BRIEF GUIDE

TO THE

CUSTOMS VALUATION AGREEMENT

_________

THIRD EDITION

August 1996

WORLD CUSTOMS ORGANIZATION

Rue du Marché, 30
B-1210 - Brussels
Belgium
 TABLE OF CONTENTS
_________________

Page

Foreword I

Agreement on Customs Valuation

- General Introductory Commentary 1

Part I

- Rules on Customs valuation 4

Part II

- Administration, consultations and

dispute settlement 27

Part III

- Special and differential treatment 28

Annex III 29
 BRIEF GUIDE TO THE CUSTOMS VALUATION AGREEMENT
______________________________________________

FOREWORD

This booklet has been prepared by the Secretariat of the World Customs
Organization* to provide Customs officials and other interested persons with
basic information on Customs Valuation under the terms of the GATT Agreement
1994.

Being limited in purpose, the booklet contains only the technical provisions
of the Agreement, namely : the rules of valuation themselves with the
corresponding Interpretative Notes and the special rules applicable to developing
countries.

The complete text of the Agreement and the texts of the Technical
Committee on Customs Valuation and of the Committee on Customs Valuation
can be found in the WCO Compendium on the Customs Valuation Agreement
(1).

The booklet also contains an insert giving the position as regards

acceptance and application of the GATT Agreement 1994 on Customs Valuation.

* Established in 1952 as the Customs Co-operation Council.

_____________
1
This Compendium can be ordered from the World Customs
Organization, Publications Section, rue de l'Industrie, 26-
38, 1040 Brussels.

I
 AGREEMENT ON IMPLEMENTATION
OF ARTICLE VII
OF THE GENERAL AGREEMENT
ON TARIFFS AND TRADE 1994

GENERAL INTRODUCTORY COMMENTARY

1. The primary basis for Customs value under this Agreement is "transaction value"
as defined in Article 1. Article 1 is to be read together with Article 8 which provides,
interalia, for adjustments to the price actually paid or payable in cases where certain
specific elements which are considered to form a part of the value for Customs
purposes are incurred by the buyer but are not included in the price actually paid or
payable for the imported goods. Article 8 also provides for the inclusion in the
transaction value of certain considerations which may pass from the buyer to the seller
in the form of specified goods or services rather than in the form of money. Articles 2 to
7 provide methods of determining the Customs value whenever it cannot be determined
under the provisions of Article 1.

2. Where the Customs value cannot be determined under the provisions of Article 1
there should normally be a process of consultation between the Customs administration
and importer with a view to arriving at a basis of value under the provisions of Articles 2
or 3. It may occur, for example, that the importer has information about the Customs
value of identical or similar imported goods which is not immediately available to the
Customs administration in the port of importation. On the other hand, the Customs
administration may have information about the Customs value of identical or similar
imported goods which is not readily available to the importer. A process of consultation
between the two parties will enable information to be exchanged, subject to the
requirements of commercial confidentiality, with a view to determining a proper basis of
value for Customs purposes.

3. Articles 5 and 6 provide two bases for determining the Customs value where it
cannot be determined on the basis of the transaction value of the imported goods or of
identical or similar imported goods. Under paragraph 1 of Article 5 the Customs value is
determined on the basis of the price at which the goods are sold in the condition as
imported to an unrelated buyer in the country of importation. The importer also has the
right to have goods which are further processed after importation valued under the
determined on the basis of the computed value. Both these methods present certain
difficulties and because of this the importer is given the right, under the provisions of
Article 4, to choose the order of application of the two methods.

1
4. Article 7 sets out how to determine the Customs value in cases where it cannot
be determined under the provisions of any of the preceding Articles.

General Note

Sequential application of valuation methods

1. Articles 1 through 7 define how the Customs value of imported goods is to be

determined under the provisions of this Agreement. The methods of valuation are set
out in a sequential order of application. The primary method for Customs valuation is
defined in Article 1 and imported goods are to be valued in accordance with the
provisions of this Article whenever the conditions prescribed therein are fulfilled.

2. Where the Customs value cannot be determined under the provisions of Article
1, it is to be determined by proceeding sequentially through the succeeding Articles to
the first such Article under which the Customs value can be determined. Except as
provided in Article 4, it is only when the Customs value cannot be determined under the
provisions of a particular Article that the provisions of the next Article in the sequence
can be used.

3. If the importer does not request that the order of Articles 5 and 6 be reversed, the
normal order of the sequence is to be followed. If the importer does so request but it
then proves impossible to determine the Customs value under the provisions of Article
6, the Customs value is to be determined under the provisions of Article 5, if it can be so
determined.

4. Where the Customs value cannot be determined under the provisions of Articles
1 through 6 it is to be determined under the provisions of Article 7.

Use of generally accepted accounting principles

1. "Generally accepted accounting principles" refers to the recognized consensus or

substantial authoritative support within a country at a particular time as to which
economic resources and obligations should be recorded as assets and liabilities, which
changes in assets and liabilities should be recorded, how the assets and liabilities and
changes in them should be measured, what information should be disclosed and how it
should be disclosed, and which financial statements should be prepared. These
standards may be broad guidelines of general application as well as detailed practices
and procedures.

2. For the purposes of this Agreement, the Customs administration of each Member
shall utilize information prepared in a manner consistent with generally accepted
accounting principles in the country which is appropriate for the Article in question. For
example, the determination of usual profit and general expenses under the provisions of

2
Article 5 would be carried out utilizing information prepared in a manner consistent with
generally accepted accounting principles of the country of importation. On the other
hand, the determination of usual profit and general expenses under the provisions of
Article 6 would be carried out utilizing information prepared in a manner consistent with
generally accepted accounting principles of the country of production. As a further
example, the determination of an element provided for in paragraph 1 (b) (ii) of Article 8
undertaken in the country of importation would be carried out utilizing information in a
manner consistent with the generally accepted accounting principles of that country.

GENERAL INTRODUCTORY COMMENTARY (contd.)

