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Transcript of © COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS By: G. S HIVADASS Executive Partner...
© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
IMPORT/EXPORT VALUATION AND PROCEDURE
By:
G. SHIVADASSExecutive PartnerLakshmi Kumaran & Sridharan, Attorneys
2© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
TOPICS COVERED IN THIS PRESENTATION
Valuation under Customs Law
Transaction Value Method
Import Valuation
Export Valuation
VALUATION UNDER CUSTOM LAW
4© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
VALUATION UNDER CUSTOM LAW
Sec 2(41) - ‘Value’ – means value determined in accordance with S.14
New S.14 applicable since 2007
Two methods of valuation
Tariff Value Method – Sec 14(2)
Transaction Value Method – Sec 14(1)
Customs Valuation Rules
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
Customs Valuation (Determination of Value of Export Goods) Rules, 2007
5© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
TRAIFF VALUE METHOD
Ad valorem duties to be calculated on tariff values fixed by the Board
Tariff values can be fixed for any class of imported or export goods
Notified in the official gazette
Notification No. 36/2001-Cus. (N.T.), dated 3.8.2001
TRANSACTION VALUE METHOD
7© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
EVOLUTION
• S. 14 and Customs Valuation Rules based on1. GATT Article VII – Valuation for Customs
Purposes – lays down general principles of valuation (presently, the WTO Valuation Agreement)
2. Agreement on Implementation of Art.VII of GATT- Multilateral agreement for– A fair, uniform and neutral system of
valuation– System consistent with commercial
practices
8© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
Article 1 of Implementation Agreement
Customs value of imported goods shall be “Transaction Value” provided –
No restrictions as to the disposition of goods by buyer
No consideration for which value cant be determined
The buyer and seller are not related
9© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
SECTION 14
“ …..the value of the imported goods and export goods shall
be the transaction value of such goods, that is to say,
the price actually paid or payable for the goods when sold
for export to India for delivery at the time and place of
importation, or as the case may be, for export from India
for delivery at the time and place of exportation, where the
buyer and seller of the goods are not related and price is
the sole consideration for the sale subject to such other
conditions as may be specified in the rules made in this
behalf :…”
10© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
INGREDEINTS OF TRANSACTION VALUE
1• price actually paid or
payable for the goods
2• sold for export to
India/from India
3
• for delivery at the time and place of importation/exportation,
4• where the buyer and
seller of the goods are not related and
5• price is the sole
consideration for the sale
11© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
CONDITIONS FOR ACCEPTING TRANSACTION VALUE
Section 14 (1)& Rule 3(2)
Buyer and seller should not be related
Price should be the sole consideration for the sale
No restriction on buyer for disposal of goods; which substantially affect the value of goods
Sale should not be subject to conditions of which value cannot be determined
No further consideration to seller of which adjustment cannot be made
13© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
SOLD FOR EXPORTATION
There must be a sale for export to the country of importation (India)
Sale can be made in high seas to be imported into India
Advisory Opinion 14.1: only transaction involving an actual international transfer of goods
Applicable when goods are cleared from a bonded warehouse to the DTA
Charges after importation should not be included in the customs value.
14© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
PRICE IS THE SOLE CONSIDARATION
If there is other consideration, it should be added to the transaction value
• Activities on account of buyer for which adjustment is not provided in rule 10 – not to be added to price
• If price is subject to a condition for which value cannot be determined – T.V. is rejected.
15© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
INCLUSION TO THE ASSESSABLE VALUERULE 10 OF CVR 2007
Rule 10 – cost and services to be included if not already included in the price paid or payable
10(1)(a) - Incurred by the buyer for the imported goods
Commissions and brokerage except buying commissions
Cost of containers being one with the goods
Labour and material cost for packing
16© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
SUPPLIES BY THE BUYER 10(1) (b)
Goods and services supplied by buyer directly or indirectly
Free of cost or at reduced cost
For use in connection with production and sale for export of imported goods
Materials, components, parts
Tools, moulds, dies
Materials consumed in the production
Engineering, plans, sketches undertaken elsewhere other than in India and necessary for the production of imported goods
17© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
ROYALTIES AND LICENSE FEES 10 (1) (c)
Royalties and License fee related to the imported goods;
Required to be paid by the buyer directly or indirectly;
As a condition of sale of the goods being valued.
