WORLD TRADE
ORGANIZATIONG/VAL/W/101
8 August 2002
(02-4364)
Committee on Customs  Valuation Original:  English
PARAGRAPH 12 OF THE DOHA MINISTERIAL DECLARATION:
IMPLEMENTATION-RELATED ISSUES
Replies to Questions on Tirets 57-61 by Australia, Canada, European Union,
Japan, Singapore and United States1
The following communication, dated 5 August 2002, has been received from the Permanent
Mission of India.
_______________
I. GENERAL QUESTIONS
1(a) Would India confirm that each of its proposals in tiret 57, 58, 59, 60 and 61 would require
amending the WTO Agreement on Customs Valuation?  ( United States )
(b) Does the proposal require a change to the CVA? ( Canada )
Ans.  The proposals envisage a few minor changes for smooth implementation of the Customs
Valuation Agreement (CVA).  No changes are proposed in the number of valuation methods or the
order of their application.
2. India's statement makes reference that "transfer pricing problems have increased manifold".(a) What specifically are the "problems" India is referring to? ( United States )
(b) What is the specific factual basis for India's conclusion that such problems have "increased
manifold"?  Is India able to provide data? ( United States )
Ans. Transfer pricing is a matter of concern when the mechanism is used to deliberately under
value the goods to evade customs duties.  This trend is on the increase as the developing countryeconomies are opening up to encourage foreign investment.
3. India's statement makes reference that "recent events have also further eroded the confidence
in accounting practices followed by major accounting firms".
(a) What "recent events" is India referring to?
(b) What does India see as the specific relevance to implementation of the WTO Agreement on
Customs Valuation of such events and what it perceives as an erosion of confidence in
accounting practices followed by major accounting firms? ( United States )
Ans. Many cases have come to light where Multi National Enterprises have adopted creative
accounting practices to circumvent legal obligations. Such instances are not nation-specific.
                                                     
1 G/VAL/W/98+Adds 1-5.G/VAL/W/101
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4. Would India agree that the issue of corruption within a customs administration is also relevant
to implementation of the WTO Agreement on Customs Valuation? ( United States )
Ans. Custom’s legislation should be clear and precise. There should be as few exemptions to the
standard rules as possible. Provisions in Valuati on rules, which can be manipulated by unscrupulous
traders, can affect the integrity levels of a customs administration.
5. India's statement makes reference that "the Agreement requires that customs value should be
based on the transactions [sic] value, or the actual value".
(a) Does India understand the "transaction value" to be something other than "the price actually
paid or payable for the goods when sold for export to the country of importation adjusted inaccordance with the provisions of Article 8"? ( United States )
(b) Does India understand what it refers to as the "actual value" to be the same as the "transaction
value" – i.e. "the price actually paid or payable for the goods when sold for export to the
country of importation adjusted in accordance with the provisions of Article 8"?
(United States )
(c) How does the proposal affect the transaction value as the basis of customs valuation?
(Canada )
Ans. The Indian proposal does not affect the ”transaction value” as the primary basis for customs
valuation as laid down in the Agreement.  India fully understands the meaning of transaction value asdefined in Article 1 of the Agreement and respects its primacy.  The reference to actual value is in the
context of transaction value read with Article VII of the GATT.
6. India's statement makes reference that "the Agreement clearly qualifies that the actual value
will be the sale price in the 'ordinary course of trade' and under 'fully competitive conditions’.
(a) Where does the Agreement on Customs Valuation refer to the term "actual value"?
(United States )
(b) Where does the Agreement on Customs Valuation use the phrase "ordinary course of trade"?
(United States )
(c) Where does the Agreement require that "actual value" be "under fully competitive
conditions"? ( United States )
(d) Is it India's understanding that the Agreement on Customs Valuation qualifies that the
"transaction value" must be the sale price "in the ordinary course of trade"? ( United States )
(e) Is it India's understanding that the Agreement on Customs Valuation qualifies that the
"transaction value" must be the sale price "under fully competitive conditions"?
(United States )
Ans. The CVA is an Agreement to implement Article VII of the GATT.  The expressions such as
“actual value”, “in the ordinary course of trade”, and “under fully competitive conditions” used in
Article VII of the GATT represent the basic principles for determination of Customs value in an
international trade transaction.  These principles  have been respected in the Customs Valuation
Agreement (CVA) as India understands it.  It is, therefore, reasonable to presume that the transaction
value defined in the Agreement should be consistent with these basic principles.
7. India's statement makes reference that for developed countries "import controls are minimal
and are not based on value".
Does India have import controls that are based on value?  If so, what type of import controls
are these, and how do they operate? ( United States )G/VAL/W/101
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Ans. The statement of India was meant to explain the problems faced by developing countries and
not discuss nature of import controls.
8. India's statement makes reference to a conclusion that "a developed country Customs
Valuation Division may have about six under-va luation cases in a month to deal with".
What is the factual basis for India's conclusion?  Is it referring to a specific country? ( United
States )
Ans. The statement was made with the intention of highlighting the gravity and magnitude of the
problem in developing countries vis a vis developed countries and not to make country specific
observations.
9(a) How would each proposal “deter fraud”, part icularly since fraud is not caused by the CVA
but is the deliberate misrepresentation of the facts, is not unique to customs valuation, and is
best addressed by transparent administration, fair verification activities and effective
enforcement programs? ( Canada ).
(b) Would India explain the specific manner in which tiret 57 (and other tirets) will deter fraud?
(United States )
Ans. The proposals made by India would reduce the scope for fraud by minor modification in the
provisions under the Agreement, which are susceptible to manipulation. For example, an importercould claim a higher proportion of the actual value of the goods as payment towards buying
commission or the cost of services supplied free of charge under Article 8.1 of the CVA.  Similarly,
the provision for adopting the lowest value of the identical or similar goods can be taken undue
advantage of by claiming the lowest values previously accepted by the Customs in pilot
consignments. The Indian proposals aim at removing these anomalies in the Agreement so as tominimise scope for fraud.
10. (a) How would each proposal facilitate “genuine trade”, as opposed, for example, to increasing
the uncertainty for importers by increasing the discretion and choice of customs authorities?
(Canada )
(b) Would India explain the specific manner in which tiret 57 (and other tirets) will facilitate
genuine trade? ( United States )
(c) How does the proposal affect the fairness, uniformity or neutrality of the determination of
customs values under the CVA? ( Canada )
(d) How does the proposal ensure and increase transparency in the determination of customs
value? ( Canada )
(e) How does the proposal ensure that customs values will not be determined by or based on
arbitrary or fictitious values? ( Canada )
Ans. The Indian proposals would facilitate genuine trade because distortion of trade on account of
under valuation will be minimized and there will be a level playing field for honest traders.  There
will be more transparency and certainty in th e determination of customs value once the Indian
proposals are implemented, as they will reduce areas of dispute on account of suspected invoice
manipulation.  In conclusion, customs values will be determined on the basis of information and
evidence available in a transparent manner thereby avoiding the need for determination of value by
the residual method.