Members,

Having regard to the Multilateral Trade Negotiations;

Desiring to further the objectives of GATT 1994 and to secure additional benefits
for the international trade of developing countries;

Recognizing the importance of the provisions of Article VII of GATT 1994 and
desiring to elaborate rules for their application in order to provide greater uniformity and
certainty in their implementation;

Recognizing the need for a fair, uniform and neutral system for the valuation of
goods for Customs purposes that precludes the use of arbitrary or fictitious Customs
values;

Recognizing that the basis for valuation of goods for Customs purposes should,
to the greatest extent possible, be the transaction value of the goods being valued;

Recognizing that Customs value should be based on simple and equitable criteria
consistent with commercial practices and that valuation procedures should be of general
application without distinction between sources of supply;

Recognizing that valuation procedures should not be used to combat dumping;

Hereby agree as follows :

3
 Part I

RULES ON CUSTOMS VALUATION

Article 1

1. The Customs value of imported goods shall be the transaction value, that is the
price actually paid or payable for the goods when sold for export to the country of
importation adjusted in accordance with the provisions of Article 8, provided :

(a) that there are no restrictions as to the disposition or use of the goods by the
buyer other than restrictions which :

(i) are imposed or required by law or by the public authorities in the

country of importation;

(ii) limit the geographical area in which the goods may be resold; or

(iii) do not substantially affect the value of the goods;

(b) that the sale or price is not subject to some condition or consideration for
which a value cannot be determined with respect to the goods being valued;

(c) that no part of the proceeds of any subsequent resale, disposal or use of
the goods by the buyer will accrue directly or indirectly to the seller, unless
an appropriate adjustment can be made in accordance with the provisions
of Article 8; and

(d) that the buyer and seller are not related, or where the buyer and seller are
related, that the transaction value is acceptable for Customs purposes
under the provisions of paragraph 2.

2. (a) In determining whether the transaction value is acceptable for the purposes
of paragraph 1, the fact that the buyer and the seller are related within the
meaning of Article 15 shall not in itself be grounds for regarding the
transaction value as unacceptable. In such case the circumstances
surrounding the sale shall be examined and the transaction value shall be
accepted provided that the relationship did not influence the price. If, in the
light of information provided by the importer or otherwise, the Customs
administration has grounds for considering that the relationship influenced
the price, it shall communicate its grounds to the importer and the importer
shall be given a reasonable opportunity to respond. If the importer so
requests, the communication of the grounds shall be in writing.

4
 (b) In a sale between related persons, the transaction value shall be accepted
and the goods valued in accordance with the provisions of paragraph 1
whenever the importer demonstrates that such value closely approximates
to one of the following occurring at or about the same time :

(i) the transaction value in sales to unrelated buyers of identical or similar

goods for export to the same country of importation;

(ii) the Customs value of identical or similar goods as determined under

the provisions of Article 5;

(iii) the Customs value of identical or similar goods as determined under

the provisions of Article 6;

In applying the foregoing tests, due account shall be taken of demonstrated

differences in commercial levels, quantity levels, the elements enumerated
in Article 8 and costs incurred by the seller in sales in which the seller and
the buyer are not related that are not incurred by the seller in sales in which
the seller and the buyer are related.

(c) The tests set forth in paragraph 2 (b) are to be used at the initiative of the
importer and only for comparison purposes. Substitute values may not be
established under the provisions of paragraph 2 (b).

Note to Article 1

Price actually paid or payable

1. The price actually paid or payable is the total payment made or to be made by
the buyer to or for the benefit of the seller for the imported goods. The payment need
not necessarily take the form of a transfer of money. Payment may be made by way of
letters of credit or negotiable instruments. Payment may be made directly or indirectly.
An example of an indirect payment would be the settlement by the buyer, whether in
whole or in part, of a debt owed by the seller.

2. Activities undertaken by the buyer on the buyer's own account, other than those
for which an adjustment is provided in Article 8, are not considered to be an indirect
payment to the seller, even though they might be regarded as of benefit to the seller.
The costs of such activities shall not, therefore, be added to the price actually paid or
payable in determining the Customs value.

3. The Customs value shall not include the following charges or costs, provided that
they are distinguished from the price actually paid or payable for the imported goods;

5
 (a) charges for construction, erection, assembly, maintenance or technical
assistance, undertaken after importation on imported goods such as
industrial plant, machinery or equipment;

(b)the cost of transport after importation;

(c)duties and taxes of the country of importation.

4. The price actually paid or payable refers to the price for the imported goods. Thus
the flow of dividends or other payments from the buyer to the seller that do not relate to
the imported goods are not part of the Customs value.

Paragraph 1 (a) (iii)

Among restrictions which would not render a price actually paid or payable
unacceptable are restrictions which do not substantially affect the value of the goods.
An example of such restrictions would be the case where a seller requires a buyer of
automobiles not to sell or exhibit them prior to a fixed date which represents the
beginning of a model year.

Paragraph 1 (b)

1. If the sale or price is subject to some condition or consideration for which a value
cannot be determined with respect to the goods being valued, the transaction value
shall not be acceptable for Customs purposes. Some examples of this include :

(a) the seller establishes the price of the imported goods on condition that the
buyer will also buy other goods in specified quantities;

(b) the price of the imported goods is dependent upon the price or prices at
which the buyer of the imported goods sells other goods to the seller of the
imported goods;

(c) the price is established on the basis of a form of payment extraneous to the
imported goods, such as where the imported goods are semi-finished goods
which have been provided by the seller on condition that the seller will
receive a specified quantity of the finished goods.

2. However, conditions or considerations relating to the production or marketing of

the imported goods shall not result in rejection of the transaction value. For example,
the fact that the buyer furnishes the seller with engineering and plans undertaken in the
country of importation shall not result in rejection of the transaction value for the
purposes of Article 1. Likewise, if the buyer undertakes on the buyer's own account,
even though by agreement with the seller, activities relating to the marketing of the
imported goods, the value of these activities is not part of the Customs value nor shall
such activities result in rejection of the transaction value.

6
Paragraph 2

1. Paragraph 2 (a) and 2 (b) provide different means of establishing the

acceptability of a transaction value.

2. Paragraph 2 (a) provides that where the buyer and the seller are related, the
circumstances surrounding the sale shall be examined and the transaction value shall
be accepted as the Customs value provided that the relationship did not influence the
price. It is not intended that there should be an examination of the circumstances in all
cases where the buyer and the seller are related. Such examination will only be required
where there are doubts about the acceptability of the price. Where the Customs
administration have no doubts about the acceptability of the price, it should be accepted
without requesting further information from the importer. For example, the Customs
administration may have previously examined the relationship, or it may already have
detailed information concerning the buyer and the seller, and may already be satisfied
from such examination or information that the relationship did not influence the price.