Include payments in respect to IPRs
Doesn’t include payment for the right to reproduce in India
Payments for the right to distribute or resell in India, includible only if a condition of sale
Payments towards process to be undertaken post importation includible if a condition of sale (Explanation) – e.g. fees towards technical know-how for using the product in India
18© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
OTHER PAYMENTS MADE TO THE SELLER
10(1)(d)
Value of any part of the proceeds of any;
Subsequent resale, disposal or use of imported goods that;
Accrues directly or indirectly to the seller.
E.g. Distributor/agent imports goods and once he sells these goods in India, proceeds are payable to the foreign seller.
10(1)(e)
Payments made or to be made
As a condition of sale of imported goods
By the buyer to the seller or a third party to satisfy an obligation of the seller.
19© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
FOR DELIVERY AT THE TIME AND PLACE OF IMPORTATION
Rule 10(2) – Value of the goods for delivery at the time and place of importation
Includes
Cost of transport to the place of importation, including ship demurrage charges
Loading and unloading charges associated with the delivery at the place of importation
The cost of insurance
Rules provide for additions as a percentage of FOB value in case the costs are unascertainable
20© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
OTHER ADDITIONS
Rule 10(4) – no other additions shall be made in determining T.V. except as provided for in Rule 10.
Rule 10(3) – Additions shall be made on the basis of objective and quantifiable data
21© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
EXCLUSION FROM ASSESSABLE VALUE
Following charges are to be excluded – Interpretative Note to R.3
Erection, testing and commissioning charges – port importation expenses
Cost of transport after importation
Duties and taxes in India
Payments that do not relate to imported goods
Bank charges for bank services
22© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
REJECTION OF DECLARED VALUE
Rule 11 – importer or his agent has to furnish a declaration – detailed disclosure relating value of imported goods
Proper officer – truth and accuracy of information furnished
Wrong declaration is an offence
Rule 12 – value declared can be rejected-AO has doubts regarding the truth or accuracy
Rule 3(4) – if value cannot be determined under Rule 3 – determined by proceeding sequentially through Rule 4-9
23© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
TRANSACTION VALUE OF DECLARED GOODS- RULE 4
If Rule 3 value is unacceptable, value of imported good; T.V. of identical goods Sold for export to India Imported at or about the same time as that of
the goods being valued Goods in comparison shouldn’t have been
provisionally assessed Rule 4(3) – More than one T.V. of Identical goods,
lowest of such value should be taken
24© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
TRANSACTION VALUE OF DECLARED GOODS- RULE 4
Identical goods fulfill the following criteria – Rule 2(1)(d)
Goods should be same in all respects
Should have been produced in the same country
Should be produced by the same manufacturer unless unavailable;
Should have been imported from the same country
Sale should be at the same commercial level
If at different commercial level, due account to adjustment and demonstration of difference
25© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
TRANSACTION VALUE OF SIMILAR GOODS
If Rule 3 or rule 4 value cannot be accepted; T.V. of similar goods imported at or about the same time
Goods in comparison shouldn’t have been provisionally assessed
Distinction regards identical goods – in case of similar goods, it is enough if they like characteristics and perform same function
26© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
TRANSACTION VALUE OF SIMILAR GOODS
Similar goods fulfill the following criteria – Rule 2(1)(d)
Goods should be alike in all respects – commercially interchangeable
Should have been produced in the same country
Should be produced by the same manufacturer unless unavailable;
Should have been imported from the same country
Sale should be at the same commercial level
If at different commercial level, due account to adjustment and demonstration of difference
27© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
RULE 6
If the value can’t be determined under Rules 3, 4 and 5
the value shall be deductive under rule 7,
otherwise, computed value under rule 8.
