Customs Valuation (Determination of Value of Export Goods) Rules, 2007 – (2023)

Customs Valuation (Determination of Value of Export Goods)Rules, 2007 :

Notification No. 95/2007 Cus. (NT) dated 13.09.2007 has notified Customs Valuation(Determination of Value of Export Goods) Rules, 2007. They shall come into force from10.10.2007. They shall apply to the export goods.

Rule 2 – Definitions : (1)In these rules, unless the context otherwise requires, –

(a) “goods of like kind and quality” means export goods which are identical or similar inphysical characteristics, quality and reputation as the goods being valued, and perform thesame functions or are commercially interchangeable with the goods being valued, produced bythe same person or a different person; and

(b) “transaction value” means the value of export goods within the meaning of sub -section

(1) of section 14 of the Customs Act, 1962 (52 of 1962).

(2) For the purposes of these rules, persons shall be deemed to be “related” only if –

(i) they are officers or directors of one another’s businesses;

(ii) they are legally recognised partners in business;

(iii) they are employer and employee;

(iv) any person directly or indirectly owns, controls or holds five per cent or more of theoutstanding voting stock or shares of both of them;

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

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

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

(viii) they are members of the same family.

Explanation I. – The term “person” also includes legal persons.

Explanation II. – Persons who are associated in the business of one another in that one is thesole agent or sole distributor or sole concessionaire, howsoever described, of the other shallbe deemed to be related for the purpose of these rules, if they fall within the criteria of thissub-rule.

Rule 3 – Determination of the method of valuation : (1) Subject to rule 8, the value ofexport goods shall be the transaction value.

(2) The transaction value shall be accepted even where the buyer and seller are related,provided that the relationship has not influenced the price.

(3) If the value cannot be determined under the provisions of sub-rule (1) and sub-rule (2),the value shall be determined by proceeding sequentially through rules 4 to 6.

Rule 4 – Determination of export value by comparison : (1) The value of the exportgoods shall be based on the transaction value of goods of like kind and quality exported at orabout the same time to other buyers in the same destination country of importation or in itsabsence another destination country of importation adjusted in accordance with the provisionsof sub-rule (2).

(2) In determining the value of export goods under sub-rule (1), the proper officer shallmake such adjustments as appear to him reasonable, taking into consideration the relevantfactors, including-

(i) difference in the dates of exportation,

(ii) difference in commercial levels and quantity levels,

(iii) difference in composition, quality and design between the goods to be assessed and thegoods with which they are being compared,

(iv) difference in domestic freight and insurance charges depending on the place ofexportation.

Rule 5 – Computed value method : If the value cannot be determined under rule 4, it shall bebased on a computed value, which shall include the following: –

(a) cost of production , manufacture or processing of export goods;

(b) charges, if any, for the design or brand;

(c) an amount towards profit.

Rule 6 – Residual method: (1) Subject to the provisions of rule 3, where the value of theexport goods cannot be determined under the provisions of rules 4 and 5, the value shall bedetermined using reasonable means consistent with the principles and general provisions ofthese rules provided that local market price of the export goods may not be the only basis fordetermining the value of export goods.

Rule 7 – Declaration by the exporter: The exporter shall furnish a declaration relating to thevalue of export goods in the manner specified in this behalf.

Rule 8 – Rejection of declared value: (1) When the proper officer has reason to doubt thetruth or accuracy of the value declared in relation to any export goods, he may ask theexporter of such goods to furnish further information including documents or other evidenceand if, after receiving such further information, or in the absence of a response of suchexporter, the proper officer still has reasonable doubt about the truth or accuracy of the valueso declared, the transaction value shall be deemed to have not been determined inaccordance with sub-rule (1) of rule 3.

(2) At the request of an exporter, the proper officer shall intimate the exporter in writing theground for doubting the truth or accuracy of the value declared in relation to the export goodsby such exporter and provide a reasonable opportunity of being heard, before taking a finaldecision under sub-rule (1).

Explanation – (1) For the removal of doubts, it is hereby declared that-

(i) This rule by itself does not provide a method for determination of value, it provides amechanism and procedure for rejection of declared value in cases where there isreasonable doubt that the declared value does not represent the transaction value; wherethe declared value is rejected, the value shall be determined by proceeding sequentiallyin accordance with rules 4 to 6.

(ii) The declared value shall be accepted where the proper officer is satisfied about the truthor accuracy of the declared value after the said enquiry in consultation with the exporter .

(iii) The proper officer shall have the powers to raise doubts on the declared value based oncertain reasons which may include –

(a) the significant variation in value at which goods of like kind and quality exported ator about the same time in comparable quantities in a comparable commercialtransaction were assessed.

(b) the significantly higher value compared to the market value of goods of like kind andquality at the time of export.

(c) the misdeclaration of goods in parameters such as description, quality, quantity,year of manufacture or production.

