Customs Valuation Audit Mechanics for Cross Border Agency Import Transactions
Customs valuation in agency imports depends on proving buying commission exemptions under Decree 213 while adjusting for assists and royalties.
Assists Valuation Article 11
Meaning
Regulatory framework governs the calculation of duty on goods and services provided by a buyer to a foreign manufacturer for the production of imported merchandise. Under assists valuation article 11, the General Administration of Customs requires that the value of such assists be incorporated into the dutiable value of the finished products. This rule covers materials, tools, dies, moulds, and engineering or development work undertaken outside the importing territory.
Importers must declare these contributions during the customs clearance process.
Dutiable Inclusion
Statutory authority for this requirement originates in the valuation measures enacted by the Ministry of Finance. These provisions isolate any asset or service provided free of charge or at a reduced cost by the buyer for use in connection with the production of the imported goods. If the importer fails to declare the cost of an assist, the regional customs branch retains the power to reassess the total transaction value.
This enforcement mechanism ensures that the full economic value of the production is captured.
Apportionment Method
Determination of how the assist is valued and allocated requires careful calculations. Importers may distribute the cost of the assist over the first shipment, over the total planned production volume, or using another systematic method that accords with generally accepted accounting principles. The choice of method dictates the tax liability on early shipments.
Once an apportionment scheme is selected, it cannot be changed without formal submission of documents to the customs bureau.
Audit Risk
Retrospective investigations often focus on undeclared engineering designs and research and development performed overseas. Companies that receive free technical assistance from foreign parents frequently overlook this duty obligation. Discrepancies lead to penalties and a downgrading of the firm’s compliance rating.