Report by the Secretariat (WT/TPR/S/249):III. TRADE POLICIES AND PRACTICES BY MEASURE: (2) Measures Directly Affecting Imports:(ii) Customs valuation and clearance: Page 39, paragraph 20:
The report states that transaction value may be rejected if reasonable doubt arises concerning the accuracy of the declared value such as a significantly higher value at which identical or similar imports at (or about) the same time, in comparable quantities and comparable commercial transaction, were assessed. What is considered a significantly higher value which gives rise to a reasonable suspicion? The report also states that royalties and license fees must be included in the transaction value if not included in the price actually paid or payable. How is this requirement consistent with Article 8 of the CVA?
Reply: Under Rule 12 of the Customs Valuation Rules 2007 the Customs may raise doubts on the truth or accuracy of the declared value of the goods where identical or similar goods are imported at a significantly higher value at or about the same time in comparable quantities in a comparable commercial transaction. The term "significantly higher value" has not been defined under the said Rules. The ordinary meaning of the term "significantly higher value" is "substantially higher value" or "considerably higher value".
It is relevant to mention here that Rule 12 by itself does not provide a method for determination of value; it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value. The acceptance of the declared value is based on the facts and circumstances of each transaction, as envisaged in the CVA.
The customs valuation legislation of India has been framed on the lines of the CVA. Following the CVA, the law provides that where the declared value is rejected, the value will be determined by proceeding sequentially in accordance with rules 4 to 9 of the said Customs Valuation Rules 2007.
Under Article 8 1(c) of the CVA, royalties and license fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable, are taken into account in determining the customs value under the provisions of Article 1. This provision has been incorporated in the customs valuation legislation of India.
U.S. Follow-Up Question: In practice does India have a threshold amount or percentage deviation from the value of identical or similar goods for purposes of raising doubts on the truth or accuracy of the declared value of the good?
Reply: India does not have a fixed threshold amount or percentage deviation from the value of identical or similar goods for the purposes of raising doubts on the truth or accuracy of the declared value of the imported goods. Rule 12 of the Customs Valuation Rules 2007 is not a substantive provision but a procedural guidance to the assessing officers for application of the said rules. The doubt as regards the inadequacy of the declared value would depend on the facts and circumstances of each transaction, and the further course of action for determination of value would be carried out as per the Indian customs valuation rules, which are aligned to the WTO Customs Valuation Agreement.