11(a) How would each proposal “protect revenue”, as opposed to increase revenue by increasing
the value for duty to be determined under the CVA? ( Canada )
(b) Would India explain the specific manner in which tiret 57 will protect revenue?
(United States )G/VAL/W/101
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(c) Would India provide similar specific factual explanations for tirets 58,59,60 & 61.
(United States)
Ans. The Indian proposal is not intended to increase revenue but to ensure collection of appropriate
revenue which is rightly due to the Government by minimizing invoice manipulation/valuation fraudand to provide a level playing field to honest traders
12. How will the proposal affect the principle in the CVA that customs value should not be
determined by or based on prices in the exporting-country’s market or in the importing country’s
market? ( Canada )
Ans. One of the proposals (Tiret 58) is to enable the determination of customs value under the
Residual method (Article 7) by exploring all re sidual eventualities, including the domestic market
price of the exporting country or the export prices to a third country.  These two methods are
specifically prohibited under Article 7.2(c) & (e).  The proposal is to do away with this restriction so
as to facilitate fair and transparent valuation in extreme situations where all other methods fail.  This
approach is not contrary to the basic principles of valuation under Article VII of the GATT. Asregards the importing country market price, it may be noted that Article 5 of the Agreement already
allows (Deductive Value Method) determination of customs value based on such prices.
13. Could India elaborate on what it meant by  “multilateralism in the context of customs
valuation”, and on how this  “multilateralism” relates to each proposal, both in terms of the problemeach proposal is trying to address and the proposed solution? ( Canada )
Ans. The reference to multilateral solution was in the context of the proposal concerning exchange
of information on export values (Tiret 56).  This proposal has been separately considered and the
outcome is reflected in Paragraph 8 of the Doha Ministerial Declaration concerning implementationissues.
14. In applying the CVA and determining the customs value of an imported good, does India
verify and confirm the value of goods at the border, before the good is cleared from customs control,
or is this done after importation (e.g., by post-entry audits)? ( Canada )
Ans. The determination of Customs value is done at the time of clearance of the goods at the
border.  However, in disputed cases the goods are allowed to be withdrawn by the importer on filing
necessary guarantee pending final determination of customs value (See Article 13 of CVA).
15. What approaches and methods, including those developed by the World Customs
Organization, has India tried to use to address the problems underlying India’s proposals, and whyhave they not worked in India’s case, particularly when other countries are addressing successfully the
same and similar problems using existing approaches, techniques and methods that do not require
changing the CVA? ( Canada )
Ans. India has long experience in implementation of the Agreement.  The proposals under
discussion have arisen due to the practical difficulties experienced in some areas.  These difficulties
could not be resolved by making use of any of instruments or guidelines developed by the World
Customs Organization or any other agency.  It is  questionable whether all other Members have been
able to resolve the difficulties successfully especially concerning invoice manipulation or under
valuation, under the existing provisions.
16. For each tiret, the proponents have failed to provide specific examples or case studies in a
detailed manner to allow other Members to better understand their proposal.  Could the proponents,G/VAL/W/101
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therefore, provide such information by illustrating problems that they are faced with and by giving the
reasons for promoting their proposal? ( Japan )
Ans. The problems being posed are self evident and do not need the help of case studies to
illustrate them. However, a case study in relation to TIRET 57 is as under –
An importer ‘A’ in country ‘X’ filed bill of entr y for clearance of a manufacturing plant.  ‘A’
had entered into an equipment supply agreement with ‘B’ in country ‘Y’.  ‘B’ in turn has placed an
indent on ‘C’ in country ‘Z’.   Goods were actually manufactured and shipped from country ‘Z’ by a
company “D”.  Importer ‘A’ filed an equipment supply agreement of Currency Units (CU) 200
million with the Customs in country ‘X’.
Subsequently, importer ‘A’ filed a document w ith the customs in country ‘X’, which stated
that the value of the actual equipment being imported was CU 150 m, only.  This prompted the
Customs officers to inquire.
The importer ‘A’ clarified that the equipment and goods being shipped from country ‘Z’ was
of the value of CU 150 m only. They claimed that th ey themselves were to incur an expense of CU 50
m towards design, engineering and drawings which would be developed indigenously for the
installation of the unit.
On further inquiry it was found that the importer ‘A’ had actually placed an indent on
company ‘E’ in country ‘X’, which in turn placed  an indent/purchase order on indenting company ‘C’
in country ‘Z’.  The design and engineering were actually supplied by the same company, which
provided the equipment, namely, company ‘D’ in country ‘Z’. It was therefore found that the
importers had mis-declared the value of the goods and that the costs towards design and engineering
should have been added to the assessable value of the goods.
II.  TIRET 57
“The addition of cost of services such as engineering, development, and design work, which are
supplied directly or indirectly by the buyer free of  charge or at reduced cost for the production of
goods under import, shall be included in Article 8:1(b)(iv).” (Indian Proposal )
17. We are under impression that India may have mi staken the understanding of Article 8:1(b)(iv)
of the Agreement on Customs Agreement (hereinafter “the Agreement”).  At the March Committee
meeting, India explained that the “value of engineering, drawings etc., procured from the country of
importation, but a person other than the buyer, was not excluded from being added to the customs
value” (paragraph 11 of G/VAL/M/25).  The provision of Article 8:1(b)(iv) states that the elements
for inclusion in the customs value is, among others , the value of “engineering, development, artwork,
design work, and plans and sketches undertaken elsewhere than in the country of importation and
necessary for the production of the imported goods”.  This means that the value of engineering,development, artwork, design work, and plans and sk etches (hereinafter “engineering etc.”) would not
need to be added if they have been developed in the country of importation, regardless of who
provides them to the buyer.  We understand that the Agreement does not provide any provisions onwho provides engineering, etc. to the buyer, but ra ther that it ensures that the value of engineering,
etc. developed in the country of importation should not be added to the customs value.  We ask India
to please check its view on Article 8:1(b)(iv) in accordance with our explanation. ( Japan )
Ans. The opening part of Article 8.1(b) indicates addition of cost and services provided by the
buyer.  It is presumed that if a person other than the buyer supplies such cost and services, it would
naturally get included in the sale price or invoice price and no separate addition is needed.  In the case
of specified services under item(iv) also such an in clusion is built in when it is provided by a thirdG/VAL/W/101
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party at the country of importation.  In short, the cost of engineering, development, design work, etc
are not specifically exempted from the Customs value, when incurred by a person other than the
importer from the country of importation.