3. Where the Customs administration is unable to accept the transaction value

without further inquiry, it should give the importer an opportunity to supply such further
detailed information as may be necessary to enable it to examine the circumstances
surrounding the sale. In this context, the Customs administration should be prepared to
examine relevant aspects of the transaction, including the way in which the buyer and
seller organize their commercial relations and the way in which the price in question was
arrived at, in order to determine whether the relationship influenced the price. Where it
can be shown that the buyer and seller, although related under the provisions of Article
15, buy from and sell to each other as if they were not related, this would demonstrate
that the price had not been influenced by the relationship. As an example of this, if the
price had been settled in a manner consistent with the normal pricing practices of the
industry in question or with the way the seller settles prices for sales to buyers who are
not related to the seller, this would demonstrate that the price had not been influenced
by the relationship. As a further example, where it is shown that the price is adequate to
ensure recovery of all costs plus a profit which is representative of the firm's overall
profit realized over a representative period of time (e.g. on an annual basis) in sales of
goods of the same class or kind, this would demonstrate that the price had not been
influenced.

4. Paragraph 2 (b) provides an opportunity for the importer to demonstrate that the
transaction value closely approximates to a "test" value previously accepted by the
Customs administration and is therefore acceptable under the provisions of Article 1.
Where a test under paragraph 2 (b) is met, it is not necessary to examine the question
of influence under paragraph 2 (a). If the Customs administration has already sufficient
information to be satisfied, without further detailed inquiries, that one of the tests
provided in paragraph 2 (b) has been met, there is no reason for it to require the
importer to demonstrate that the test can be met. In paragraph 2 (b) the term "unrelated
buyers" means buyers who are not related to the seller in any particular case.

Paragraph 2 (b)

7
 A number of factors must be taken into consideration in determining whether one
value "closely approximates" to another value. These factors include the nature of the
imported goods, the nature of the industry itself, the season in which the goods are
imported, and, whether the difference in values is commercially significant. Since these
factors may vary from case to case, it would be impossible to apply a uniform standard
such as a fixed percentage, in each case. For example, a small difference in value in a
case involving one type of goods could be unacceptable while a large difference in a
case involving another type of goods might be acceptable in determining whether the
transaction value closely approximates to the "test" values set forth in paragraph 2 (b) of
Article 1.

Article 2

1. (a) If the Customs value of the imported goods cannot be determined under the
provisions of Article 1, the Customs value shall be the transaction value of
identical goods sold for export to the same country of importation and
exported at or about the same time as the goods being valued.

(b) In applying this Article, the transaction value of identical goods in a sale at
the same commercial level and in substantially the same quantity as the
goods being valued shall be used to determine the Customs value. Where
no such sale is found, the transaction value of identical goods sold at a
different commercial level and/or in different quantities, adjusted to take
account of differences attributable to commercial level and/or to quantity,
shall be used, provided that such adjustments can be made on the basis of
demonstrated evidence which clearly establishes the reasonableness and
accuracy of the adjustment, whether the adjustment leads to an increase or
a decrease in the value.

2. Where the costs and charges referred to in paragraph 2 of Article 8 are included
in the transaction value, an adjustment shall be made to take account of significant
differences in such costs and charges between the imported goods and the identical
goods in question arising from differences in distances and modes of transport.

3. If, in applying this Article, more than one transaction value of identical goods is
found, the lowest such value shall be used to determine the Customs value of the
imported goods.

8
 Note to Article 2

1. In applying Article 2, the Customs administration shall, wherever possible, use a

sale of identical goods at the same commercial level and in substantially the same
quantities as the goods being valued. Where no such sale is found, a sale of identical
goods that takes place under any one of the following three conditions may be used :

(a) a sale at the same commercial level but in different quantities;

(b) a sale at a different commercial level but in substantially the same

quantities; or

(c) a sale at a different commercial level and in different quantities.

2. Having found a sale under any one of these three conditions, adjustments will
then be made, as the case may be, for :

(a) quantity factors only;

(b) commercial level factors only; or

(c) both commercial level and quantity factors.

3. The expression "and/or" allows the flexibility to use the sales and make the
necessary adjustments in any one of the three conditions described above.

4. For the purposes of Article 2, the transaction value of identical imported goods
means a Customs value, adjusted as provided for in paragraphs 1 (b) and 2, which has
already been accepted under Article 1.

5. A condition for adjustment because of different commercial levels or different

quantities is that such adjustment, whether it leads to an increase or a decrease in the
value, be made only on the basis of demonstrated evidence that clearly establishes the
reasonableness and accuracy of the adjustments, e.g. valid price lists containing prices
referring to different levels or different quantities. As an example of this, if the imported
goods being valued consist of a shipment of 10 units and the only identical imported
goods for which a transaction value exists involved a sale of 500 units, and it is
recognized that the seller grants quantity discounts, the required adjustment may be
accomplished by resorting to the seller's price list and using that price applicable to a
sale of 10 units. This does not require that a sale had to have been made in quantities
of 10 as long as the price list has been established as being bona fide through sales at
other quantities. In the absence of such an objective measure, however, the
determination of a Customs value under the provisions of Article 2 is not appropriate.

9
 Article 3

1. (a) If the Customs of the imported goods cannot be determined under the
provisions of Articles 1 and 2, the Customs value shall be the transaction
value of similar goods sold for export to the same country of importation and
exported at or about the same time as the goods being valued.

(b) In applying this Article, the transaction value of similar goods in a sale at the
same commercial level and in substantially the same quantity as the goods
being valued shall be used to determine the Customs value. Where no
such sale is found, the transaction value of similar goods sold at a different
commercial level and/or in different quantities, adjusted to take account of
differences attributable to commercial level and/or to quantity, shall be used,
provided that such adjustments can be made on the basis of demonstrated
evidence which clearly establishes the reasonableness and accuracy of the
adjustment, whether the adjustment leads to an increase or a decrease in
the value.

