deductive method may be used next if the above methods are not available. In this case, the value is deduced based on the unit price at which the goods are sold within the EU. The unit price may be for imported goods or identical or similar goods. The price is subject to deductions or commission, usually paid or agreed to be paid, for profit and general expenses in actual EU sales. It includes
- the direct and indirect costs of marketing;
- the usual costs of transport, insurance and associated costs incurred within the EU,
- the customs duties and other taxes payable by reason of the importation or sale.
The unit price is the price at which the greatest number of units is sold at the first commercial level after importation. Contemporaneous sales should be used. The earliest sale which may be used is within 90 days. The sale price of imported goods after processing may be used. Allowance must be made by way of deductions of the value added in processing.
The Computed method which may be used, if the above methods fail to or are not available, may be used where the producer of the goods has access to all information relating to production. The customs value is determined by calculating the sum of the cost or value of materials processing and manufacture; the amount for profit and general expenses; direct and indirect costs of producing and selling the goods; and the cost of transport and insurance of the goods.
The costs of materials and fabrication include the cost of containers and packing. It also includes a portion of the value of assists provided they are used in the production of the goods.
Exceptionally, it may not be possible to determine the customs value based on the above valuation methods. In this case, the value may be determined in a flexible manner, by whichever of the methods most readily enables calculation of the customs value. More than one of the usual methods may be applied flexibly. The above sequence should be taken into account. The customs value should be fair, reasonable, uniform and neutral and reflect the commercial reality, to the extent possible.
The residual method must not be based on:
- selling price in the EU;
- a system which provides for the acceptance of the higher of two alternative values;
- the price of goods on the domestic market of the country of exportation;
- the price for export to a country not forming part of the EU territory;
- minimum customs value;
- arbitrary or fictitious values.
Import on Consignment
Goods are imported on consignment, where they are dispatched to the State of importation not as a result of the sale, but with the intention that they be sold for the account of the supplier, at the best price payable.
At the time of importation, no sale should have taken place, so that no transaction value is available at the point of entry. The system is not available if there is a transaction and one of the standard methods of valuation must be used.
Cost of Transport
The cost of transporting goods to the place of introduction to the EU may be included in the customs value. Where the transport is free or provided by the buyer to the place of introduction, a calculated transport cost is included in the value. It is calculated in accordance with the schedule of freight rates normally applied to the mode of transport.
Where the importer has to pay an all-inclusive price to have goods transported to a point beyond the place of introduction, several modes of transport may be used. The cost of transport must be calculated by deducting either from the price actually paid, the cost of transport within the EU, determined on the basis of rates normally applied or by determining the cost of transport to the place of introduction of the goods into the EU territory.
Where goods are transported by air on the same means of transport to a place beyond the place of introduction, transport costs are to be assessed in proportion to the distance covered inside and outside the territory of the EU.
In the case of goods imported by post, all postal charges levied up to the place of destination, with the exception of postal charges levied in the country of importation, are to be included in the customs value. The cost of insurance effected in relation to the transport and handling of goods must be included in the value for customs purposes. In the case of floating policies, a proportionate part of the premium should be included.
Charges such as foreign port dues, loading charges and demurrage charges at foreign ports, in respect of bringing the goods to the place of introduction, may be included in the customs value. Expenses incurred in connection with handling or delivery of goods after arrival, such as port dues or landing charges, are not to be included.
Many imported goods are subject to duties and taxes applicable outside the EU. They are to be included in the customs value. They are normally borne by the seller and therefore form part of the price payable. Any claim for a reduction in the customs value on the basis that the goods have been or will be relieved from such duties may be allowed.
Other expenses are not generally to be included. Where the transaction value or a value of identical goods or transactions is being used, the following expenses should not be included:
- charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation of goods, such as industrial plant, machinery or equipment;
- customs duties and other taxes payable in the EU by reason of the importation or sale of goods;
- a charge for the right to reproduce the goods in the EU;
- a purchase commission to be paid by an importer;
- transport charges after importation into the EU;
- charges for interest under financing arrangements entered into by the buyer and related to the purchase of the goods.
The last exclusion is on the condition that financing arrangement has been made in writing; and the buyer can demonstrate that such goods were actually sold at the price declared as the price actually paid; and that the claimed rate of interest does not exceed the level for such transactions prevailing in the country at the time when finance was provided.
Miscelleneous Issues Second-Hand Goods, Series of Sales;Some Special Rules
When second-hand or used articles are the subject of a sale, and the conditions for transaction value are satisfied, that method is appropriate. Where no sale price exists, the transaction valuation method cannot be used. The value is to be determined sequentially using the alternative valuation methods.
Where goods have been the subject of a number of sales prior to importation, the last sale occurring in the commercial chain prior to the introduction of the goods is the sales price. A sale taking place within the EU before entry for free circulation can alternatively be considered the sales price.
There is a simplified procedure for valuing certain fruit and vegetables. The unit price may be used as the basis of the customs value of whole fruit and vegetables, of a single kind, imported on consignment only. The value of the unit price is dependent on sales prices for the products in the major marketing centres throughout the EU.
Place of Importation
The place of importation of goods for valuation purposes is
- for goods carried by sea to the port of unloading or port of transhipment subject to transhipment being certified by customs authorities of that port;
- for goods carried by rail or road, the place where the first customs office is situated;
- for goods carried by air, the place where the land frontier of the customs territory of the EU is crossed.
Goods may be introduced into the customs territory of the EU and then carried across other territories such as Switzerland, former Yugoslavia, Belarus, Russia etc. The customs value is determined by reference to the first place of introduction, provided that goods are carried through the other territories by a usual route.
Goods may also be introduced into the territory of the EU and then carried by sea to another part of the territory. The value at the place of introduction into the EU determines the value.
Where factors used to determine the value of goods are in a currency other than euro, the rate of exchange to be used is the periodic rate below. It applies even where the payment for the goods has been made prior to importation at a different rate of exchange.
The rate of exchange quoted by the Central Bank on the second last Wednesday of each month is used for customs valuation for the following calendar month. Details of rates to be applied in a particular calendar month are posted on Revenue website.
Declaration of Particulars
Consignments in excess of €10,000 require the production, with the relevant customs entry, of a declaration of particulars relating to the customs value of the goods being imported. There are a number of types of declaration. One form of declaration is used where there is a price actually paid or payable. Where there is no price actually paid or payable, an appropriate declaration, supported by documentary evidence, should be made.
In the case of continuing traffic, goods supplied by the same buyer to the same seller, under the same commercial conditions, a general declaration may be acceptable.
A declaration is not required in respect of value
- where the customs value is less than €10,000;
- where the importation involved is not of a commercial nature;
- where ad valorem duty does not apply or
- where goods are liable to VAT only and the importer is registered for VAT purposes.
A value declaration may be made by the importer
- if an individual by the individual,
- in the case of a firm by a partner,
- in the case of the company by the director;
- by an employee authorised in writing of one of the above.