18(a) If the value of engineering etc. is counted towards the customs value, does this not create a
double taxation problem? ( Japan )
(b) What would be the impact on fiscal revenues, as well as the economic implications if the
Agreement were to be amended along the lines of this tiret? ( Japan )
Ans. The question of double taxation would not arise as specific exemption could be granted by
countries wanting to exempt such services from the purview of customs duty. Further, countries
wishing to continue the previous practice of not taxing such services, could also grant exemption on
the value representing such services at the time of import and there would be no need for making anexception in the customs Valuation Agreement itself fo r this purpose.  An alternative is to make it
optional for Members to include or exclude such se rvices from the Customs value  There would be no
adverse impact on the fiscal revenue if the CVA were amended along the lines of this tiret.
19(a) Can some further explanation be provided as to why it would be in the interests of Members,
and in particular developing country Members, to levy customs duties on the listed
goods/services carried out in the country of importation? ( European Union )
(b) Why would this proposal not increase the discretion of customs authorities in the
determination or acceptance of the transaction value as the value of duty? ( Canada )
(c) Since the proposal would now require importers to add to the price paid or payable the costs
of domestically-supplied cost of engineering, development and design work, why would this
proposal not increase uncertainty for traders or create additional compliance burdens on
importers. ( Canada )
Ans. The proposal would be in the interest of the Members and in particular the developing country
members as it would reduce the scope for an artificial split between the real engineering/design
carried out by the supplier and that carried out by the buyer in the country of import. It would also
ensure that all cost elements involved in the manuf acture of goods are included in the Customs value.
It would also  bring at par all costs and services detailed in Article 8(1) (b).
The proposal is intended to bring clarity, certainty and transparency in the application of
CVA.  It would not create any additional compliance burden on traders/importers; rather it wouldfacilitate Customs valuation.
20(a) Could the proponents of this tiret explain w ho they think should bear the burden of proving
whether or not engineering etc. has been devel oped in the country of importation?  We are of
the view that the importer should, in principle, bear the burden of proving the declared value
to the customs administration. ( Japan )
(b) For this tiret, if the importer claims that engineering etc. was developed in the country of
importation, the customs administration can request the importer to prove its claim.  We also
believe that the current Agreement enables the customs administration to know the accurate
customs value.  Could the proponents of this tiret provide its views on this point? ( Japan )
Ans. So long as the goods and services [as indicated in Article 8 (1)(b)] are supplied by the buyer
and the value of the same have not been included in the price actually paid or payable, it would be
correct to add such values in determining the tr ansaction value of imported goods in question. It
should not discriminate whether such goods and services are produced/developed in the country ofimportation or at other place(s). However, the Agreement makes a special dispensation in respect of
services specified in item (iv) of Article 8.1 (b) causing the burden of proving whether or not the
engineering, services etc. have been developed in the country of importation or not and whether it has
been supplied by the buyer.  If the importer makes such a claim, the Customs needs to verify it.  SinceG/VAL/W/101
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it relates to addition to invoice value it is also li kely that the importer suppresses this information to
avoid tendering evidence and to avoid scrutiny by customs officers.  The proposed amendment will
avoid such uncertainties and would enable customs administration to determine the accurate customs
value.
21(a) In administering the CVA, does Indian Cu stoms audit or verify the amount paid, and any
additions (Article 8) to the price paid or to be paid?  How are audits conducted and why do
such audits not redress situations where the value of engineering, development, and design
work claimed by an importer as being supplied domestically is unsubstantiated or overstated
and the value found incorrect? ( Canada )
(b) In a case where an importer makes a false claim to the effect that goods/service, dutiable
under Article 8(1)(b)(iv), were undertaken in the country of import, would India not agreethat information concerning the importer, or access to importer's records in the country of
importation, can ensure that the facts in question will be clear to the relevant authorities.
(European Union  )
Ans.: Indian customs has a post audit system in place, but it is not extended to the importer’s
premises. Moreover, since the existing provision under Article 8 (1)(b) allows an importer to exclude
from the invoice value those charges that are incurred in respect of engineering, services etc. carried
out in the country of importation, it encourages importers to artificially apportion large amounts
towards such services. Within the existing framework of Article 8(1)(b), a post audit even at
importer’s premises cannot reveal such deliberate manipulation in accounts.   It would be extremelydifficult to disallow the inflated amounts claimed towards such services as unsubstantiated/overstated.
It is also not feasible to verify the importers records in all cases of such importation as it would not be
worth the resources spent to ascertain whether the importer had made a false claim. The Indian
proposal will obviate all these difficulties and put all the cost and services under Article 8.1.b on the
same footing so as to include all costs that should legitimately get included in the transaction value. 
22(a) Could India therefore elaborate how the inclusion of certain services in Article 8.1(b)(iv),
presently excluded, would address the problem of fraud?  ( Singapore )
(b) How does Article 8.1(b)(iv) actually encourage artificial reduction in customs value and
parallel payments?  To what extent (i.e. what proportion or percentage of the customs
valuation amount) do these services "artificially" reduce the customs value? ( Singapore )
(c) Since Customs would still need to audit the importer to determine the monetary cost of
domestically-supplied engineering, development and design work and how much should be
allocated to the imported goods, how would this proposal address fraud related to such assists
supplied domestically? ( Canada )
Ans. With regard to these questions the case study mentioned in reply to question number 16 of
these replies may be examined.  The customs fraud in this case was detected because the importer ‘I’
had in the first place filed a full purchase order.  It appears that the scheme to de-fraud the revenue
came as an after thought.  If the original and complete purchase order had not been filed in the first
instance, the assessing officers may not have detected the case altogether. It is possible that in manycases the importer would be more alert and file a single declaration to customs without making any
mention of costs towards design and engineering. In such circumstances the importers would escape
investigation into their accounts.
Secondly, the arrangement for payment made between the importer and the actual
manufacturer and supplier of the goods is highly complex. On a simple examination of the importer’s
accounts it would appear that the buyer has procured the design and engineering in the country of
importation.  Customs would need to investigate into the accounts of the so-called local supplier of
the design and engineering works in order to dete rmine the actual supplier of the design/engineeringG/VAL/W/101
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works who, in this case, happened to be in a different country from the importer’s. Such intensive
investigation would not be taken by Customs in the normal circumstances where the records do not
show a prima facie discrepancy or any other ground for doubting the veracity of the declaration.
