Abstract
The purpose of this contribution is to provide the reader with a general introduction to customs valuation with particular emphasis on the activities of the World Customs Organisation (“WCO”) and World Trade Organisation (“WTO”).
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Notes
- 1.
The WTO, WCO, and academic literature provide detailed overviews of the determination of customs value, whereas the World Bank and Organization for Economic Co-operation and Development have provided surveys on the implementation of the current WTO customs valuation agreement in developing countries. See generally World Customs Organization, Customs Valuation Compendium, 2009, http://wcoomdpublications.org/valuation/compendium-customs-valuation.html; specifically within the context of the European Union, see Compendium of Customs Valuation Texts of the Customs Code Committee, Customs Valuation Section, TAXUD/800/2002 (Update), January 2007, p. 62, available at: http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_duties/declared_goods/european/compendium_2007_en.pdf; Rosenow/O’Shea, A Handbook on the WTO Customs Valuation Agreement, 2010; Wolfrum/Stoll/Hestermeyer (eds.), WTO – Trade in Goods, 2011; De Wulf/Sokol (eds.), Customs Modernization Handbook, 2005. Considering the importance of commercial practices to customs valuation, see also the OECD Trade Policy Working Papers Series, available at: http://www.oecd.org/document/40/0,3746,en_2649_37431_44756840_1_1_1_37431,00.html and the WTO’s Trade Policy Review Gateway, available at: http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm.
- 2.
See Art. 15.1(a) of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (“CVA”). The vast majority of WTO members calculate duties on an ad valorem basis. In the case of specific duties, no valuation is necessary because the duties are levied by weight (e.g. 20 cents per kilo). Switzerland is one example of a state that still uses specific duties. The CVA is available at: http://www.wto.org/english/docs_e/legal_e/20-val.pdf.
- 3.
For example, according to Art. 201(1)(a) and (2) of the Customs Code, Council Regulation (EEC) No. 2913/92, OJ [1992] L 302/1, the acceptance of the customs declaration for the release of goods into free circulation also gives rise to the customs debt on importation. The customs declarant is also the customs debtor and must therefore either pay the due amount immediately or provide a security (Art. 201(3), Art. 74 CC). The Code is available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1992R2913:20070101:EN:PDF.
- 4.
See Jackson, World Trade and the Law of GATT. A Legal Analysis of the General Agreement on Tariffs and Trade, 1969, p. 447.
- 5.
E.g. the notorious American Selling Price (ASP), see Jackson, World Trade and the Law of GATT. A Legal Analysis of the General Agreement on Tariffs and Trade, 1969, pp. 446–447 (at fn. 2). It is still possible for states to circumvent the CVA, e.g. by using a secret system of reference prices. See e.g. Executive Office of the President of the United States, United States Trade Representative, 2011 Report to Congress on China’s WTO Compliance, December 2011, pp. 28–30, available at: http://www.ustr.gov/webfm_send/3189.
- 6.
See e.g. De Wulf/Sokol (eds.), Customs Modernization Handbook, 2005, p. 157.
- 7.
Statement by Mr. F. Edmond-Smith, Representative of the European Customs Union Study Group, Working Party I on the International Chamber of Commerce Resolutions, General Agreement on Tariffs and Trade, W.7/8, 7 October 1952, p. 2.
- 8.
In this respect, Ad Art. VII(2)(1) of GATT 1947 Annex I states that the invoice price (after adjustments) can be seen as representative of the actual price. The American Selling Price (ASP) was particularly notorious, see Jackson, World Trade and the Law of GATT. A Legal Analysis of the General Agreement on Tariffs and Trade, 1969, pp. 446–447 (at note 2).
- 9.
GATT, Committee on Trade in Industrial Products, Working Group 2 on Non-Tariff Barriers, COM.IND/W/47, 18 December 1970, p. 3: “Because of the vagueness of Article VII and the use of procedures of exception, no country considered that its system was inconsistent with the terms of that Article.”
- 10.
See Wolffgang/Dallimore, The World Customs Organization and its Role in the System of World Trade, in: Herrmann/Terhechte (eds.), European Yearbook of International Economic Law 2012, pp. 617–618.
- 11.