2. Where the costs and charges referred to in paragraph 2 of Article 8 are included
in the transaction value, an adjustment shall be made to take account of significant
differences in such costs and charges between the imported goods and the similar
goods in question arising from differences in distances and modes of transport.

3. If, in applying this Article, more than one transaction value of similar goods is
found, the lowest such value shall be used to determine the Customs value of the
imported goods.

Note to Article 3

1. In applying Article 3, the Customs administration shall, wherever possible, use a

sale of similar goods at the same commercial level and in substantially the same
quantities as the goods being valued. Where no such sale is found, a sale of similar
goods that takes place under any one of the following three conditions may be used :

(a) a sale at the same commercial level but in different quantities;

(b) a sale at a different commercial level but in substantially the same

quantities; or

(c) a sale at a different commercial level and in different quantities.

10
2. Having found a sale under any one of these three conditions, adjustments will
then be made, as the case may be, for :

(a) quantity factors only;

(b) commercial level factors only; or

(c) both commercial level and quantity factors.

3. The expression "and/or" allows the flexibility to use the sales and make the
necessary adjustments in any one of the three conditions described above.

4. For the purpose of Article 3, the transaction value of similar imported goods
means a Customs value, adjusted as provided for in paragraphs 1 (b) and 2, which has
already been accepted under Article 1.

5. A condition for adjustment because of different commercial levels or different

quantities is that such adjustment, whether it leads to an increase or a decrease in the
value, be made only on the basis of demonstrated evidence that clearly establishes the
reasonableness and accuracy of the adjustment, e.g. valid price lists containing prices
referring to different levels or different quantities. As an example of this, if the imported
goods being valued consist of a shipment of 10 units and the only similar imported
goods for which a transaction value exists involved a sale of 500 units, and it is
recognized that the seller grants quantity discounts, the required adjustment may be
accomplished by resorting to the seller's price list and using that price applicable to a
sale of 10 units. This does not require that a sale had to have been made in quantities
of 10 as long as the price list has been established as being bona fide through sales at
other quantities. In the absence of such an objective measure, however, the
determination of a Customs value under the provisions of Article 3 is not appropriate.

Article 4

If the Customs value of the imported goods cannot be determined under the
provisions of Articles 1, 2 and 3 the Customs value shall be determined under the
provisions of Article 5 or, when the Customs value cannot be determined under that
Article, under the provisions of Article 6 except that, at the request of the importer, the
order of application of Articles 5 and 6 shall be reversed.

11
 Article 5

1. (a) If the imported goods or identical or similar imported goods are sold in the
country of importation in the condition as imported, the Customs value of
the imported goods under the provisions of this Article shall be based on the
unit price at which the imported goods or identical or similar imported goods
are so sold in the greatest aggregate quantity, at or about the time of the
importation of the goods being valued, to persons who are not related to the
persons from whom they buy such goods, subject to deductions for the
following :

(i) either the commissions usually paid or agreed to be paid or the

additions usually made for profit and general expenses in connection
with sales in such country of imported goods of the same class or
kind;

(ii) the usual costs of transport and insurance and associated costs within
the country of importation;

(iii) where appropriate, the costs and charges referred to in paragraph 2 of

Article 8; and

(iv) the Customs duties and other national taxes payable in the country of
importation by reason of the importation or sale of the goods.

(b) If neither the imported goods nor identical nor similar imported goods are
sold at or about the time of importation of the goods being valued, the
Customs value shall, subject otherwise to the provisions of paragraph 1 (a)
be based on the unit price at which the imported goods or identical or similar
imported goods are sold in the country of importation in the condition as
imported at the earliest date after the importation of the goods being valued
but before the expiration of 90 days after such importation.

2. If neither the imported goods nor identical nor similar imported goods are sold in
the country of importation in the condition as imported, then, if the importer so requests,
the Customs value shall be based on the unit price at which the imported goods, after
further processing, are sold in the greatest aggregate quantity to persons in the country
of importation who are not related to the persons from whom they buy such goods, due
allowance being made for the value added by such processing and the deductions
provided for in paragraph 1 (a).

12
 Note to Article 5

1. The term "unit price at which ... goods are sold in the greatest aggregate quantity"
means the price at which the greatest number of units is sold in sales to persons who
are not related to the persons from whom they buy such goods at the first commercial
level after importation at which such sales take place.

2. As an example of this, goods are sold from a price list which grants favourable
unit prices for purchases made in larger quantities.

Sale quantity Unit price Number of sales Total quantity

sold at each price

1-10 units 100 10 sales of 5 units 65

5 sales of 3 units

11-25 units 95 5 sales of 11 units 55

over 25 units 90 1 sale of 30 units 80

1 sale of 50 units

The greatest number of units sold at a price is 80; therefore, the unit price in the
greatest aggregate quantity is 90.

3. As another example of this, two sales occur. In the first sale 500 units are sold at
a price of 95 currency units each. In the second sale 400 units are sold at a price of 90
currency units each. In this example, the greatest number of units sold at a particular
price is 500; therefore, the unit price in the greatest aggregate quantity is 95.

4. A third example would be the following situation where various quantities are sold
at various prices.

(a) Sales

Sale quantity Unit price

40 units 100
30 units 90
15 units 100
50 units 95
25 units 105
35 units 90
5 units 100

13
 (b) Totals

Total quantity sold Unit price

65 90
50 95
60 100
25 105

In this example, the greatest number of units sold at a particular price is 65;
therefore, the unit price in the greatest aggregate quantity is 90.

5. Any sale in the importing country, as described in paragraph 1 above, to a person

who supplies directly or indirectly free of charge or at reduced cost for use in connection
with the production and sale for export of the imported goods any of the elements
specified in paragraph 1 (b) of Article 8, should not be taken into account in establishing
the unit price for the purposes of Article 5.

6. It should be noted that "profit and general expenses" referred to in paragraph 1 of

Article 5 should be taken as a whole. The figure for the purposes of this deduction
should be determined on the basis of information supplied by or on behalf of the
importer unless the importer's figures are inconsistent with those obtained in sales in the
country of importation of imported goods of the same class or kind. Where the
importer's figures are inconsistent with such figures, the amount for profit and general
expenses may be based upon relevant information other than that supplied by or on
behalf of the importer.