The exclusion of the cost of engineering development and the design work supplied directly
or indirectly by the buyer from the country of importation creates a permissive environment in which
traders can resort to creative accounting practices and perpetuate commercial frauds. Rigorous post
clearance audit is no doubt an effective tool for detecting commercial frauds, which have already
taken place but it places a heavy demand on the resources of a Customs administration. It may not be
administratively feasible to build post-clearance audit departments, which will effectively deal with
frauds that are disguised under highly creative accounting practices. Therefore a far more desirable
option for any customs administration is to plug the loopholes in the Customs Valuation Law as aprophylactic measure and prevent commi ssioning of such commercial frauds.
 The amount of evasion of duty due to misuse of provisions for excluding certain costs on
design and engineering can not be estimated but the case study does reveal that the duties involved
would be considerable.
23. If the Agreement were to be amended along the lines of this tiret, it would result in an
increased customs value by expanding elements for inclusion in the customs value, and thus would
erode the effects of tariff negotiations by offsetting the advantages of tariff reductions or elimination
through the price increase of imported goods.  Could the proponents of this tiret provide its views onthis point? ( Japan )
Ans. The CVA is aimed at reducing arbitrariness and to lay down a positive basis for valuation of
goods. The Indian proposal would lead to approp riate determination of Customs value by avoiding
arbitrary reduction on account of certain services undertaken in the country of importation and checkirregular accounting practices.
24. What percentage of imports during a year involves domestically supplied engineering,
development and design work) ( Canada )
Ans. The exact percentage of import involving domestically supplied engineering development and
design work in a year cannot be quantified. However, substantial amount of cost involved in respectof several projects involving imports of machinery, equipments, industrial plants, etc. pertain to the
domestically-supplied assists specified in Article 8.1.b (iv) carried out in the country of importation.
25. Canada requests India to provide a copy of its regulations, policies and procedures for
applying CVA Article 8:1(b)(iv), including those pertaining to the circumstances under which the
costs of engineering, development, and design work are included or excluded from the customs value?
(Canada )
Ans. The relevant extract of Indian Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988 is enclosed (Annexe A).
III. TIRET 58
“The residual method of determining customs value under Article 7 shall be inclusive of all residual
eventualities, thus allowing valuation based on domestic market price or export price in a third
country with appropriate adjustments.” (Indian Proposal )
26. Recognizing that the valuation method based on the domestic market price or the export price
in a third country tends to become arbitrary or fictitious, and one of the main objectives of the currentG/VAL/W/101
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Agreement is to prevent such arbitrary or fictitious valuation.  We think that the proposal of the tiret
would require some fundamental changes in the conc ept of the Agreement.  Do the proponents of the
tiret wish to pursue an overall revision of the current Agreement?  (We should note here that one of
major trading countries, upon introducing the Agreement under the GATT, abolished its valuation
method based on the domestic sale price).( Japan )
Ans. India is committed to applying the methods of valuation under the CVA.  It is only in respect
of application of the residual method under Article 7 that India suggests that the restrictions contained
under Article 7 (2)(c) and (e) be removed so as to explore all possible ways to arrive at the appropriate
Customs value.  India does not believe that using domestic market prices of exporting country or
export prices to third countries would require any fundamental changes in the concept of CVA.  Such
prices are in any case prices of comparable goods and under CVA, comparison with prices of identicaland similar goods is allowed in the importing country. Only when such prices are not available it is
proposed to make use of similar comparable prices from other markets.  Such a flexible approach
should be permitted under Article 7 of CVA.
27. Although the application of anti-dumping provision measures is, in principle, based on the
domestic sale price, the objectives of customs valuation are different from those of imposing anti-
dumping measures.  In order to achieve the objectives of the Agreement, which includes, among
others, preventing arbitrary or fictitious customs value, the method to determine customs valuation
must be transparent.  Japan cannot accept the valuation method based on the domestic sale price as, in
our view, it is strongly against the basic principles of the Agreement and would very likely be used tocombat dumping, which the preamble of the Agreement tries to prevent.  Could the proponents of this
tiret provide their views on this point? ( Japan )
Ans. India does not suggest that anti-dumping provision be brought in for custom valuation
purposes. However, such values are regularly relied upon for anti-dumping purposes under anotherWTO Agreement. Therefore, recognized mechanisms  are available to obtain the relevant price
information.  Only in cases where other methods of valuation under Articles 1 to 6 and a flexible
application of these articles under Article 7 of CVA fail, it is proposed to place reliance on the
domestic market prices of exporting countries or on export prices to a third country.  India does not
believe that adopting such prices as the basis after suitable adjustments would lead to arbitrary or
fictitious customs values.  On the other hand, it would only facilitate appropriate valuation in a
transparent manner, which avoids arbitrariness in valuation.
28(a) There would appear to be no reason to resort to this proposal since the interpretative notes in
Article 7 of the Agreement on Customs Valuation already deliver enough flexibility to use
previously determined values.  Why then are references to "domestic market price or export
price in a third country" necessary? ( Australia )
(b) When does a customs administration find itself unable to use the range of valuation methods
provided in the Agreement, and in particular  as provided for  in Article 7, in order to
determine the customs value of imported goods? ( European Union )
Ans. See Answers to Questions 26 and 27
29(a)  In addition, how does India propose to obtain the information on the domestic market price
of the exporter or verify the transaction prices in a third country?  We feel that the verification
contemplated would create additional burdens on the exporter, exporting country authorities
or that of a third country.  Such exercises would not facilitate trade at all. ( Singapore )
(b) Who is responsible for collecting information on the domestic market price or the export price
in a third country?  We believe it to be very difficult for the importer to do so. ( Japan )G/VAL/W/101
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(c) During the 27 March meeting of the Customs Valuation Committee, India indicated that the
application of this proposal would not require exporting countries to provide information on
export prices or domestic prices.  In this regard:
(i) where would  the information on these export and domestic prices be obtained;
(ii) what would be the appropriate adjustme nts, how would these adjustments be made,
and how and where would the information on such adjustments be obtained;
(iii) how would such information on the above prices and adjustments be verified?
(Canada )
Ans. With the advancement in the communication technology, it is not difficult to gather
information on the domestic market prices of exporting country or third country export prices.
Importers could also be consulted and the informati on gathered in a transparent manner.  Appropriate
adjustments for the nature of transaction, commercial levels, quantity levels and other expenses could
be made while determining the customs value based on such prices. This will also depend upon the
arrangements for mutual administrative assistance between customs administrations.