This is made clear in the preamble to the Convention on the Valuation of Goods for Customs Purposes 1950, which refers to the desire to facilitate international trade and explicitly declares the convention to be international in nature. That said, the Convention reflected European conditions in one important respect, namely the adoption of the c.i.f. value.
- 12.
See Art. V(a) of the 1950 Valuation Convention. Along with the nomenclature of goods, customs valuation has represented a basic function of the Customs Co-operation Council since its inception. Art. III(b) of the CCC states that the function of the CCC shall be to “[…] ensure the highest degree of harmony and uniformity.”
- 13.
Many provisions of the 1950 Valuation Convention reflected the principles of Art. VII GATT. For example, note 5 of Annex II underlined that the object of the “normal price” was to make it possible to calculate the duties payable based on the ordinary course of trade under competitive conditions and Art. II(1)(b) provided that the price could not be based on fictitious values. Art. VI(a) provided for transparency in national legislation. Art. X(b) accommodated existing obligations under international agreement incurred by the Contracting Parties.
- 14.
This would be the case, for example, if the shipment were delayed with a resultant drop in the value of the goods. Alternatively, the goods could be damaged during shipment with the result that their actual value would also be far less than their sale price. See statement by Mr. F. Edmond-Smith, Representative of the European Customs Union Study Group, Working Party I on the International Chamber of Commerce Resolutions, General Agreement on Tariffs and Trade (W.7/8), 7 October 1952, p. 2.
- 15.
The International Chamber of Commerce (ICC) also criticised the BDV for its “length, looseness and susceptibility to differences of interpretation.” See GATT, Working Party I on the International Chamber of Commerce Resolutions, Statement by Mr. M. Dreyfus, Chairman of the International Chamber of Commerce Delegation, General Agreement on Tariffs and Trade (W.7/54), 31 October 1952, p. 2.
- 16.
See Kreider, Valuation for Customs, The Quarterly Journal of Economics 56 (1941) 1, p. 157.
- 17.
This provision was later amended but before it was ratified by members, the GATT Valuation Agreement entered into force.
- 18.
See also Trujillo, in: Wolfrum/Scholl/Hestermeyer (eds.), WTO – Trade in Goods, 2011, p. 223.
- 19.
GATT Multilateral Trade Negotiations, Group “Non-Tariff Measures,” Sub-Group “Customs Matters:” Communication from the Customs Co-operation Council, MTN/NTM/W/17, 26 August 1975, p. 1.
- 20.
See Rege, Developing Country Participation in Negotiations Leading to the Adoption of WTO Agreements on Customs Valuation and Preshipment Inspection. A Public Choice Analysis, World Competition 22 (1999) 1, p. 37 (42–43). The reason for this was the belief that import duties were likely to decline in importance in the near future and the need to ensure that European exports were not exposed to high rates of duties.
- 21.
See Multilateral Trade Negotiations, Group “Non-Tariff Measures,” Sub-Group “Customs Matters,” Statement made by the Commission of the European Communities at the Meeting of the Sub-Group of 15 November 1977, MTN/NTM/W/126, 21 November 1977.
- 22.
These include: to secure additional benefits for the international trade of developing countries; to provide greater uniformity and certainty in the implementation of Article VII; to establish a fair, uniform and neutral system for the valuation of goods for customs purposes that precludes the use of arbitrary of fictitious customs values.
- 23.
See also Liu, in: Wolfrum/Scholl/Hestermeyer (eds.), WTO – Trade in Goods, 2011, pp. 867, 880.
- 24.
The Interpretative Note to Annex 1a of the Agreement Establishing the World Trade Organization states: “In the event of conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A to the Agreement Establishing the World Trade Organization (referred to in the agreements in Annex 1A as the “WTO Agreement”), the provision of the other agreement shall prevail to the extent of the conflict.”
- 25.
Report of the Panel, Argentina—Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/R; Report of the Panel, Colombia—Indicative Prices and Restrictions on Ports of Entry, WT/DS366/R; Report of the Panel, Thailand—Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/R; Report of the Panel, Argentina—Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R. The WTO website provides a list of disputes that refer to the CVA: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds241_e.htm.
- 26.
Summarised from the provisions of the CVA. For a detailed analysis of all valuation methods see Liu/Wolffgang, in: Wolfrum/Stoll/Hestermeyer (eds.), WTO – Trade in Goods, 2011, pp. 875–929
- 27.