7. The "general expenses" include the direct and indirect costs of marketing the
goods in question.

8. Local taxes payable by reason of the sale of the goods for which a deduction is
not made under the provisions of paragraph 1 (a) (iv) of Article 5 shall be deducted
under the provisions of paragraph 1 (a) (i) of Article 5.

9. In determining either the commissions or the usual profits and general expenses
under the provisions of paragraph 1 of Article 5, the question whether certain goods are
"of the same class or kind" as other goods must be determined on a case-by-case basis
by reference to the circumstances involved. Sales in the country of importation of the
narrowest group or range of imported goods of the same class or kind, which includes
the goods being valued, for which the necessary information can be provided, should be
examined. For the purposes of Articles 5, "goods of the same class or kind" includes
goods imported from the same country as the goods being valued as well as goods
imported from other countries.

10. For the purposes of paragraph 1 (b) of Article 5, the "earliest date" shall be the
date by which sales of the imported goods or of identical or similar imported goods are
made in sufficient quantity to establish the unit price.

14
11. Where the method in paragraph 2 of Article 5 is used, deductions made for the
value added by further processing shall be based on objective and quantifiable data
relating to the cost of such work. Accepted industry formulas, recipes, methods of
construction, and other industry practices would form the basis of the calculations.

12. It is recognized that the method of valuation provided for in paragraph 2 of Article
5 would normally not be applicable when, as a result of the further processing, the
imported goods lose their identity. However, there can be instances where, although
the identity of the imported goods is lost, the value added by the processing can be
determined accurately without unreasonable difficulty. On the other hand, there can
also be instances where the imported goods maintain their identity but form such a
minor element in the goods sold in the country of importation that the use of this
valuation method would be unjustified. In view of the above, each situation of this type
must be considered on a case-by-case basis.

Article 6

1. The Customs value of imported goods under the provisions of this Article shall be
based on a computed value. Computed value shall consist of the sum of :

(a) the cost or value of materials and fabrication or other processing employed
in producing the imported goods;

(b) an amount for profit and general expenses equal to that usually reflected in
sales of goods of the same class or kind as the goods being valued which
are made by producers in the country of exportation for export to the country
of importation;

(c) the cost or value of all other expenses necessary to reflect the valuation
option chosen by the Member under paragraph 2 of Article 8.

2. No Member may require or compel any person not resident in its own territory to
produce for examination, or to allow access to, any account or other record for the
purposes of determining a computed value. However, information supplied by the
producer of the goods for the purposes of determining the Customs value under the
provisions of this Article may be verified in another country by the authorities of the
country of importation with the agreement of the producer and provided they give
sufficient advance notice to the government of the country in question and the latter
does not object to the investigation.

15
 Note to Article 6

1. As a general rule, Customs value is determined under this Agreement on the

basis of information readily available in the country of importation. In order to determine
a computed value, however, it may be necessary to examine the costs of producing the
goods being valued and other information which has to be obtained from outside the
country of importation. Furthermore, in most cases the producer of the goods will be
outside the jurisdiction of the authorities of the country of importation. The use of the
computed value method will generally be limited to those cases where the buyer and
seller are related, and the producer is prepared to supply to the authorities of the
country of importation the necessary costings and to provide facilities for any
subsequent verification which may be necessary.

2. The "cost or value" referred to in paragraph 1 (a) of Article 6 is to be determined

on the basis of information relating to the production of the goods being valued supplied
by or on behalf of the producer. It is to be based upon the commercial accounts of the
producer, provided that such accounts are consistent with the generally accepted
accounting principles applied in the country where the goods are produced.

3. The "cost or value" shall include the cost of elements specified in paragraphs 1
(a) (ii) and (iii) of Article 8. It shall also include the value, apportioned as appropriate
under the provisions of the relevant note to Article 8, of any element specified in
paragraph 1 (b) of Article 8 which has been supplied directly or indirectly by the buyer
for use in connection with the production of the imported goods. The value of the
elements specified in paragraph 1 (b) (iv) of Article 8 which are undertaken in the
country of importation shall be included only to the extent that such elements are
charged to the producer. It is to be understood that no cost or value of the elements
referred to in this paragraph shall be counted twice in determining the computed value.

4. The "amount for profit and general expenses" referred to in paragraph 1 (b) of
Article 6 is to be determined on the basis of information supplied by or on behalf of the
producer unless the producer's figures are inconsistent with those usually reflected in
sales of goods of the same class or kind as the goods being valued which are made by
producers in the country of exportation for export to the country of importation.

5. It should be noted in this context that the "amount for profit and general
expenses" has to be taken as a whole. It follows that if, in any particular case, the
producer's profit figure is low and the producer's general expenses are high, the
producer's profit and general expenses taken together may nevertheless be consistent
with that usually reflected in sales of goods of the same class or kind. Such a situation
might occur, for example, if a product were being launched in the country of importation
and the producer accepted a nil or low profit to offset high general expenses associated
with the launch. Where the producer can demonstrate a low profit on sales of the
imported goods because of particular commercial circumstances, the producer's actual
profit figures should be taken into account provided that the producer has valid
commercial reasons to justify them and the producer's pricing policy reflects usual

16
pricing policies in the branch of industry concerned. Such a situation might occur, for
example, where producers have been forced to lower prices temporarily because of an
unforeseeable drop in demand, or where they sell goods to complement a range of
goods being produced in the country of importation and accept a low profit to maintain
competitivity. Where the producer's own figures for profit and general expenses are not
consistent with those usually reflected in sales of goods of the same class or kind as the
goods being valued which are made by producers in the country of exportation for
export to the country of importation, the amount for profit and general expenses may be
based upon relevant information other than that supplied by or on behalf of the producer
of the goods.

6. Where information other than that supplied by or on behalf of the producer is

used for the purposes of determining a computed value, the authorities of the importing
country shall inform the importer, if the latter so requests, of the source of such
information, the data used and the calculations based upon such data, subject to the
provisions of Article 10.

7. The "general expenses" referred to in paragraph 1 (b) of Article 6 covers the

direct and indirect costs of producing and selling the goods for export which are not
included under paragraph 1 (a) of Article 6.

