Customs Valuation of Imported Goods; with Act and Rules

The Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 provides the manner for determining the transaction value of Imported goods.

In order to understand the valuation, we need to understand FOB and CIF value.

FOB: FOB means Free on Board. In FOB the seller/exporter pays for transportation of goods up to port of shipment plus loading cost. Once the goods have been loaded the liability shifts from seller to buyer. When the ship or conveyance starts coming, the buyer then assumes all liability. So, in FOB value besides cost of the goods, the buyer pays charges involved in marine freight transport, insurance, and transportation from the arrival port to the final destination.

CIF: CIF (Cost Insurance and Freight). Under CIF value terms the seller/exporter pays the cost of marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination.  In this, seller is obligated to insure the goods while in transit for 110% of their value.

 

Valuation of Imported Goods

Firstly Section 12 provides that duties of customs shall be levied at such rates as may be specified in the Customs Tariff Act, 1975, Section 14 provides for valuation of imported goods as-

  • the transaction value of such goods,
  • also, the value of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services as provided under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The rules will also cover –
    • the circumstances in which the buyer and the seller shall be deemed to be related,
    • the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case,
    • the manner of acceptance or rejection of value declared by the importer.
    • The price will be calculated upon after conversion of currency taking into consideration the rate of exchange on the date on which bill of entry[1] is presented which will be notified by the Central Board of Excise and Customs, Reserve Bank of India, and the Foreign Exchange Dealers’ association from time to time through a notification frequently.

 

By virtue of Section 14, the value of the imported goods shall be the transaction value of such goods, or, the price actually paid or payable for the goods when sold for export or exported to India for delivery at the time and place of importation where the buyer and seller of the goods are not related and the price is the sole consideration of the sale subject. The transaction value is the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, where the buyer and seller of the goods are not related and the price is the sole consideration for sale, subject to such other conditions as may be specified in the rules made in this behalf. Proviso to section 14(1) states that the price shall be calculated as per the rate of exchange as in force on the date of presentation of bill of entry or shipping bill or bill of export under section 46[2] or section 50, as the case may be. Further, if transaction value is not determinable (in case of no sale or buyer or seller being related or price not being sole consideration), value is determined in accordance with valuation rules. Hence, the value of imported goods shall be computed in accordance with section 14(1) read with the Customs Valuation (Determination of Value of imported Goods) Rules, 2007. The CBEC generally notifies rates every fortnight.

Also, as per Rule 10[3] the value of the imported goods shall be the value of such goods, for delivery at the time and place of importation and also includes the cost of transport of the imported goods to the place of importation, loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation and the cost of insurance. And as per Customs Tariff Act[4], additional duty of Customs or Countervailing duty will be applicable if any article is imported into India (along with BCD) as mentioned in Section 12 of Customs Act, 1962, and as per section 3(5) of the Act SAD i.e., Special Additional Duty will be imposed on import of goods[5].

 

CUSTOMS VALUATION (DETERMINATION OF PRICE OF IMPORTED GOODS) RULES, 2007

Rule 10- Costs and Services

  • Rule 10(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 has been amended vide Notification dated 26 September 2017 which provide for inclusions in the value of imported goods to determine the Assessable Value.
  • If the cost of transportation, loading, unloading and handling charges is not ascertainable, the same shall be taken as 20% of the FOB value (In case of import of goods by air the same shall be restricted to 20% of the FOB Value where actual cost is more).

By virtue of Customs Act, 1962 The Central Board of Excise and Customs (the Board defined in section 2(6)) has been given the powers to appoint Customs Ports, Airports and Inland Container Depots (ICD), where the imported goods can be brought in for unloading or loading of export goods. Also, powers have been given to the Board to notify places as Land Customs Stations (LCS) for clearance of goods imported or exported by land or by inland water.

 

[1] Customs Act 1962, s 46

[2] Customs Act 1962, s 46

[3] CUSTOMS VALUATION (DETERMINATION OF PRICE OF IMPORTED GOODS) RULES 2007, rule 10(2)

 

[4] Customs Tariff Act 1975, s 2

[5] Customs Tariff Act 1975, s 3(5)

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