30(a) In its proposal under tiret 58, what is meant by India by the phrase “all residual eventualities”
and how would this be defined for purposes of applying the CVA? ( Canada )
(b) Since the Valuation Agreement provides several possibilities for a customs administration to
determine a customs value on information readily available and used for customs and/or tax
purposes in the country of importation, why would an administration find it necessary - or
possible - to seek other sources of information which have no connection with the importtransactions? ( European Union )
(c) Even if this tiret were accepted, how could the proponents ensure the truth or accuracy of the
price? ( Japan )
Ans. The phrase “all residual eventualities” has been used with the reference to the present
restrictions under Article 7 (2)(c) & (e). The flexib ility contained in the interpretative notes to Article
7 of the Agreement would be further facilitated for extreme cases if the proposal is accepted.  It is
recalled that some flexibility in comparing with identical/similar imported goods produced in a third
country (other than country of exportation) is already existing.  The proposed tiret would only
broaden this concept.  If the customs value can be determined on the basis of information readily
available and used for customs and/or tax purposes in the country of importation, there would be no
necessity for using this facility. The truth or accuracy of the price as proposed to be included underthis tiret can be verified from published sources or information gathered through other sources.
31(a) It is Singapore's view that the value of any imported goods should be based on the actual
transaction price – this is the principle of the Customs Valuation Agreement.  The domestic
market price in the country of export or export price to a third country is not reflective of theactual transaction price.  In fact, the negotiating history on this aspect shows that developing
countries had argued against using the domestic value in the country of export, as this would
be to their disadvantage given that these domestic prices were often at artificially high levels.
As for the proposal to use export price to a third country, the proposal seeks to allow
importing authorities to choose a third country with  the highest export price.  It appears that
such a proposal would give importing authorities a lot of leeway to establish artificial inflated
values, and give impetus to more fraud.
Could India therefore explain how such a pr oposal would go towards eliminating fraud?
(Singapore )
(b) How could the abandonment of provisions in Article 7, which contribute to a fair, uniform
and neutral system for the valuation of goods lead to improvements in fighting fraud and
facilitating trade? ( European Union )
(c) How would this proposal ensure that custom s values would be determined on a fair, uniform
and neutral basis as called for in the CVA? ( Canada )G/VAL/W/101
Page 11
(d) Does this proposal increase the discretion of customs officials in determining the customs
value, and hence increase uncertainty and unpredictability for traders? ( Canada )
Ans. There is no dispute that transaction value should be the first choice to value imported goods.
Only in such cases where other methods of valuati on under Articles 1 to 6 of CVA fail and available
information in the country of importation is inadequate to apply Article 7 in its present form, is it
proposed to place reliance on the domestic market prices of exporting countries or on export prices to
a third country.  It would only broaden the scope of flexible approach permitted under Article 7 and
would go a long way in facilitating genuine trade and in fighting fraud.  It would be transparent and
predictable, as information would be shared with the importer. The apprehension concerning adoption
of highest value of third country exports could be avoided by specifying the unit price of greatest
aggregate quantity.
32. During the last five years, what were the main reasons for Indian Customs to determine that
the customs value could not be determined under Article 1 of the CVA?  ( Canada )
Ans. On most occasions customs value is determined under Article 1 of CVA. However, in cases
of established fraud or where the Customs has reason to doubt the truth or accuracy of the value
declared and the importer fails to provide satisfac tory information/ evidence, the transaction value
method is ruled out and the Customs value is determined under subsequent methods of the CVA.
33. For each of the last five years, what percentage of customs value determinations were made
by India on the basis of Article 7 of the CVA?  What percentage of imports in each year was the
customs value determined under Article 7 of the CVA? ( Canada )
Ans. It has not been possible to ascertain the exact percentage of customs value determined under
the Article 7 of CVA during the last 5 years.
IV. TIRET 59
“The Agreement should be amended to provide for the highest value when more than one transaction
value of identical or similar goods is found.”
(Indian Proposal )
34. One of the main objectives of the current Agreement is to eliminate the adverse effects
(instability of customs value, lack of predictabi lity towards the customs valuation system from the
perspective of importers, etc) of utilizing the highest value for customs valuation, whenever there is
more than one transaction value for identical or  similar goods.  (For example, under the former
customs valuation system in one of the major trading Members, the customs value was based on either
the value of the goods for the domestic market in the exporting country, or the value of the goods forexport to that country, whichever was the highest.  However, this system was abolished upon
introduction of the Agreement under the GATT.)  Since the proposal of this tiret would mean
changing the basic principles of the Agreement, we would like to know whether the proponents of the
tiret are of the view that a fundamental revision of the Agreement is necessary or not. ( Japan )
Ans. The proposal does not envisage a fundamental revision of the Agreement.  It has emanated
from long years of experience in the application of CVA.  It was noticed that imports of pilot
consignments at substantially under valued prices compared to international prices have enabled
importers to continue imports at such prices due to the existing provision in CVA to accept the lowest
transaction value of identical or similar goods.  Appropriate legal basis is needed to deal with suchsituations that endanger free and fair international trade.  It is in this context that the proposal to
provide for the acceptance of the highest value was ma de to deal with such fraudulent transactions.G/VAL/W/101
Page 12
35(a) Bearing in mind that the transaction value differs among countries, is it not inappropriate to
use the highest value as the customs value?  Ac cording to the Agreement, the customs value
of imported goods shall be the transaction value (Article 1) and if the customs value cannot be
determined under Article 1, the customs value will be determined based on the provisions of
Articles 2 to 7.  Under Articles 2 and 3, whenever there is more than one transaction value ofidentical or similar goods, the lowest of such values shall be used to determine the customs
value of the imported goods.  By changing this to the highest value, would this not
significantly exceed the appropriate estimate of the actual transaction value? ( Japan )
(b) Given that the use of "the highest value" would introduce an arbitrary element into the
valuation process, should not the most appropriate transaction value of identical or similar,
not the highest, be used? ( Australia )
(c) In real commercial transaction, the price of the goods varies depending on the amount of
goods that the buyer purchases (for example, a high price for a small amount and a discounted
price for a large quantity).  In such a case, if the transaction value of the imported goods
cannot be determined under Article 1 of the Agreement and thus the value will have to be
determined under Article 2 of the Agreement, is it not inappropriate to determine the
transaction value based on the highest value?  (In the case of a customs value for discountedgoods, the discounted price is accepted as the price actually paid or payable.  See paragraphs
5 of both Note to Article 2 and Note to Article 3 of the Agreement.)  (Japan)
Ans. The circumstances for suggesting the use of highest transaction value of identical or similar
goods have been explained earlier.  It is obvious that the lowest value is quite inappropriate to dealwith such situations.