8. Whether certain goods are "of the same class or kind" as other goods must be
determined on a case-by-case basis with reference to the circumstances involved. In
determining the usual profits and general expenses under the provisions of Article 6,
sales for export to the country of importation of the narrowest group or range of goods,
which includes the goods being valued, for which the necessary information can be
provided, should be examined. For the purposes of Article 6, "goods of the same class
or kind" must be from the same country as the goods being valued.

Article 7

1. If the Customs value of the imported goods cannot be determined under the
provisions of Articles 1 through 6, the Customs value shall be determined using
reasonable means consistent with the principles and general provisions of this
Agreement and of Article VII of GATT 1994 and on the basis of data available in the
country of importation.

2. No Customs value shall be determined under the provisions of this Article on the
basis of :

(a) the selling price in the country of importation of goods produced in such
country;

17
 (b) a system which provides for the acceptance for Customs purposes of the
higher of two alternative values;

(c) the price of goods on the domestic market of the country of exportation;

(d) the cost of production other than computed values which have been
determined for identical or similar goods in accordance with the provisions
of Article 6;

(e) the price of the goods for export to a country other than the country of
importation;

(f) minimum Customs values; or

(g) arbitrary or fictitious values.

3. If the importer so requests, the importer shall be informed in writing of the

Customs value determined under the provisions of this Article and the method used to
determine such value.

Note to Article 7

1. Customs values determined under the provisions of Article 7 should, to the

greatest extent possible, be based on previously determined Customs values.

2. The methods of valuation to be employed under Article 7 should be those laid

down in Articles 1 through 6 but a reasonable flexibility in the application of such
methods would be in conformity with the aims and provisions of Article 7.

3. Some examples of reasonable flexibility are as follows :

(a) Identical goods - the requirement that the identical goods should be
exported at or about the same time as the goods being valued could be
flexibly interpreted; identical imported goods produced in a country other
than the country of exportation of the goods being valued could be the basis
for Customs valuation; Customs values of identical imported goods already
determined under the provisions of Articles 5 and 6 could be used.

(b) Similar goods - the requirement that the similar goods should be exported at
or about the same time as the goods being valued could be flexibly
interpreted; similar imported goods produced in a country other than the
country of exportation of the goods being valued could be the basis for
Customs valuation; Customs values of similar imported goods already
determined under the provisions of Articles 5 and 6 could be used.

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 (c) Deductive method - the requirement that the goods shall have been sold in
the "condition as imported" in paragraph 1 (a) of Article 5 could be flexibly
interpreted; the "90 days" requirement could be administered flexibly.

Article 8

1. In determining the Customs value under the provisions of Article 1, there shall be
added to the price actually paid or payable for the imported goods :

a) the following, to the extent that they are incurred by the buyer but are not
included in the price actually paid or payable for the goods;

(i) commissions and brokerage, except buying commissions;

(ii)the cost of containers which are treated as being one for Customs
purposes with the goods in question;

(iii) the cost of packing whether for labour or materials;

(b) the value, apportioned as appropriate, of the following goods and services
where supplied directly or indirectly by the buyer free of charge or at
reduced cost for use in connection with the production and sale for export of
the imported goods, to the extent that such value has not been included in
the price actually paid or payable;

(i) materials, components, parts and similar items incorporated in the

imported goods;

(ii) tools, dies, moulds and similar items used in the production of the
imported goods;

(iii) materials consumed in the production of the imported goods;

(iv) engineering, development, artwork, design work, and plans and

sketches undertaken elsewhere than in the country of importation and
necessary for the production of the imported goods;

(c) royalties and licence 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;

19
 (d) the value of any part of the proceeds of any subsequent resale, disposal or
use of the imported goods that accrues directly or indirectly to the seller.

2. In framing its legislation, each Member shall provide for the inclusion in or the
exclusion from the Customs value, in whole or in part, of the following :

(a) the cost of transport of the imported goods to the port or place of
importation;

(b) loading, unloading and handling charges associated with the transport of the
imported goods to the port or place of importation; and

(c) the cost of insurance.

3. Additions to the price actually paid or payable shall be made under this Article
only on the basis of objective and quantifiable data.

4. No additions shall be made to the price actually paid or payable in determining

the Customs value except as provided in this Article.

Note to Article 8

Paragraph 1 (a) (i)

The term "buying commissions" means fees paid by an importer to the importer's
agent for the service of representing the importer abroad in the purchase of the goods
being valued.

Paragraph 1 (b) (ii)

1. There are two factors involved in the apportionment of the elements specified in
paragraph 1 (b) (ii) of Article 8 to the imported goods - the value of the element itself
and the way in which that value is to be apportioned to the imported goods. The
apportionment of these elements should be made in a reasonable manner appropriate
to the circumstances and in accordance with generally accepted accounting principles.

2. Concerning the value of the element, if the importer acquires the element from a
seller not related to the importer at a given cost, the value of the element is that cost. If
the element was produced by the importer or by a person related to the importer, its
value would be the cost of producing it. If the element had been previously used by the
importer, regardless of whether it had been acquired or produced by such importer, the
original cost of acquisition or production would have to be adjusted downward to reflect
its use in order to arrive at the value of the element.

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3. Once a value has been determined for the element, it is necessary to apportion
that value to the imported goods. Various possibilities exist. For example, the value
might be apportioned to the first shipment if the importer wishes to pay duty on the
entire value at one time. As another example, the importer may request that the value
be apportioned over the number of units produced up to the time of the first shipment.
As a further example, the importer may request that the value be apportioned over the
entire anticipated production where contracts or firm commitments exist for that
production. The method of apportionment used will depend upon the documentation
provided by the importer.

4. As an illustration of the above, an importer provides the producer with a mould to

be used in the production of the imported goods and contracts with the producer to buy
10,000 units. By the time of arrival of the first shipment of 1,000 units, the producer has
already produced 4,000 units. The importer may request the Customs administration to
apportion the value of the mould over 1,000 units, 4,000 units or 10,000 units.

Paragraph 1 (b) (iv)

1. Additions for the elements specified in paragraph 1 (b) (iv) of Article 8 should be
based on objective and quantifiable data. In order to minimize the burden for both the
importer and Customs administration in determining the values to be added, data readily
available in the buyer's commercial record system should be used in so far as possible.