According to Art. 1, the transaction value itself is not simply the price stated on the invoice price but is to be adjusted according to Art. 8 “on the basis of objective and quantifiable data,” Art. 8(3).
- 28.
See Technical Committee on Customs Valuation, Advisory Opinion 1.1: The Concept of “Sale” in the Agreement.
- 29.
See Conclusion No. 5: Imports by branches, Compendium of Customs Valuation Texts of the Customs Code Committee, Customs Valuation Section, TAXUD/800/2002 (Update), January 2007, p. 62, available at: http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_duties/declared_goods/european/compendium_2007_en.pdf.
- 30.
This is reflected in the preamble to the CVA that states that the “valuation procedure should not be used to combat dumping.” In addition, contract law also permits goods to be sold at far less than their actual value. In common law systems, it has been held that good consideration can be “adequate but not sufficient.” As a result, a valid contract of sale only requires a nominal sale price. See Thomas vs. Thomas [1842] 2 Q.B. 851, 114 E.R. 330: “A court will not look into the adequacy of consideration or the reasons for the bargain, if there is a real bargain between the parties.”
- 31.
See World Customs Organisation, Customs Valuation Control Handbook, Part I, p. 1, para. 1; the Handbook also defines an invoice as “[a] document which lists the goods shipped, sent or consigned, together with the relevant prices of the goods an charges for their dispatch. […] It is usually the document against which payment for the goods is required to be made.” See Part II, Chapter 4, p. 3, para. 5.
- 32.
For example, the sale price reflects the parties’ respective bargaining power during contractual negotiations, prevalent external economic conditions as well as marketing considerations including branding and consumer behaviour. See e.g. Kristensen/Gabrielsen/Zaichkowsky, How Valuable is a Well-Crafted Design and Name Brand? Recognition and Willingness to Pay, Journal of Consumer Behaviour 11(2012) 1, p. 44 (46): “It is very important for firms to charge the maximum amount the consumer is willing to pay for their goods. However, answering the question what the consumer is willing to pay is not that easy […],” available at: http://onlinelibrary.wiley.com/doi/10.1002/cb.368/pdf.
- 33.
See GATT, Working Party I on the International Chamber of Commerce Resolutions, Statement by Mr. M. Dreyfus, Chairman of the International Chamber of Commerce Delegation, General Agreement on Tariffs and Trade, W.7/54, 31 October 1952, pp. 2–3.
- 34.
See interpretative note 1 to Article 1 CVA Annex I as well as Paragraph 7 CVA Annex III.
- 35.
See Paragraph 1 of the General Introductory Commentary to the CVA. See also Rosenow/O’Shea, A Handbook on the WTO Customs Valuation Agreement, 2010, p. 30.
- 36.
According to Art. 8(4) CVA, this list is final.
- 37.
See e.g. Art. 32(1)(e)(i) of the Community Customs Code, which provides for the inclusion of transportation costs “to the place of introduction into the customs territory of the Community.”
- 38.
Collins, The Concept of Assist as Applied to Customs Valuation of Imported Merchandise, Detroit College of Law Review 239 (1991) 1, pp. 243–244; see also Technical Committee on Customs Valuation, Advisory Opinion 24.1 (Determination of the Value of an Assist under Article 8.1(b) of the Agreement).
- 39.
See interpretative note to Art. 8(1)(b)(ii) CVA.
- 40.
See also Liu, in: Wolfrum/Stoll/Hestermeyer (eds.), WTO – Trade in Goods, 2011, p. 947.
- 41.
See World Customs Organisation, WTO Agreement & Texts of the Technical Committee on Customs Valuation, Case Study 2.1 (Application of Art. 8.1(d) of the Agreement) and Case Study 2.2 (Treatment of Proceeds under Art. 8.1(d)).
- 42.
See Report of the Panel, Thailand—Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/R, para. 7.154.
- 43.
The interpretative notes provide limited guidance in this respect. They simply refer to the use of previously determined values and a flexible application of Art. 1-6.
- 44.
Art. 13 allows the importer to withdraw the goods from customs supervision provided that he provides a sufficient guarantee. See e.g. Art. 74 of the Community Customs Code.
- 45.