At the request of the importer + approval of the proper officer, Rule 8 can be used first
28© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
DEDUCTIVE VALUE- RULE 7
When Rule 3, 4 and 5 not acceptable/available – but products are sold in India
A.V. calculated by reducing post-importation costs and expenses from the selling price
Price only after processing of imported goods- processing costs to be deducted
Price at or about the time goods are being valued If not, date within 90 days of importation
29© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
COMPUTED VALUE- RULE 8
Computed value shall consist of the sum of:
the cost or value of materials for producing imported goods;
amount for profit and general expenses usually reflected in sales of similar goods;
the cost or value of all other expenses under sub-rule (2) of rule 10
Used in cases of buyer and seller being related and producer supplies necessary costing
30© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
RESUDIAL METHOD- RULE 9
A best judgment method – where value cannot be determined under preceding rules
Reasonable means consistent with the principles and general provisions of these rules and available data
The value arrived shall not exceed price of like goods sold for import to India
31© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
PROHIBITIONS IN DETERMINING THE VALUE
Use of selling price in India of goods produced in India
System of accepting highest of the alternatives
Price of goods prevalent in the country of exportation
Price of goods for export to a country other than India
Minimum customs values
Arbitrary or fictitious value
32© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
RELATED PARTY- RULE2(2)
Officers or directors of each other’s business Legally recognized partners in business Employer-Employee Any person directly or indirectly owning, controlling or
holding 5% or more of the stock or share of both the parties
One of them controls the other or both controlled by a third person or together they control a third person - directly or indirectly
Members of the same family. Subject to their falling within the above criteria- sole
agent or sole concessionaire or sole distributor of the other shall be deemed to be related.
Persons include “legal persons” .
33© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
VALUATION OF RELATED PARTY TRANSACTIONS RULE 3(3)
Rule 3(3)(a) – Transaction Value to be accepted where relationship do not influence the price.
Rule 3(3)(b) – Importer to demonstrate that declared value closely approximates to one of the following values at or about the same time:
The transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India;
The deductive value for identical goods or similar goods;
The computed value for identical goods or similar goods.
Where T.V. cannot be applied – sequential application of R.4-9
EXPORT VALUATION
35© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
VALUATION OF EXPORTS
Based on Transaction Value – S.14 and
Customs Valuation (Determination of Value of Export Goods) Rules, 2007
If conditions of T.V. are not met, valuation as per Rules
Rule 3(2) of Export Valuation Rules – T.V. to be accepted even if buyer and seller are related – but price not influenced
Valuation under the Rules – if T.V. not possible – sequentially through rule 4 – 6
36© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
VALUATION OF EXPORTS
Export Value by Comparison – Rule 4 T.V. of Goods of like kind and quality – identical
or similar – commercially interchangeable – R.2(1)(a)
Exported at or about the same time To other buyers in the same destination
country If not, another destination country is
considered Computed Value – Rule 5 if R.4 is inapplicable –
on the basis of Cost of production of export goods Charges for deign or brand An amount towards profit
Residual Method – Rule 6 when R.4 & 5 inapplicable Best judgment method similar to import
valuation
IMPORT PROCEDURE
38© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
IMPORT PROCEDURE
Person in charge of Conveyance – Import manifesto (IGM) submitted – ‘entry inwards’ granted
Self Assessment based on RMS in respect of specified importers
IEC code number from DGFT prior to filing BoE
Importer – Submission of Bill of Entry with relevant docs – contains description, value, quantity, exemption notification, classification – Sec 46
White Bill of Entry - home consumption - cleared on payment of customs duty
Yellow Bill of Entry – warehousing - ‘into bond Bill of Entry’ as bond is executed – no duty is paid and imported goods are transferred to warehouse
Green Bill of Entry - clearance from warehouse on payment of customs duty - ex-bond clearance.
39© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
IMPORT PROCEDURE
Bill of Entry is noted - Goods are assessed to duty, examined and pre-audit is carried out - Customs duty is paid after assessment.
Rate of customs duty on the day of noting Self Assessment under Section 17 Payment under protest Provisional assessment – Section 18
On importer’s request if unable to make SA Deemed necessary to carry out tests Necessary to make further enquiry
Final Assessment – difference paid or refund
40© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
IMPORT PROCEDURE
Out of customs charge for clearance issued
After that, port dues, demurrage and other charges are paid and goods are cleared.