2. For those elements supplied by the buyer which were purchased or leased by the
buyer, the addition would be the cost of the purchase of the lease. No addition shall be
made for those elements available in the public domain, other than the cost of obtaining
copies of them.

3. The ease with which it may be possible to calculate the values to be added will
depend on a particular firm's structure and management practice, as well as its
accounting methods.

4. For example, it is possible that a firm which imports a variety of products from
several countries maintains the records of its design centre outside the country of
importation in such a way as to show accurately the costs attributable to a given
product. In such cases, a direct adjustment may appropriately be made under the
provisions of Article 8.

5. In another case, a firm may carry the cost of the design centre outside the
country of importation as a general overhead expense without allocation to specific
products. In this instance, an appropriate adjustment could be made under the
provisions of Article 8 with respect to the imported goods by apportioning total design
centre costs over total production benefiting from the design centre and adding such
apportioned cost on a unit basis to imports.

6. Variations in the above circumstances will, of course, require different factors to

be considered in determining the proper method of allocation.

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7. In cases where the production of the element in question involves a number of
countries and over a period of time, the adjustment should be limited to the value
actually added to that element outside the country of importation.

Paragraph 1 (c)

1. The royalties and licence fees referred to in paragraph 1 (c) of Article 8 may
include, among other things, payments in respect to patents, trademarks and copyrights.
However, the charges for the right to reproduce the imported goods in the country of
importation shall not be added to the price actually paid or payable for the imported
goods in determining the Customs value.

2. Payments made by the buyer for the right to distribute or resell the imported
goods shall not be added to the price actually paid or payable for the imported goods if
such payments are not a condition of the sale for export to the country of importation of
the imported goods.

Paragraph 3

Where objective and quantifiable data do not exist with regard to the additions
required to be made under the provisions of Article 8, the transaction value cannot be
determined under the provisions of Article 1. As an illustration of this, a royalty is paid
on the basis of the price in a sale in the importing country of a litre of a particular
product that was imported by the kilogram and made up into a solution after importation.
If the royalty is based partially on the imported goods and partially on other factors
which have nothing to do with the imported goods (such as when the imported goods
are mixed with domestic ingredients and are no longer separately identifiable, or when
the royalty cannot be distinguished from special financial arrangements between the
buyer and the seller), it would be inappropriate to attempt to make an addition for the
royalty. However, if the amount of this royalty is based only on the imported goods and
can be readily quantified, an addition to the price actually paid or payable can be made.

Article 9

1. Where the conversion of currency is necessary for the determination of the

Customs value, the rate of exchange to be used shall be that duly published by the
competent authorities of the country of importation concerned and shall reflect as
effectively as possible, in respect of the period covered by each such document of
publication, the current value of such currency in commercial transactions in terms of
the currency of the country of importation.

2. The conversion rate to be used shall be that in effect at the time of exportation or
the time of importation, as provided by each Member.

22
 Note to Article 9

For the purpose of Article 9, "time of importation" may include the time of entry for
Customs purposes.

Article 10

All information which is by nature confidential or which is provided on a

confidential basis for the purposes of Customs valuation shall be treated as strictly
confidential by the authorities concerned who shall not disclose it without the specific
permission of the persons or government providing such information, except to the
extent that it may be required to be disclosed in the context of judicial proceedings.

Article 11

1. The legislation of each Member shall provide in regard to a determination of

Customs value for the right of appeal, without penalty, by the importer or any other
person liable for the payment of the duty.

2. An initial right of appeal without penalty may be to an authority within the

Customs administration or to an independent body, but the legislation of each Member
shall provide for the right of appeal without penalty to a judicial authority.

3. Notice of the decision on appeal shall be given to the appellant and the reasons
for such decision shall be provided in writing. The appellant shall also be informed of
any rights of further appeal.

Note to Article 11

1. Article 11 provides the importer with the right to appeal against a valuation
determination made by the Customs administration for the goods being valued. Appeal
may first be to a higher level in the Customs administration, but the importer shall have
the right in the final instance to appeal to the judiciary.

23
2. "Without penalty" means that the importer shall not be subject to a fine or threat
of fine merely because the importer chose to exercise the right of appeal. Payment of
normal court costs and lawyers' fees shall not be considered to be a fine.

3. However, nothing in Article 11 shall prevent a Member from requiring full payment
of assessed Customs duties prior to an appeal.

Article 12

Laws, regulations, judicial decisions and administrative rulings of general

application giving effect to this Agreement shall be published in conformity with Article X
of GATT 1994 by the country of importation concerned.

Article 13

If, in the course of determining the Customs value of imported goods, it becomes
necessary to delay the final determination of such Customs value, the importer of the
goods shall nevertheless be able to withdraw them from Customs if, where so required,
the importer provides sufficient guarantee in the form of a surety, a deposit or some
other appropriate instrument, covering the ultimate payment of Customs duties for which
the goods may be liable. The legislation of each Member shall make provisions for such
circumstances.

Article 14

The notes at Annex I to this Agreement form an integral part of this Agreement
and the Articles of this Agreement are to be read and applied in conjunction with their
respective notes. Annexes II and III also form an integral part of this Agreement.

Article 15

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1. In this Agreement :

(a) "Customs value of imported goods" means the value of goods for the
purposes of levying ad valorem duties of Customs on imported goods;

(b) "country of importation" means country or Customs territory of importation;

and

(c) "produced" includes grown, manufactured and mined.

2. In this Agreement :

(a) "identical goods" means goods which are the same in all respects, including
physical characteristics, quality and reputation. Minor differences in
appearance would not preclude goods otherwise conforming to the
definition from being regarded as identical.

(b) "similar goods" means goods which, although not alike in all respects, have
like characteristics and like component materials which enable them to
perform the same functions and to be commercially interchangeable. The
quality of the goods, their reputation and the existence of a trademark are
among the factors to be considered in determining whether goods are
similar.

(c) The terms "identical goods" and "similar goods" do not include, as the case
may be, goods which incorporate or reflect engineering, development,
artwork, design work, and plans and sketches for which no adjustment has
been made under paragraph 1 (b) (iv) of Article 8 because such elements
were undertaken in the country of importation.

(d) Goods shall not be regarded as "identical goods" or "similar goods" unless
they were produced in the same country as the goods being valued.