General Agreement on Tariffs and Trade, Resolutions Submitted by the International Chamber of Commerce on Valuation, Nationality of Manufactured Goods and Formalities Connected with Quantitative Restrictions, G/22, 29 August 1952, p. 2.
- 46.
It may be possible to obtain advance rulings on customs valuation. See Moïsé/Orliac/Minor, Trade Facilitation Indicators: The Impact on Trade Costs, OECD Trade Policy Working Papers, (2011) 118, p. 16, available at: http://dx.doi.org/10.1787/5kg6nk654hmr-en.
- 47.
Art. X(3)(a) also requires each Contracting Party to administer customs valuation laws in a uniform, impartial and reasonable manner and Art. X(3)(b) requires review tribunals to be independent of administrative enforcement agencies.
- 48.
See the Understanding on Rules and Procedures Governing the Settlement of Disputes 1994. The GATT Customs Valuation Agreement provided for a self-contained procedure. Compare Art. XI of the Customs Valuation Convention 1950 with Art. 19 of the CVA 1994.
- 49.
See CVA Annex III, Paragraphs 1, 3 and 4. Nowadays, no member maintains an extension to the delay period. See World Trade Organization, Report of the Committee on Customs Valuation, G/VAL/W/203, 2011, p. 1.
- 50.
In April 1997, the Committee granted observer status to UNCTAD, WCO, ACP, IADB. The World Bank and IMF also have observer status. See WTO, Draft Report of the Committee on Customs Valuation to the Council for Trade in Goods, G/VAL/W/197, 4 November 2010, para. 3.
- 51.
The rules of procedure are those of the General Council with the necessary modifications. See rules of Procedure for Meetings of the Committee on Customs Valuation, approved by the Council for Trade in Goods on 1 December 1995, G/L/146, 24 February 1997.
- 52.
See CVA Annex II.
- 53.
The Terms of Reference of the Technical Committee on Customs Valuation are available online at: http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/About%20Us/Terms%20Reference%20WB%20E_Rev20090513.pdf.
- 54.
An issue can be dealt with by more than one instrument. For example, related party transactions are dealt with by AO 7.1, AO 21.1; Com. 10.1, Com. 14.1; EN. 4.1; CS. 9.1, CS 10.1, CS. 11.1.
- 55.
World Customs Organisation, Customs Valuation Compendium, Technical Committee Texts, General Part (G3-G4).
- 56.
World Customs Organization, Customs Valuation Compendium, Technical Committee Texts, General Part (G5, paras. 25–26).
- 57.
Another example would be the express reference to the United Nations in Art. XXI of the GATT.
- 58.
For the legal implications on decisions interpreting the WTO Agreements (within the context of the discussions concerning the valuation of computer software), see GATT Committee on Customs Valuation, Minutes of the Meeting Held on 10 May 1983, VAL/M/7, 7 July 1983, pp. 8–9.
- 59.
Examples of incorrect information provided by the importer include undervaluation or overvaluation, an incorrect description of the goods or failing to make the necessary adjustments required by Art. 8.
- 60.
For example, customs duties still represent an important source of revenue for the state in many countries; undervaluation can give an importer an unfair advantage over his competitors and last but not least, valuation fraud is connected to organised crime such as money laundering and smuggling. See Report of the Panel, Columbia—Indicative Prices and Restrictions on Ports of Entry, WT/DS366/R, p. 3 (para. 2.5).
- 61.
World Customs Organization, Customs Valuation Control Handbook, Part II, Chapter 1, p. 1, paras. 4–5; Report of the Panel, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/R, para. 7.160.
- 62.
See Report of the Panel, Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/R, para. 6.44.
- 63.
See Committee on Customs Valuation, Justification for India’s Proposal on the Burden of Proof, VAL/W/51, 10 October 1989, p. 1.
- 64.
Available at: http://www.wto.org/english/docs_e/legal_e/42-dval1.pdf.
- 65.
See De Wulf/Sokol (eds.), Customs Modernization Handbook, 2005, p. 158. See also Liu, in: Wolfrum/Scholl/Hestermeyer (eds.), WTO – Trade in Goods, 2011, p. 981, deeming the legal effects of the Decision “controversial” and emphasising that it “does not and should not shake the fundamental basis of the agreement, which is that the primary base for customs value is the transaction value.” However, from the importer’s point of view, it is difficult to reconcile the obligation to prove compliance with the rule of law according to which the burden of proof is to be borne by the accuser of wrongdoing. See Abad, Forging a Translation: The “Circumstances of Sale” Criterion, Transfer Pricing, and Economics, Global Trade and Customs Journal 5 (2010) 9, p. 335 (338).