36(a) India described a scenario where an importer would first import a small pilot consignment to
establish the “artificially low value” and then, in order to avoid detection through the
application of the provisions under Articles 2 and 3 of the CVA in future shipments (e.g., thestipulation of “in substantially the same quantity”), continue to import in similar small
volumes in subsequent shipments.    Since CVA Articles 2:1(a) and 3:1(b) stipulate that the
identical or similar goods should be “exported at or about the same time as the goods being
valued”, why would a Customs Administration be required to use the “artificially low values”
of an earlier smaller pilot consignment to determine the customs value? ( Canada )
Ans. There is no prescribed time limit for the purposes of Article 2 and 3.  Further, the pilot
consignments could give way to a subsequent cons ignment, which would become the reference point
for comparison for a third consignment and so on.  Thus the damage done by a pilot consignment can
be perpetuated for a long time to come.
37. The acceptability of  completed 'pilot' transactions would also be subject to the same
procedure of consultation. Pilot transactions having the objective of providing a basis for the valuation
of subsequent imports under Articles 2 and 3 would no doubt come in for particular attention. Against
this background, an importer does not have a guaranteed basis for the determination of the customs
value by reference to the so-called 'pilot' transactions.
In view of the role which the administration play s in application of Articles 2 and 3, it would
be interesting to know whether importers have any real opportunity to present such pilot transactions.
(European Union )
Ans. In a country like India, which has a large number of minor ports and inland container depots,
it is not difficult for an importer to attempt and clear pilot consignments at very low prices especially
when the goods are being imported for the first time into the country.  In order to make use of that
benefit, the importer could further understate the value for future consignments to have the declared
value rejected.   Such “artificially low values” continue to get perpetuated by cartels and it leads to anG/VAL/W/101
Page 13
anomalous situation when substantially higher contemporaneous value(s) in respect of identical
/similar goods are also available and the lowest value has to be accepted under the CVA.
38(a) If a Customs Administration suspected customs-value fixing by a cartel of traders to establish
“artificially low values (e.g., such as in cases where there is “contemporaneous evidence ofhigher values for identical/similar goods ex ists for sales between independent buyers and
sellers of repute under fully competitive conditions”), why would it not conduct an audit or
verification of the records of the importers to investigate the matter?  If importers were
attempting deliberately to undervalue a series of imports following a small consignment
import, would this not be revealed in such an audit or verification?  Would this then not be a
case of fraud to be addressed by proper enforcement and not by CVA Articles 2 and 3?
(Canada )
(b) Could India identify how it obtains informatio n on identical and similar goods when it applies
CVA Articles 2 and 3. ( Canada )
Ans. India maintains an import database containing information on identical and similar goods for
the purpose of Articles 2 and 3 of CVA. Imports from third country traders via the transshipmentroute through large numbers of ports/Inland container depots/ container freight stations in India makes
it extremely difficult, if not impossible, to tackle  such cases through post audit. Moreover, with the
existing provisions in the CVA binding the hands of the Customs Administration to accept the lowest
amongst values in respect of identical/similar goods, most of the fraudulent importers get away, as it
is not feasible to conduct detailed auditing or verification of the records or investigation into all theirimports.
39. We fail to see how the proposal would go towards curbing customs fraud.  Would not the
proposal instead distort the value to the other extreme and have the undesired effect of increasing
under-declaration by traders in an attempt to counter the higher valuation rules? ( Singapore )
Ans. The proposal would not distort the customs value.  On the other hand, it would enable
determination of appropriate value by eliminating comparison with fraudulent transactions.
40. Under the proposal of this tiret, how will the pilot transaction, where the customs value is set
at low level, be treated?  An explanation with specific examples or detailed case studies would be
appreciated. ( Japan )
Ans. As explained earlier, the undervalued pilot trans actions get away without much of a problem,
mainly at remote customs stations.  The Customs ma y not have any information at that time that they
are artificially low valued consignments.  If the proposal under the tiret is accepted, subsequent
consignments could be subjected to detailed scrutiny based on international market information andother factors.  If the truth or accuracy of the declaration is suspected the importer should be given the
opportunity to explain special price with evidence.  In the absence of reasonable explanation or
evidence to substantiate the declared price, it wo uld be dealt with in accordance with Uruguay Round
decision concerning cases where customs administrations have reasons to doubt the truth and
accuracy of the declared value. Upon rejection of the transaction value method, the highest transactionvalue of identical or similar goods would be used to determine the customs value.
V. TIRET 60
“Buying commissions should be taken into account in the determination of customs value of imported
goods as it forms a legitimate component of the landed cost of imported goods.” (Indian Proposal)G/VAL/W/101
Page 14
41(a) Could India please provide a copy of its regulations, practices and procedures provided to
importers that explain India’s policies for appl ying the provisions of CVA Articles 2 and 3 on
the use of identical or similar goods to value imports?   ( Canada )
(b) Would India please provide its existing domestic legislation or policy that defines “a buying
agent” and sets out India’s practices and procedures for applying this provision of the customsvaluation agreement?  Has India incorporated the work of the World Customs Organisation in
refining its policies and practices for applying this provision of the customs valuation
agreement? ( Canada)
Ans. The relevant extract of Indian Customs Valuation Rules is appended (Annexe B).
42(a) Given that genuine buying comm issions are not payments which accrue to or for the benefit
of the vendor in the import sales transaction, what is the rationale for seeking their inclusion?
(Australia )
(b) In the Agreement, there is a clear definition fo r "buying commissions".  The Note to Article 8
stipulates that “the term "buying commissions" means fees paid by an importer to the
importer’s agent for the service of representing  the importer abroad in the purchase of the
goods being valued.”  We would like to request the proponents of this tiret to provide an
explanation, based on specific examples or detailed case studies, on what kind of problems
they are faced with through the current practice: i.e. by not adding buying commissions to the
price actually paid or payable for the imported goods. ( Japan )
(c) Since the services of a buying agent brings  no value to the goods being imported, how does
this proposal promote a fair, uniform and neutral customs valuation system? ( Canada )
(d) How can a buying commission be regarded as part of the price paid for the goods
(European Union )
(e) With respect to the specific example cited by India, In what special circumstances, did a
buying commission come to be “deducted” from the price of the goods?  ( European Union)
Ans. The buying commission, being the fees paid by the importer towards procurement of the
goods from abroad, adds to the cost of the imported goods so far as the importer is concerned. Since
the importer incurs these costs and so long as they have not been included in the price actually paid or
payable for the imported goods, they should appropriately and logically be included in the transaction
value. The proposal to include the buying commi ssion brings it at par with the other commissions
such as selling commission, indenting agent commi ssion, etc.   This would also avoid disputes
concerning the value of commission sought to be excluded from the invoice value.
