1. Customs valuation
(1) The definition
The Customs valuation is a procedure that the Customs of a country determines Customs dutiable values of imported or exported goods, in accordance with the unified valuation rules stipulated according to the laws and regulations of the country. It is a legal system based on commercial pricing.
(2) The origin
The Customs valuation is the legal rules made by the Customs of a country for tariff collection. However, due to its direct influence on international trade, most countries once took it as a non-tariff barrier to restrict import by setting floor prices or adopting unreasonable valuation methods. Thus, with great efforts made by many countries and international business circles, a unified Customs valuation system has taken shape to promote the healthy development of international trade. At present, the Chinese Customs conducts the Customs valuation on the basis of transaction values, which links the legal system of Customs valuation with the prevailing international rules.
2. The Customs valuation system of China
Since China entered the World Trade Organization (WTO) in 2001, in order to fulfill its WTO entry commitments and implement the “Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994” (hereafter shortened as the “Agreement”), Chinese Customs has embodied the principles and valuation rules of the “Agreement” into the following laws, regulations and department rules:
The first is the “Customs Law of the People’s Republic of China” (hereafter shortened as the “Customs Law”) passed by the standing committee of the National People’s Congress. The new “Customs Law” amended in 2000 in line with the “Agreement” stipulates in Article 55 that the way of Customs valuation shall be based on transaction values. According to the Article, the dutiable values of imported or exported goods shall be determined by the Customs on the basis of transaction values. If the transaction values can not be determined, the dutiable values shall be valued by the Customs. This marks a legal connection between the “Customs Law” and the “Agreement”.
The second is the “Regulations of the People’s Republic of China on Import and Export Duties” (hereafter shortened as the “Regulations”) promulgated by the State Council. Coming into effect since January 1, 2004, it defines in Article 18 the dutiable values and the transaction values as follows. “The dutiable values of imported goods shall be determined by the Customs on the basis of the transaction values which comply with the conditions specified in Paragraph 3 of this Article, as well as the costs of transport, charges associated with transport, and the cost of insurance incurred prior to unloading of such goods at the port or place of entry within the Customs territory of the People’s Republic of China. The transaction values of imported goods is the prices actually paid or payable for the import goods by the buyers when sold by the sellers for export to the Customs territory of the People’s Republic of China, and adjusted in accordance with the provisions of Articles 19 and 20 of the “Regulations”, including the prices paid directly and indirectly”. For the first time, such concepts as “selling”, “actually paid”, “payable”, “adjusted prices”, “paid directly and indirectly” have been embodied in the definition of the transaction values, which keeps in conformity with the “Agreement”.
The third is the “Measures of the People’s Republic of China on Customs Dutiable Valuation of Imported and Exported Goods” (hereafter shortened as the “Measures”) issued by the General Administration of Customs of PRC. As the department rules, the “Measures”, by elaborating the rules of entities and procedures, is the legal basis for Customs valuation. It completely and accurately demonstrates the basic principles and main contents of the “Agreement”. In 2001 and 2006, the Chinese Customs has successively amended the “Measures” to conform to the international valuation rules in terms of transaction value conditions, valuation methods, adjustment of actually paid or payable prices. In line with higher-level laws, the “Measures” adopts the narration in the “Agreement” to a maximum extent, which has reached the conformity between the domestic legislation and the international valuation rules. Meanwhile, importers have more rights in the Customs valuation, with the valuation transparency remarkably enhanced.
3. Principles of Customs valuation
The Customs valuation in China conforms to the principles of “Objectivity, Fairness and Uniformity”. “Objectivity” means that the Customs valuation is conducted by using truthful data in the import and export trade, rather than groundless or fraudulent data. Based on the actual sales contracts signed by importers or exporters with their counterparts, if a contract is truthful and conforms to the definition and conditions of the transaction value, the Customs shall determine the value according to the actual transaction value. Meanwhile, the imported goods’ transaction values should be adjusted based on objective and quantifiable fees or values. Without the above data, the Customs shall not accept the declared values, and the Customs valuation shall be conducted in other ways.
“Fairness” is, especially, emphasized in the valuation process. The same trading mode and transaction process should go through the same procedures for Customs valuation. The price discrepancy resulting from different negotiation skills of importers is neither a factor of valuation adjustment, nor a problem to be solved in the Customs valuation. The Customs can not determine the values based on a unified price. All these are the principles of fairness in Customs valuation.
The principle of “Uniformity” means that the valuation methods for trading in the same modes should be consistent. If a company’s trading mode is consistent, the custom valuation should also be consistent. In a word, the Customs valuation should not impede the sound development of international trade.
4. Determination of dutiable values of imported and exported goods
(1) Dutiable values of imported goods
The dutiable values of imported goods shall be determined by the Customs based on transaction values as well as the costs of transport, charges associated with transport, and the cost of insurance incurred prior to unloading of such goods at the port or place of entry within the Customs territory of the People’s Republic of China.
(2) Dutiable values of exported goods
The dutiable values of exported goods shall be determined by the Customs based on transaction values as well as the cost of transport, charges associated with transport of the goods and cost of insurance incurred prior to the loading of such goods at the port or place of leaving within the Customs territory of the People’s Republic of China.
(3) Methods of Customs valuation
The Customs valuation can be conducted by transaction values, identical goods’ transaction values, similar goods’ transaction values, price deduction, formula or reasonable quantification.
In most cases, it is conducted by the method of transaction values (based on the values of the imported or exported goods’ actual receipts or contracts). However, not all imported or exported goods can be valuated in that way. For instance, the values of the goods without selling behavior should be determined by the following methods in their given order: the method of identical goods’ transaction values, the method of similar goods’ transaction values, price deduction, formula and reasonable quantification. Moreover, any duty payer may, after submitting relevant materials to the Customs, make a request to reverse the order of the method of price deduction and that of formula.