Analysis: Circular No. 37/2007 Cus. dated 09.10.2007 has been issued regarding theCustoms Valuation (Determination of Value of Export Goods) Rules, 2007 notified videNotification No 95/2007 Cus. (NT) dated 13.09.2007. The Customs Valuation (Determinationof Value of Export Goods) Rules 2007 have been framed in a format similar to the ValuationRules for the imported goods. Conceptually also, acceptance of Transaction Value for exportgoods has been emphasized in the said rules, in as much as Rule 3 specifically provides for it.

Rule 3 of the said rules also stipulates that the Transaction Value for export goods shall b eaccepted even where buyer and seller are related, provided that the relationship did notinfluence the price of the goods. Where the relationship is found to influence the price, asdetermined by the proper officer on receipt of further information from the exporter, the valueof the export goods shall be determined by proceeding sequentially through rules 4 to 6 of thesaid Valuation Rules. The persons who shall be deemed to be ‘related‘ have been specified inRule 2(2) of the said Valuation Rules, and this provision has been adopted from the CustomsValuation (Determination of Value of Imported Goods) Rules, 2007.

Thus transaction value is the primary basis for valuation of export goods and the methodspecified under Rule 3 will be applicable in the vast majority of cases of export by acceptanceof declared value. In cases where the transaction value is not accepted, the valuation of theexport goods shall be done by application of Rules 4 to 6 sequentially.

Acceptance of transaction value is, however, subject to the provision of Rule 8 which providesfor rejection of declared value for the export goods in certain exceptional cases. These aresituations where the assessing officer has reasons to doubt the truth or accuracy of thedeclared value and further enquiry or investigation is needed to determine the appropriatevalue. It is hereby instructed that when an investigation / enquiry is undertaken to determinewhether or not the Declared Value should be accepted as Transaction Value, the exportconsignment shall not be ordinarily detained. Wherever there are doubts about the declaredvalue of the export goods, the proper officer shall retain representative sealed samples,wherever considered necessary and feasible, and allow the goods to be exported aft er dueprocessing. However, it is clarified that in a situation of serious violation such as outright mis –declaration of goods, attempt to export the goods unauthorisedly, i.e., smuggle the goods outof the country, or where there is forgery or fraudulent documentation, the goods may bedetained or seized as required. No export consignment shall be detained for reasons ofdoubts regarding valuation without the approval of the jurisdictional PrincipalCommissioner/Commissioner of Customs.

An ‘Explanation‘ relating to rejection of declared value of export goods has been added toRule 8 to bring clarity and objectivity in exercising the authority for rejection of declared value.The Explanation clarifies that this rule as such does not provide a method for determination ofvalue, and that it merely provides a mechanism and procedure for rejection of declared valueof export goods in certain cases. It also clarifies that where the proper officer is satisfied afterconsultation with the exporter, the declared value shall be accepted. This Explanation alsogives certain illustrative reasons which could form the basis for having doubt about the truth oraccuracy of the declared value.

While raising doubt about truth or accuracy of the declared value in terms of Rule 8, theproper officer shall issue a query memo specifying reasons for such doubt. Meanwhile, thegoods will be released for export against a simple undertaking after drawal of representativesample as indicated in para 5. The decision to initiate the process of investigation intovaluation aspects, if any, shall be taken at the earliest at the level of Joint /AdditionalCommissioner.

In a case where transaction value cannot be determined or the declared value is rejectedunder Rule 8, and export value has to be determined by comparison in terms of Rule 4, theproper officer shall take utmost care in selecting an export product for an in -depth inquiry. Theproper officer will make the adjustments objectively on the basis of the relevant factors, someof which have been illustrated at sub rule (2) of Rule 4.

Where the value has to be determined by Computed value method under Rule 5, the properofficer shall give due consideration to the cost-certificate issued by a Cost Accountant orChartered Accountant or Government approved valuer, as produced by the exporter.

It is clarified that the main purpose of introducing the Export Valuation Rules is to provide for asound legal basis for the valuation of export goods. It is also expected to check deliberateovervaluation of export goods and mis-utilization of value based export incentive schemes. Atthe same time due care has to be taken to facilitate the movement of bonafide export goodswhich is vital for the country‘s economic growth. The assessing officer s shall, therefore,exercise due caution to avoid unnecessary queries regarding truth or accuracy of the declaredexport value. The Export Valuation Rules are not intended to bring about any significantchange in the existing pattern of valuation of export goods. It is the responsibility of thesupervisory officers to monitor regularly the export valuation practices, so as to ensure properimplementation of the said Valuation Rules without hindering the flow of bona fide exportgoods.

Rule 7 of the Export Valuation Rules calls for a declaration relating to the value to be filed bythe exporter. A declaration format for this purpose has been designed and the same isenclosed as Annexure-A. Since it may be sometime before the format is notified to the tradeby the respective Commissionerates, care should be taken to ensure that no exportconsignments are held up for want of such declaration which may for the time being beobtained subsequent to exports. The filing of the declaration along with the shipping bi ll shouldhowever be enforced with effect from 12th November 2007.

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