43(a) The issue of buying commissions is also taken up in the WCO (World Customs
Organization).  According to one of its explanatory notes on this issue, the customs
administration can verify whether or not the commission payment by the importer is a buyingcommission by requesting the importer to present the authorities with the buying agent’s
contract.  If this is not possible, the customs administration can still ask the importer to
provide the agent's activities with a view of clarifying whether or not the agent really is a
buying agent.  If the importer fails to provide the customs administration with these elements,
it may reject the importer’s claim that the commission payment is a buying commission (seeparagraph 8 of the WCO’s Commentary 17.1).  What is the view of the proponents of the tiret
on this point? ( Japan )
(b) Does India not find that the instruments of the Technical Committee give valuable
information and guidance with regard to the na ture of buying agents, evidentiary materials
and the nature of commissions and brokerage? Are there other related issues which Indiaconsiders should be considered there?  (European Union )
Ans. The importers can develop a purported contract claiming it as buying agents contract for the
purpose of seeking exemption as buying agent commission under existing Article 8(1)(a).  The broadG/VAL/W/101
Page 15
activities of so called buying agent can be doctored for the purpose of presenting it to customs
administration. With the existing provisions under Article 8(1)(a) supporting the fraudulent importer,
and the burden of disproving it being on customs, it would be difficult on part of customs
administration to reject an importer’s fraudulent claim that commission payment is a genuine buying
agents commission. The existing instruments of the WCO Technical Committee on customs valuationon this issue do not help.
44(a) Under the proposal of this tiret, if buying commissions were added to the price actually paid
or payable for imported goods, would not fair competition be inhibited, since there would be a
difference in the customs value between those importers who need not rely on a buying agent
for the purchase of goods abroad and those who do? ( Japan )
(b) Since Buying Agents bring purchasers and buyers together and hence facilitate trade, would
the proposal not be, in effect, the same as imposing a new tax on facilitating trade? ( Canada )
(c)  Would not this proposal discriminate between importers who do not use buying agents (e.g.,
large companies) and importers who use buying agents (e.g., small companies)? ( Canada )
Ans. The Customs value should reflect the actual cost incurred by the buyer whether through an
agent or not.  If buying commission was added to price actually paid or payable for imported goods, it
would place all importers on the same footing and avoid discrimination.  It would also facilitate
determination of Customs value in a predictable and transparent manner.
45. India argues that these commissions are a legitimate component of the landed cost of the
imported good, and also that excluding them would give rise to misuse of the Customs Valuation
Agreement.  We would argue to the contrary that, if it is a question of fraud, there are other means to
deal with fraud, and amending Art. 8:1(a)(i) does not necessarily solve the fraud problem.  We would
like to better understand India’s argument. ( Singapore )
Ans. By amending Article 8.1(a)(i), the buying agents commission are placed at par with
selling/indenting agents commission. Moreover, by including buying agents commission in the
transaction value, there will be less incentive for fraudulent importers to artificially bifurcate total
payments towards so called buying agents commission to claim exemption from customs duty on such
component of customs value.  In this regard, the proposal would definitely prevent misuse of CVA.
VI. TIRET 61
“Persons associated with each other as sole agents, sole distributors, and sole concessionaires,
howsoever described, should automatically be deemed ‘related’”. (Indian Proposal )
46(a) It is not clear why persons associated with each other as sole agents, sole distributors and sole
concessionaires should automatically be deemed "related".  Article 15.4 already recognizesthat the only involvement of sole agents, distributors and concessionaires with the import
transaction is in their capacity of providing a client with a specific service.  Thus, we would
be grateful for clarification of the rationale for this proposal. ( Australia )
(b) Are the proponents of this tiret of the view th at whenever there are relations, such as a sole
agent, a sole distributor or a sole concessionaire, between an importer and an exporter, bothparties are "related"? ( Japan )
(c) There is perhaps need to verify their rela tionship based on their contracts in accordance with
the criteria of paragraph 4 (see paragraphs 3 and 4 of WCO's Explanatory Note 4.1 and Case
Study 9.1). ( Japan )
(d) Why is the current definition of “related” under Article 15:4 inadequate or inappropriate for
applying the CVA where importations involve sole agents/distributors/concessionaires?
(Canada )G/VAL/W/101
Page 16
(e) According to paragraph 5 of Article 15 of the Agreement, “persons who are associated in
business with one another in that one is the sole agent, sole distributor or sole concessionaire,
however described, of the other shall be deemed to be related for the purposes of this
Agreement if they fall within the criteria of paragraph 4”.  Can the proponents of this tiret
explain what kind of problems they are faced with in cases where the criteria of paragraph 4are not met? ( Japan  )
Ans. The categories like “sole agents”, “sole distributors”, and “sole concessionaires” stand in a
different footing compared to ordinary agents / distributors / concessionaires.  By virtue of their
categorisation, they should be regarded partners in the business in so far as supplier is concerned.
Such sole agents are highly susceptible to influence of the suppliers which lends itself to a situation
where the two can resort to creative accounting practices for defrauding revenue. The explanationsprovided in Article 15.5 in respect of sole agents /sole distributors/sole concessionaires, beg the
question and does not clarify the issue. The WCO Case studies referred to are not of help since they
analyse the relationship within the existing provision of Article 15.5.
47(a) We also do not see how tiret 61 would go towards combating customs fraud.  We therefore
seek elaboration from India as to how its pr oposal for tiret 61 would combat customs fraud.
(Singapore )
(b) Even if we were to accept the proposal of the tiret, this fact shall not, in itself, be grounds for
regarding the transaction value as unacceptable; the circumstances surrounding the sale shall,
therefore, be examined (Paragraph 2(a) of Ar ticle 1).  Hence, even if both the importer and
exporter are related, this does not automatically  mean that the declared value by the importer
may be treated as unacceptable.  We think that the fundamental concern of the proponents of
this tiret (under-valuation) might not be solved through this proposal alone. ( Japan )
(c) In what concrete way does a sole agent, distributor or concessionaire present a risk of fraud or
does not facilitate trade. ( European Union )
Ans. It is true that by merely accepting the proposals of this tiret, there would not be sufficient
ground for regarding the transaction value as unacceptable.  The case will have to be dealt with under
Article 1.2; the circumstances surrounding the sale shall therefore be required to be examined before
any decision on the value is taken.  However, in view of the existing provision under CVA, the burden
of proving that the sole agents/sole distributors/sole concessionaires are related to the supplier, is on
the Customs Administration. Therefore, in many cases sole agents/sole distributors/soleconcessionaires escape scrutiny. The tiret, if accepted, would change the situation and would facilitate
determination of Customs value in a fair manner. Please also see answer to Question 46.