- 66.
E.g. rating the transaction according to a checklist of risk factors such as undervaluation, no-sale situations, subsequent sale etc. See World Customs Organization, Customs Valuation Control Handbook, Part III, Chapter 1, Appendix to Chapter 1 (III), “Risk Rating,” p. 4. See also World Customs Organization, Guidelines on the Development and Use of a National Valuation Database as a Risk Assessment Tool, available at: http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Valuation/guidelines_national_db.pdf. See also World Customs Organization, Customs Valuation Control Handbook, Part V on the computerisation of valuation.
- 67.
See Shin, Implementation of the WTO Customs Valuation Agreement in Developing Countries, Issues and Recommendation, Journal of World Trade 33 (1999) 1, p. 124 (132–133).
- 68.
Diaz Gavier/Pierola, Related Parties and Customs Valuation: Guidance Derived from the Panel Report Thailand—Cigarettes, Global Trade and Customs Journal 7 (2012) 1, p. 7 (9).
- 69.
In this respect, the 19 U.S.C. s. 1401a(b)(2)(B) imposes the unique obligation on importers to exercise “reasonable care.” See US Customs and Border Protection Bureau, Reasonable Care (A Checklist for Compliance), April 2004, p. 3, available at:http://www.cbp.gov/linkhandler/cgov/trade/legal/informed_compliance_pubs/icp021.ctt/icp021.pdf. See also Abad, Forging a Translation: The “Circumstances of Sale” Criterion, Transfer Pricing, and Economics, Global Trade and Customs Journal 5 (2010) 9, p. 335 (337–339), who argued that the concept implicitly imposes an “obligation to prospectively evaluate and document RPTs” and further, that its breach “may result in civil customs penalties, even when the imported goods are free of duty.”
- 70.
See Report of the Panel, Columbia – Indicative Prices and Restrictions on Ports of Entry, WT/DS366/R, p. 109, (para. 7.155), “[…] the Panel recognizes that WTO members have a legitimate right to apply measures aimed at combating under-invoicing, smuggling and money laundering. However, these measures should be WTO-consistent […].” See also Report of the Panel, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/R, para. 7.159, where the Panel stated that “any situation giving rise to a reason(s) for questioning the transaction value would naturally demand the customs authorities’ critical consideration of, inquiry into, and investigation of, the relevant situation.”
- 71.
See Diaz Gavier/Pierola, Related Parties and Customs Valuation: Guidance Derived from the Panel Report Thailand-Cigarettes, Global Trade and Customs Journal 7 (2012) 1, p. 7, pointing out that in 2009, such trade accounted for approx. 48% of imports into the United States.
- 72.
See OECD Guidelines for Multinational Enterprises, p. 12, para. 3, available at: http://www.oecd.org/dataoecd/56/36/1922428.pdf, which state that MNEs “usually comprise companies or other entities established in more than one country and so linked that they may co-ordinate their operations in various ways.”
- 73.
According to the TCCV, importers “are more likely to be able to show that the price was not influenced than they will be able to demonstrate that the transaction value meets one of the tests in Art. 1.2 (b).” See World Customs Organization, Customs Valuation Control Handbook, Part III, Chapter 7, p. 1, para. 2.
- 74.
The interpretative notes to Art. 1, Paragraph 2 CVA Annex I state that “Where the customs administration have no doubts about the acceptability of the price, it should be accepted without requesting further information from the importer.”
- 75.
Report of the Panel, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/R. For a brief analysis see Krallmann, WTO Dispute Settlement: Current Cases, in: Herrmann/Terhechte, European Yearbook of International Economic Law 2012, p. 590.
- 76.
See Report of the Panel, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/R, para. 7164, drawing a parallel with the Agreement on Safeguards.
- 77.
See World Customs Organization, Customs Valuation Control Handbook, Part III, Chapter 7, p. 1.
- 78.
See Diaz Gavier/Pierola, Related Parties and Customs Valuation: Guidance Derived from the Panel Report Thailand-Cigarettes, Global Trade and Customs Journal 7 (2012) 1, p. 7 (8).
