Meaning
This administrative regulation issued by the General Administration of Customs defines the methods used to determine the taxable value of imported and exported goods. Customs valuation decree 213 establishes that the primary basis for valuation is the transaction value, which is the price paid or payable for the items. It provides a hierarchy of alternative methods if the transaction value is found to be unreliable or cannot be determined.
The decree aims to prevent tax evasion through under invoicing and to ensure a uniform application of duties at the border. It applies to all goods crossing the customs frontier and governs how secondary costs like royalties and insurance are included in the tax base. The authority of this decree stops when the value is finalized and the duties are paid, or if the goods are exempt from tax.
This instrument is essential for importers to calculate their landing costs and for customs to protect the national revenue.
Price Assessment
The process of valuation starts with the submission of the commercial invoice and the contract to the customs authorities. If the officer suspects that the declared price does not reflect the market value, they can initiate a formal inquiry. This assessment considers factors such as the relationship between the buyer and the seller and whether this relationship influenced the price.
Customs valuation decree 213 requires that all additional payments related to the goods, such as commissions and royalties, be disclosed and added to the value. Costs for transport and insurance and loading up to the point of entry are also part of the taxable total. If the importer cannot prove the accuracy of the transaction value, customs will move to the next method in the hierarchy.
This involves looking at the transaction value of identical or similar goods imported at roughly the same time. The goal is to reach a fair value that reflects the actual economic transaction.
Transaction Value
The use of the transaction value is the standard approach but it depends on the transparency of the financial records. For a price to be accepted, there must be no restrictions on the buyer and no conditions that make the value impossible to determine. The decree specifies that any discounts must be clearly stated and justified by commercial practice.
If the buyer and seller are related, the importer must demonstrate that the price is consistent with prices charged to unrelated parties. This often requires the submission of detailed transfer pricing reports or benchmark studies. Customs valuation decree 213 provides the legal basis for these requests and for the rejection of values that appear manipulated.
The importer bears the burden of proof to show that the declared price is the actual price paid. If the value is rejected, the resulting tax adjustment can lead to a significant increase in the total cost of the goods. This certainty of valuation is a major concern for companies with complex global supply chains.
Customs Inquiry
When a price is questioned, the authorities issue a notice requesting additional information and supporting evidence from the importer. This inquiry can involve a review of the bank transfers and the correspondence between the parties and the accounting books of the enterprise. Customs valuation decree 213 gives the officers the power to examine these documents to verify the components of the price.
The importer has a set period to respond and can provide an explanation for the pricing strategy used. If the explanation is not satisfactory, customs will issue a formal valuation ruling that sets the taxable amount. This ruling is binding for the specific shipment and may influence the valuation of future imports of the same product.
The importer can appeal the decision through an administrative review process if they believe the decree was applied incorrectly. This mechanism ensures that the valuation process remains subject to legal oversight and procedural fairness. The results of an inquiry can have long term implications for the profitability of the import business.