48(a) Why is different treatment required in the case of importation involving “sole
agents/distributors/concessionaires”? ( Canada )
(b) What would be the other forms of relationshi ps that India would wish to include in the
definition of “related” as it applies to sole agents / distributors / concessionaires? ( Canada )
(c) Why does India believe it is necessary to include these forms of relationship for purposes of
applying the CVA where sole agents/distributors/concessionaires are involved in the import
transaction? ( Canada )
Ans. India proposes to treat the persons under the category “sole agents/sole distributors/sole
concessionaires” as deemed to be related and to include under the definitions provided under Article
15.4. If the proposal is accepted, in a sale between supplier and its sole agents/sole distributor/sole
concessionaires, the provisions as under Article 1.2 would apply so as to facilitate determination ofappropriate Customs value.  It is necessary to include these as a category of relationship defined under
Article 15.4 so as to bring predictability and transparency in the application of CVA.  It would also
enhance the effectiveness of Customs to deal with possible fraud involving such entities.G/VAL/W/101
Page 17
49. Would India’s proposal require the importer or the sole agent/distributor/concessionaire to
prove there was not a relationship; and if so, why does India believe that the importer and sole agent /
distributor / concessionaire should be deemed as being related unless they prove otherwise?
(Canada )
Ans. India’s proposal is to regard the sole agent/distributor/concessionaire as related persons.  They
would however have the opportunity to prove that ev en though they are related, the relationship has
not influenced the price for acceptance of declared transaction value.
50(a) What are the definitions of “sole agents”, “sole distributors” and “sole concessionaires” for
purposes of this proposal? ( Canada )
(b) Who would make the determination that there was a “related” relationship, what would be the
criteria for determining if a relationship was “related” or not, and what information would theimporter or the sole agent/distributor/concessionaire be required to provide to prove there is
no “related” relationship? ( Canada )
(c) Would such determinations be subject to the CVA review and appeal provisions?
(Canada )
Ans. The commonly understood definitions of sole agents/sole distributors/sole concessionaires as
presently applied in the existing CVA would also apply for the purposes of Indian proposal. There is
no need to determine the relationship as they would be deemed to be related.  The examination of
circumstances surrounding the sale between the supplier and the sole agents/sole distributors/sole
concessionaires may be done in the same way as in respect of other related parties as provided inArticle 1.2. In case it is decided by the Customs Administration that such a relationship has influenced
the price and that the transaction value is not accep table, the importer would be informed in writing
by a speaking order which would be subject to review and appeal provisions.
51. When India states that:
"The effect of the provisions in Article 15.5 is thus also that the onus of proving that some
agents, sole distributors and sole agents are related to other persons associated in the business
rests with the Customs administration of the importing Member", does this view suggest that
the responsibilities of the customs authorities in such cases do not take into account the
responsibilities of importers? ( European Union )
Ans. It is also the view of the Indian Administra tion that the existing provisions under Article 15.5
of CVA suggest that the onus of proving that sole agents/sole distributors/ sole concessionaires are
related, rests with the Customs Administration and not with the importer.
52. Why should an importer who has little more than a particular form of distribution contract be
subject to the special rules which govern trade between related parties? ( European Union )
Ans. The categories like “sole agents”, “sole distributors”, and “sole concessionaires” stand on a
different footing compared to ordinary agents / distributors / concessionaires.  By virtue of their
categorisation, they should be regarded as partners in the business so far as the supplier is concerned.Hence India feels that these particular forms of distribution contracts be subject to the special rules
which govern trade between related parties.G/VAL/W/101
Page 18
ANNEXE  A
Extract of Indian Customs legislation corresponding to Article 8(1)(b)(iv)
[Customs Valuation (Determination of price of imported goods ) Rules 1988]
Rule 9 :      Cost and services: - (1) In determining the transaction value, there shall be added to the
price actually paid or payable for the imported goods,-
(a)  : ---------------------------------------------------------------------------------------------------
(b)  : the value, apportioned as appropriate, of  the following goods and services where supplied
directly or indirectly by the buyer free of charge or at reduced cost for use in connection with
the production and sale for export of imported goods, to the extent that such value has not
been included in the price actually paid or payable, namely :-
---------------------------------------------------------------------------------------------------
 (iv) : engineering, development, art work, design work, and plans and sketches       undertaken
elsewhere than in India and necessary for the production of the imported goods;
Interpretative notes to Rule 9(1)(b)(iv)  :
1. Additions for the elements specified in rule 9(1)(b)(iv) should be based on objective and
quantifiable data. In order to minimise the burden for both the importer and proper officer of
customs in determining the values to be added, data readily available in the buyer’s
commercial record system should be used in so far as possible.
2. For those elements supplied by the buyer which were purchased or leased by the buyer, the
addition would be the cost of the purchase or th e lease. No addition shall be made for those
elements available in the public domain, other than the cost of obtaining copies of them.
3. The case with which it may be possible to calculate the values to be added will depend on a
particular firm’s structure and management practice, as well as its accounting methods.
4. For example, it is possible that a firm which imports a variety of products from several
countries maintains the records of its design centre outside the country of importation in such
a way as to show accurately the costs attributable to a given product. In such cases, a direct
adjustment may appropriately be made under the provisions of rule 9.
5. In another case, a firm may carry the cost of the design centre outside the country of
importation as a general overhead expenses without allocation to specific products. In thisinstance, an appropriate adjustment could be made under the provisions of rule 9 with respect
to the imported goods by apportioning total design centre costs over total production
benefiting from the design centre and adding such apportioned cost on a unit basis to imports.
6. Variations in the above circumstances will, of course, require different factors to be
considered in determining the proper method of allocation.
7. In case where the production of the element in question involves a number of countries and
over an period of time, the adjustments should be limited to the value actually added to that
element outside the country of importation.G/VAL/W/101
Page 19
ANNEXE B
Extract of Indian Customs Legislation corresponding to Article 8(1)(a)(i) of CVA
[Customs Valuation ( Determination of  price of imported goods) Rules, 1988 ]
Rule 9 (1) : Cost and services: - (1) In determining the transactio n value, there shall be added to
the price actually paid or payable for the imported goods,-
(a) the following cost and services, to the extent  they are incurred by    the buyer but  not
included in the price actually paid or payable for the imported goods,  namely:-
(i)       commissions and brokerage, except buying commissions;
Interpretative notes to Rule 9(1)(a)(i)  :
In rule 9(1)(a)(i), the term “buying commissions” means fees paid by an importer to his agent
for the service of representing him abroad in the purchase of the goods being valued.
__________