- 79.
See Desiderio/Desiderio, Thoughts on the “First Sale” Rule, World Customs Journal 4 (2010) 1, p. 39, stating that using the first sale can reduce the amount of ad valorem duties payable by up to 50%. The article is available at: http://www.worldcustomsjournal.org/media/wcj/-2010/1/Desiderio.pdf.
- 80.
Technical Committee on Customs Valuation, Advisory Opinion 14.1: Meaning of the Expression “Sold for Export to the Country of Importation” (in response to the question “How should this be interpreted?”). In Example 2, the TCCV states: “It is not necessary that the sale takes place in a specific country of exportation.”
- 81.
For example, Art. 147 of the Customs Code Implementing Provisions, Commission Regulation (EEC) No. 2454/93, OJ [1993] L 253/1 (the Code is available online at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1992R2913:20070101:EN:PDF), allows Member States to accept the first sale rule. This provision states that, in the case of successive sales before valuation, “each price resulting from these sales may, subject to the provisions of Articles 178 to 181, be taken as a basis for valuation.” This is supported by Commentary No. 7 of the Customs Code Committee (Customs Valuation Section) on the application of Article 147 of Commission Regulation (EEC) No. 2454/93, available in Compendium of Customs Valuation Texts of the Customs Code Committee, Customs Valuation Section, TAXUD/800/2002 (Update), January 2007, pp. 40 et seq., available at: http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_duties/declared_goods/european/compendium_2007_en.pdf.
- 82.
Cf. the approach stipulated by Art. 31 and 32 of the Vienna Convention on the Law of Treaties 1969.
- 83.
Ruessmann/Willems, Revisiting The First Sale For Export Rule: An Attempt to Remove Fairness in the Interests of Raising Revenues Without Improving Legal Certainty, World Customs Journal 3 (2009) 1, p. 45 (48), available at: http://worldcustomsjournal.org/media/wcj/-2009/1/Willems-Ruessmann.pdf.
- 84.
As required by Art. 31(3) of the Vienna Convention on the Law of Treaties 1969. This treaty represents customary international law and is expressly followed by the Panel and Appellate Body. The provision requires “any subsequent practice between the parties regarding the interpretation of the treaty or application of its provisions” to be taken into account together with the context.
- 85.
In the United States, CBP’s attempt to incorporate A.O. 22.1 in national law failed due to the protest of commerce and legislative requirements. For an overview see Desiderio/Desiderio, Thoughts on the “First Sale” Rule, World Customs Journal 4 (2010) 1, p. 39 (40–42), available at: http://www.worldcustomsjournal.org/media/wcj/-2010/1/Desiderio.pdf.
- 86.
Regulation (EC) No. 450/2008 of the European Parliament and of the Council, OJ [2008] L 145/1 (“Modernised Customs Code,” available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:145:0001:0064:EN:PDF), entered into force on 24 June 2008 but could not be applied without its implementing provisions. These were due to be issued by June 2012. However, in February 2012, the Commission replaced the code with a Proposal of the European Parliament and of the Council laying down the Union Customs Code, COM(2012) 64 final, available at: http://ec.europa.eu/taxation_customs/resources/documents/common/legislation/proposals/customs/com%282012%2964_en.pdf. It will take a number of years before the code enters into force.
- 87.
Parliamentary Questions, Answer given by Mr. Šemeta on behalf of the Commission, 2 May 2011 (E-002959/2011), available at: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2011-002959&language=EN.
- 88.
Liu, Transfer Pricing and Customs Valuation: Exploring Convergence, Global Trade and Customs Journal 2 (2007) 3, p. 117.
- 89.
Concerning the European Union, Council Directive 2006/112/EC of 28 November 2006, OJ [2006] L 347/1, Art. 85 states: “In respect of the importation of goods, the taxable amount shall be the value for customs purposes, determined in accordance with the Community provisions in force.” It is available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006L0112:EN:HTML.
- 90.
In this respect, it is significant that the United States has stated that an importer who relies solely on an APA or transfer pricing study will fail not only to satisfy the transaction value method of customs valuation but also to discharge the burden of reasonable care imposed by US law. See US Customs and Border Protection Bureau, Determining the Acceptability of Transaction Value for Related Party Transactions, April 2007, p. 17, available at: http://www.cbp.gov/linkhandler/cgov/trade/legal/informed_compliance_pubs/icp089.ctt/icp089.pdf.