(e) Goods produced by a different person shall be taken into account only when
there are no identical goods or similar goods, as the case may be, produced
by the same person as the goods being valued.

3. In this Agreement "goods of the same class or kind" means goods which fall
within a group or range of goods produced by a particular industry or industry sector,
and includes identical or similar goods.

4. For the purposes of this Agreement, persons shall be deemed to be related only
if :

(a) they are officers or directors of one another's businesses;

25
 (b) they are legally recognized partners in business;

(c) they are employer and employee;

(d) any person directly or indirectly owns, controls or holds 5 percent or more of
the outstanding voting stock or shares of both of them;

(e) one of them directly or indirectly controls the other;

(f ) both of them are directly or indirectly controlled by a third person;

(g) together they directly or indirectly control a third person; or

(h) they are members of the same family.

5. Persons who are associated in business with one another in that one is the sole
agent, sole distributor or sole concessionaire, however described, of the other shall be
deemed to be related for the purposes of this Agreement if they fall within the criteria of
paragraph 4.

Note to Article 15

Paragraph 4

For the purposes of Article 15, the term "persons" includes a legal person, where
appropriate.

Paragraph 4 (e)

For the purposes of this Agreement, one person shall be deemed to control
another when the former is legally or operationally in a position to exercise restraint or
direction over the latter.

Article 16

Upon written request, the importer shall have the right to an explanation in writing
from the Customs administration of the country of importation as to how the Customs
value of the importer's goods was determined.

26
 Article 17

Nothing in this Agreement shall be construed as restricting or calling into question

the rights of Customs administrations to satisfy themselves as to the truth or accuracy of
any statement, document or declaration presented for Customs valuation purposes.

Part II

ADMINISTRATION, CONSULTATIONS AND DISPUTE SETTLEMENT

Article 18

Institutions

1. There is hereby established a Committee on Customs Valuation (referred to in

this Agreement as "the Committee") composed of representatives from each of the
Members. The Committee shall elect his own Chairman and shall normally meet once a
year, or as is otherwise envisaged by the relevant provisions of this Agreement, for the
purpose of affording Members the opportunity to consult on matters relating to the
administration of the Customs valuation system by any Member as it might affect the
operation of this Agreement or the furtherance of its objectives and carrying out such
other responsibilities as may be assigned to it by the Members. The WTO Secretariat
shall act as the secretariat to the Committee.

2. There shall be established a Technical Committee on Customs Valuation

(referred to in this Agreement as "the Technical Committee") under the auspices of the
Customs Co-operation Council (referred to in this Agreement as "the CCC"), which shall
carry out the responsibilities described in Annex II to this Agreement and shall operate
in accordance with the rules of procedures contained therein.

Part III

27
 SPECIAL AND DIFFERENTIAL TREATMENT

Article 20

1. Developing country Members not Party to the Agreement on Implementation of

Article VII of the General Agreement on Tariffs and Trade done on 12 April 1979 may
delay application of the provisions of this Agreement for a period not exceeding five
years from the date of entry into force of the WTO Agreement for such Members.
Developing country Members who choose to delay application of this Agreement shall
notify the Director-General of the WTO accordingly.

2. In addition to paragraph 1 above, developing country Members not Party to the

Agreement on Implementation of Article VII of the General Agreement on Tariffs and
Trade done on 12 April 1979 may delay application of paragraph 2 (b) (iii) of Article 1
and Article 6 for a period not exceeding three years following their application of all other
provisions of this Agreement. Developing country Members that choose to delay
application of the provisions specified in this paragraph shall notify the Director-General
of the WTO accordingly.

3. Developed country Members shall furnish, on mutually agreed terms, technical

assistance to developing country Members that so request. On this basis developed
country Members shall draw up programmes of technical assistance which may include,
inter alia, training of personnel, assistance in preparing implementation measures,
access to sources of information regarding Customs valuations methodology, and
advice on the application of the provisions of this Agreement.

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 ANNEX III

1. The five-year delay in the application of the provisions of the Agreement by

developing country Members provided for in paragraph 1 of Article 20 may, in practice,
be insufficient for certain developing country Members. In such cases a developing
country Member may request before the end of the period referred to in paragraph 1 of
Article 20 an extension of such period, it being understood that the Members will give
sympathetic consideration to such a request in cases where the developing country
Member in question can show good cause.

2. Developing countries which currently value goods on the basis of officially

established minimum values may wish to make a reservation to enable them to retain
such values on a limited and transitional basis under such terms and conditions as may
be agreed to by the Members.

3. Developing countries which consider that the reversal of the sequential order at
the request of the importer provided for in Article 4 of the Agreement may give rise to
real difficulties for them may wish to make a reservation to Article 4 in the following
terms :

"The Government of .......... reserves the right to provide that the relevant
provision of Article 4 of the Agreement shall apply only when the Customs
authorities agree to the request to reverse the order of Articles 5 and 6."

If developing countries make such a reservation, the Members shall consent to it

under Article 21 of the Agreement.

4. Developing countries may wish to make a reservation with respect to paragraph 2

of Article 5 of the Agreement in the following terms :

"The Government of .......... reserves the right to provide that paragraph 2 of

Article 5 of the Agreement shall be applied in accordance with the provisions of
the relevant note thereto whether or not the importer so requests."

If developing countries make such a reservation, the Members shall consent to it

under Article 21 of the Agreement.

5. Certain developing countries may have problems in the implementation of Article

1 of the Agreement insofar as it relates to importations into their countries by sole
agents, sole distributors and sole concessionaires. If such problems arise in practice in
developing country Members applying the Agreement, a study of this question shall be
made, at the request of such Members, with a view to finding appropriate solutions.

29
6. Article 17 recognizes that in applying the Agreement, Customs administrations
may need to make enquiries concerning the truth or accuracy of any statement,
document or declaration presented to them for Customs valuation purposes. The Article
thus acknowledges that enquiries may be made which are, for example, aimed at
verifying that the elements of value declared or presented to Customs in connection with
a determination of Customs value are complete and correct. Members subject to their
national laws and procedures, have the right to expect the full co-operation of importers
in these enquiries.

7. The price actually paid or payable includes all payments actually made or to be
made as a condition of sale of the imported goods, by the buyer to the seller, or by the
buyer to a third party to satisfy an obligation of the seller.

30