7. Part 2: Technical rules of the WTO Valuation agreement

Learning objectives

✓

Identify the six methods of Customs valuation and the hierarchical order in which they must be applied.

✓

Explain the conditions under which transaction value can be used as the primary basis for Customs value.

✓

Apply the rules governing movement from one valuation method to the next.

Part 2 provides a detailed understanding of the various methods of valuation. It explains how each method is applied, the rules governing movement from one method to the next, how WTO Principles are applied in practice, and which valuation methods are prohibited.

 

Further reading: WTO Valuation Agreement

·         Article VII of the General Agreement on Tariffs and Trade (GATT)

·         General Introductory Commentary

·         Articles 1 to 8

·         Interpretative Notes to Articles 1 to 8

The primary basis for Customs value under the Agreement is the transaction value of the imported goods, the price actually paid or payable for goods sold for export to the country of importation.

Where transaction value cannot be determined, or where those conditions cannot be met, the Agreement provides five alternative methods, applied in strict hierarchical order:

Method

Name

Basis for Customs value

I

Transaction Value

The price actually paid or payable for goods sold for export, adjusted per Article 8. This is the primary method.

II

Identical goods

The transaction value of identical imported goods, previously accepted under Method I.

III

Similar goods

The transaction value of similar imported goods, previously accepted under Method I.

IV

Deductive Value

A unit price at which the imported goods, or identical or similar goods, are sold in the country of importation to an unrelated buyer, with deductions made for costs incurred after importation.

V

Computed Value

The sum of the cost of materials and fabrication, plus an amount for profit and general expenses. For the WTO member country chooses to base the customs value on Cost, Insurance, and Freight (CIF), the cost of transportation and insurance to the place of importation is also included.

VI

Fallback Method

Where none of the above methods can be applied, Customs value is determined using reasonable means consistent with the principles and general provisions of the Agreement and Article VII of GATT 1994.

Each method is applied only when the one before it cannot be used. The Agreement does not permit Customs to skip the hierarchy or apply methods out of order.

Because the customs valuation provisions of WTO Members typically replicate the six‑method hierarchy in domestic law, Customs administrations are legally bound to apply the methods in the same strict sequence set out in the Agreement. Skipping methods or applying them out of order is not permitted under either international or national legislation