- 91.
See OECD Guidelines for Multinational Enterprises, available at: http://www.oecd.org/dataoecd/56/36/1922428.pdf.
- 92.
In this respect, the CVA prohibits the use of a transaction price that has been influenced through a relationship between the buyer and seller. The OECD’s Guidelines uses the concept of an “arm’s length transaction.” See OECD Guidelines for Multinational Enterprises, Principle X (Taxation), available at: http://www.oecd.org/dataoecd/56/36/1922428.pdf.
- 93.
This makes it difficult for MNEs to satisfy the requirements of both regimes in a way that operates to their advantage. An advantage under the CVA requires a low transaction value whereas an advantage under the OECD Guidelines requires the highest possible deductible value.
- 94.
See Abad, Forging a Translation: The “Circumstances of Sale” Criterion, Transfer Pricing, and Economics, Global Trade and Customs Journal 5 (2010) 9, p. 335 (336–337). Annex I offers only vague guidance on the methodology to use and this is often reflected in national legislation.
- 95.
For example, under s.482 of the US Internal Revenue Code, taxpayers can prove an arm’s length transaction in relation to an aggregate value of transactions. By contrast, customs authorities are required to examine in each and every transaction whether a relationship between the parties has influenced the transaction price pursuant to 19 U.S.C. §1401a(b)(2)(A)(iv). See Murphy/Files, The Intersection of Transfer Pricing and Customs Valuation: Challenges (and Opportunities) for Multinational Enterprises, International Trade Law and Regulation15 (2009) 5, p. 149 (152).
- 96.
See Liu, in: Wolfrum/Scholl/Hestermeyer (eds.), WTO – Trade in Goods, 2011, pp. 900–902.
- 97.
See Weerth, Tariffs of the World: Are Customs Duties Really Growing Unimportant?, Global Trade and Customs Journal 4 (2009) 2, p. 53 (55): According to data from the WCO, the revenue from tariffs accounts for between 30-50% of revenue in 27 countries.
- 98.
The informal sector is estimated to represent 43% of the GDP in Africa, almost equivalent to the formal sector. See Organisation for Economic Co-operation and Development, Trade and Agriculture Directorate Trade Committee, Working Party of the Trade Committee, Informal Cross-Border Trade and Trade Facilitation Reform in Sub-Saharan Africa, OECD Trade Policy Working Paper No. 86, TAD/TC/WP(2008)13/FINAL, 18 February 2009, p. 8, available at: http://www.oecd.org/dataoecd/24/6/42222094.pdf.
- 99.
See Satapathy, Implementation of WTO Agreement on Customs Valuation, Economic and Political Weekly, 17 June 2000, p. 2098, who refers to “fraudulent re-invoicing in third countries, double invoicing with the connivance of the foreign suppliers, misdeclaration of description, quantity and quality of imported goods to suppress value, overvaluation of exempted and low-rated imports to transfer hard currency abroad and overvaluation of exports to get additional export incentives.”
- 100.
See comments by Belize in Report by the Technical Committee on Customs Valuation Concerning the Effects of False Invoicing on Customs Valuation, GATT Committee on Customs Valuation, VAL/W/32, 7 November 1985. See also GATT, Committee on Customs Valuation, Justification for India’s Proposal on the Burden of Proof, VAL/W/51, 10 October 1989, paras. 4–5.
- 101.
E.g. by using official indicative values based on the average prices of imports as well as minimum values. See GATT, Non-Tariff Measures Affecting Trade of Developing Countries: Note by the Secretariat, MTN/3B/23, 31 December 1974, p. 24, para. 58.
- 102.
See Rosenow/O’Shea, A Handbook on the WTO Customs Valuation Agreement, 2010, pp. 29–30.
- 103.
For an explanation of the weak negotiating position of developing countries in trade negotiations see Rege, Developing Country Participation in Negotiations Leading to the Adoption of the WTO Agreements on Customs Valuation and Preshipment Inspection, A Public Choice Analysis, World Competition 22 (1999) 1, p. 37 (38). See also Finger/Schuler, Implementation of Uruguay Round Commitments: The Development Challenge, World Bank Policy Working Paper No. 2215, October 1999, p. 11, available at: http://elibrary.worldbank.org/content/workingpaper/10.1596/1813-9450-2215.
