Customs Valuation, Related Party Transaction and Royalty and Licence Fee

Zhaokang Jiang
Sandler, Travis & Rosenberg
[email protected]

For the corporate world, a different customs value report by the importer of record results in different customs revenue and internal tax liabilities and capital flow. On the other hand, governments may take advantage of customs valuations in order to increase the importer's duty liabilities for revenue purposes. In developing countries, understanding and supporting procedures for customs valuation are technical and legal challenges that arise for the government and the international trade community. This is particularly true if customs valuation involves related party transactions or other technical issues such as royalties and license fees, which are the focus for customs valuation in Asian countries.

WTO rules emphasise that customs value should be based on the actual value of the imported goods or like goods. Generally, the customs value of all merchandise exported to a country of importation will be the transaction value, price actually paid or payable, for the goods. If the transaction value cannot be used and found, then certain secondary bases are considered in order of precedence: transaction value of identical merchandise; transaction value of similar merchandise; deductive value; and computed value. The order of precedence of the last two values can be reversed if the importer requests.