Goods can be disposed of if not cleared from port within 30 days – Sec 48
41© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
SELF ASSESSMENT PROCEDURE
Introduced during Budget speech 2011-2012
ALL IMPORTERS/EXPORTERS
Already prevalent in Excise & Service Tax
Extended to Customs
Trade Facilitation Measure
Procedure is same for exports & imports
To quicken the clearance of cargo
42© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
NEED FOR SELF ASSESSMENT
To reconcile 2 conflicting interests (Customs Checks vs. Faster Clearance)
To allow release of the goods on the basis of self-assessment
Without examination of the goods – Green Channel
To enable the importer to have possession of the goods
Also interests of the government are protected by resorting to On-Site Post Clearance Audit (OSPCA)
Underlying Reason
43© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
CHANGES INTRODUCED IN SELF ASSESSMENTSub-
Section Old Section New Section
(1) PO to assess the goods imported Self Assessment by Importer
(2) Verification to be done by PO PO may verify the self-assessment of such goods
(3) PO may ask for documents for the purpose of assessing duty
PO may ask for documents for the purpose of Verification of Self assessment
(4) prior to the examination or testing PO may permit to be assess duty on the basis of the statements made in the entry and the documents produced
Re-assessment of goods if on verification self assessment found to be wrong
(5) Speaking order if assessment done by PO different from assessment sought by importer/exporter
Speaking order if re-assessment done by PO different from self assessment done by importer/exporter
(6) Not there Audit of self assessment where re-assessment not done
44© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
FLOW OF SELF ASSESSMENT
An importer / exporter SHALL Self Assess the Duty
PO may VERIFY the SA by examination & Testing PO may require the importer / exporter to produce documents
On verification of SA , if
SA NOT DONE correctly SA is DONE correctly
PO MAY RA the duty
If RA is contrary to SA
If importer/exporter accept RA (writing) If importer/exporter
not accept
No issue of Formal Order Speaking Order to be passed with in 15 days from date of RA
45© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
IMPACT OF SELF ASSESSMENT
In case of
No SA done SA done + RA is required under
Section 17
Importer / exporter can opt for PA by PO
PA gets converted into FA PA gets converted into RA
Key:
PA – Provisional Assessment; RA - Re-Assessment
SA – Self Assessment
PARA 7 OF THE CIRCULAR 17/2011-CUS
46© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
PROVISIONAL ASSESSMENT- S.18
Unable to make SA + requests in writing to PO or
PO deems it necessary for the imported goods to be tested or
Importer produced documents + for further enquiry or
Documents not produced/Information not provided + further enquiry
Customs (Provisional Duty Assessment) Regulations, 2011 which supersedes 1963 Regulations
EXPORT PROCEDURE
48© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
EXPORT PROCEDURE
Loading in conveyance after ‘Entry Outward’ is sanctioned Person in charge of conveyance submission of ‘Export
Manifest’ Exporter to obtain IEC number from DGFT - registered
with Export Promotion Council if export benefits claimed Export is required to submit Shipping Bill with required
documents for obtaining permission to export. Shipping Bill for export of goods under claim for duty
drawback Shipping Bill for export of dutiable goods - this should
be yellow colour Shipping bill for export of duty free goods - it should be
white colour shipping bill for export of duty free goods ex-bond - i.e.
from bonded store room - it should be pink colour Shipping Bill for export under DEPB scheme - Blue
colour.
49© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
EXPORT PROCEDURE
FEMA formalities - GR/SDF/Softex form is required to be submitted.
The shipping bill is noted, goods are assessed and examined. Export duty is paid, if applicable.
Customs check for advance licenses, restriction and prohibitions
If export is under export incentives, relevant documents are checked and certified. Then proof of export is obtained on ARE-1
Conveyance can leave only after ‘Let Export’ order is issued.
© COPYRIGHT 2012, LAKSHMI KUMARAN & SRIDHARAN, ATTORNEYS
THANK YOU