- 104.
Ministerial conference, 4th Session (Doha, November 2001)—Decision on Implementation-related issues and concerns, WT/MIN(01)/17, 20 November 2001, available at: http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_implementation_e.pdf.
- 105.
See Duran/Sokol, Policy and Operational Lessons Learned From Eight Country Case Studies, in: De Wulf/Sokol (eds.), Customs Modernization Handbook, 2005, pp. 116–119.
- 106.
See World Customs Organization, Customs Valuation Control Handbook, Part II, Chapter 1, p. 1, para. 1.
- 107.
Finger/Schuler, Implementation of Uruguay Round Commitments: The Development Challenge, World Bank Policy Working Paper No. 2215, October 1999, p. 12, available at: http://elibrary.worldbank.org/content/workingpaper/10.1596/1813-9450-2215.
- 108.
See World Customs Organization, Capacity Building Strategy, 2003, pp. 4–5, available at: http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Capacity%20Building/Cap%20buil%20strat.pdf.
- 109.
See Resolution of the Customs Cooperation Council passed in June 2009 to enhance delivery of capacity building as a response to declining revenue collection caused by the economic downturn, available at: http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/About%20Us/Annex%20%20-%20Resolution%20Global%20Economic%20Downturn.pdf. See also, World Customs Organization, Revenue Collection Package, 2011, pp. 4–5, available at: http://www.wcoomd.org/files/1.%20Public%20files/english/revenue_package/revenue_package.pdf.
- 110.
See Lesser/Moisé-Leeman, Organisation for Economic Co-operation and Development, Trade and Agriculture Directorate Trade Committee, Working Party of the Trade Committee, Informal Cross-Border Trade and Trade Facilitation Reform in Sub-Saharan Africa, OECD Trade Policy Working Paper No. 86, TAD/TC/WP(2008)13/FINAL, 18 February 2009, pp. 43–45, available at: http://www.oecd.org/dataoecd/24/6/42222094.pdf.
- 111.
Accordingly, reference values can be used to check the customs values but not to calculate the duties themselves. See Report of the Panel, Columbia – Indicative Prices and Restrictions on Ports of Entry, WT/DS366/R, p. 103 (para. 7.129): The Panel rejected Columbia’s argument that the payment made by the importer was a guarantee because the importer could only have the goods released if he paid the customs duties and sales tax based on indicative prices. In the event, the Panel held the system of indicative pricing contravened Art. 1-3, 5-6, and 7.2(b) and (f) of the CVA.
- 112.
See also World Customs Organization, Guidelines on the Development and Use of a National Valuation Database as a Risk Assessment Tool, Preamble, para. 1, available at: http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Valuation/guidelines_national_db.pdf.
- 113.
The preamble to this agreement recognises that developing countries need to verify price of imported goods but also that PSI programmes must not give rise to unnecessary delays or unequal treatment. The PSI agreement is available at: http://www.wto.org/english/docs_e/legal_e/21-psi.pdf.
- 114.
Asakura, World History of the Customs and Tariffs, 2003, p. 173: “[C]ustoms valuation is always a delicate business.”
- 115.
Pehle, The Bretton Woods Institutions, The Yale Law Journal 55 (1946) 5, p. 1127.
- 116.
See Weerth, Tariffs of the World: Are Customs Duties Really Growing Unimportant?, Global Trade and Customs Journal 4 (2009) 2, p. 53 (55).
- 117.
See e.g. Clarete, Managing the Challenges of WTO Participation, Case Study 37, Philippines: Adopting the Transaction Basis for Customs Valuation, in: Gallagher/Low/Stoler (eds.), Managing the Challenges of WTO Participation – 45 Case Studies, 2005, also available at: http://www.wto.org/english/res_e/booksp_e/casestudies_e/case37_e.htm.
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Wolffgang, HM., Dallimore, C. (2013). The Valuation of Goods for Customs Purposes. In: Herrmann, C., Krajewski, M., Terhechte, J. (eds) European Yearbook of International Economic Law 2013. European Yearbook of International Economic Law, vol 4. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33917-2_15
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