Study Guide
12. Method VI: Fallback method
If no earlier method can determine the value, the fallback method applies. The value is then determined by reasonable means consistent with the general provisions of the Agreement and Article VII of GATT 1994, and on the basis of data available in the country of importation.
How the fall-back method works
- · The Interpretative Note to Article 7: So far as possible, base the value on previously determined Customs values, applying Articles 1–6 with reasonable flexibility
- · WCO Advisory Opinion 12.2: Keep to the hierarchical order
- · WCO Advisory Opinion 12.1: If a flexible application of Articles 1–6 still gives no value, other reasonable methods may be used, except those prohibited by Article 7.2
The value rests on data available in the importing country, but WCO Advisory Opinion 12.3 makes clear that Article 7 is silent on the original source of the data. Data drawn partly from foreign sources is not barred, provided it is available in the importing country and Customs can satisfy itself of its truth and accuracy.
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✘ Prohibited methods (Article 7.2) |
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Never used to set the Customs value ✕ The selling price in the importing country of goods produced in that country ✕ A system that accepts the higher of two alternative values ✕ The price of goods on the domestic market of the exporting country ✕ A cost of production other than a computed value determined for identical or similar goods under Article 6 ✕ The price of goods sold for export to a country other than the importing country ✕ Minimum customs values ✕ Arbitrary or fictitious values |
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Key point: The six methods run in strict order, each used only when the one before it cannot be, and the fall-back method is bounded by the seven approaches Article 7.2 prohibits. |
Price‑Referencing Databases and Arbitrary Values
Price‑referencing databases are increasingly used by Customs administrations as part of risk assessment. These tools—often commercially licensed—provide up‑to‑date unit prices and market data for commonly traded goods. They help identify potentially fictitious or unreasonably low declared values, supporting Customs in detecting anomalies that may warrant further enquiry or post-clearance audit.
This practice aligns with WCO thinking, which recognises that external data sources can legitimately inform risk management, provided they do not replace the WTO valuation methods. The WCO has consistently emphasized that such databases may be used as risk indicators but must not be used to determine or adjust customs value.
In line with Article 7.2 of the WTO Valuation Agreement, Customs must still determine value strictly through the six‑method hierarchy. Database prices cannot be substituted for transaction value or used as minimum values. When applied correctly, price‑referencing databases enhance risk assessment while preserving the prohibition on arbitrary or fictitious values.