   
  
G/VAL/Q/IND/2  
 
27 October  2021 
(21-8134) Page: 1/5 
Committee on Customs Valuation  Original: English  
 
NOTIFICATION UNDER ARTICLE 22 OF AGREEMENT  ON IMPLEMENTATION  
OF ARTICLE VII OF THE GENERAL AGREEMENT  
ON TARIFFS AND TRADE  1994  
REPLIES FROM INDIA TO QUESTIONS  FROM THE UNITED STATES  
REGARDING DOCUMENT S G/VAL/ N/1/IND/4 AND G/VAL/ N/2/IND/2 
INDIA 
The following communication, dated 21 October 2021, is being circulated at the request of the 
delegation of India. 
 
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Question 1  
 
Rule 9(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, states 
that the "residual method " of valuation applies "[p]rovided that the value so determined shall not 
exceed the price at which such or like goods are ordinarily  sold or offered for sale for delivery at the 
time and place of importation in the course of international trade, when the seller or buyer has no 
interest in the business of other and price is the sole consideration for the sale or offer for sale. " 
 
Please  explain how this provision is consistent with Article 7 of the CVA, in light of the prohibition on 
the use of minimum, arbitrary, or fictitious customs values.  Does this mean that "the price at which 
such or like goods are ordinarily sold . . . " may be u sed as the customs value?  
 
Response   
 
Rule 9(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 
prescribes a residual method of valuation. However, the rule also provides that the value determined 
shall not exceed the price at which such or like goods are ordina rily sold or offered for sale for 
delivery at the time and place of importation in the course of international trade, when the seller or 
buyer has no interest in the business of other and price is the sole consideration for the sale or offer 
for sale.  
 
This is consistent with Article 7 of the ACV which provides that if the customs value of the imported 
goods cannot be determined under the provisions of Articles 1 through 6, inclusive, the customs 
value shall be determined using reasonable means consistent with the principles and general 
provisions of this Agreement and of Article VII of GATT  1994 and on the basis of data available in 
the country of importation ".  
 
The emphasized portion above has been given effect in rule 9 (1) of the Indian valuation rules . The 
condition that the value determined shall not exceed the price at which such or like goods are 
ordinarily sold … respects the principle laid down Article 1 of the ACV. It may be noted that Article 1 
of the ACV lays down that the customs value of impo rted goods shall be the transaction value, that 
is 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.  
 
 G/VAL/Q/IND/2  
 
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  As regards the clarification sought on how thi s would prevent the use of use of minimum, arbitrary, 
or fictitious customs values, rule 9 (2) of the Indian valuation rules clearly specifies that ‘no value 
shall be determined under the provisions of this rule on the basis of….  
 
(vi) minimum customs values; or  
(vii)  arbitrary or fictitious values . 
 
Question 2   
 
Rule 10(1)(e) provides for an addition to the price actually paid or payable, to the extent they are 
incurred by the buyer but are not included in the price actually paid or payable, f or "all other 
payments actually made or to be made as a condition of sale of the imported goods, by the buyer 
to the seller, or by the buyer to a third party to satisfy an obligation of the seller . . . " 
 
Please explain how the addition of "all other payme nts . . . " is consistent with Article 8(4) of the 
CVA, which provides that "[n]o additions shall be made to the price actually paid or payable in 
determining the customs value except as provided in this Article. " 
 
Response   
 
It may be noted that Article 8 of the Agreement on Customs Valuation (ACV) provides that the value, 
apportioned as appropriate, of certain 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 an d sale for 
export of the imported goods, can be added to the price actually paid or payable, to the extent that 
such value has not been included in the price.   
 
Paragraph 7 of Annex III to the ACV provides that ‘the price actually paid or payable includes  all 
payments actually made or to be made as a condition of sale of the imported goods, by the buyer 
to the seller, or by the buyer to a third party to satisfy an obligation of the seller ". The cited rule 
10 (1)(e) states the same provision.  
 
Article 8 (4) does not allow additions to the price actually paid or payable, except as provided. Since 
it has been provided in the above paragraph 7 that the price actually paid or payable includes 
payments actually made or to be made as a condition of sa le of the imported goods, the provision 
in the Indian valuation rules is not inconsistent with the ACV.  
 
Question 3  
 
The explanation to Rule 10(1) states that "[w]here the royalty, license fee or any other payment for 
a process, whether patented or otherwise, is includible referred to in clauses (c) and (e), such 
charges shall be added to the price actually paid or payable for the imported goods, notwithstanding 
the fact that such goods may be subjected to the said process after importation of such g oods. " 
 
For greater clarity, please provide an example of the application of the explanation to Rule 10(1).  
 
Response   
 
Examples regarding the application of explanation to Rule 10 (1) can be gleaned from the 
explanatory notes provided in the ACV. Illustra tively, paragraph 2 under para 1 (c) of Notes to Article 
8 provides for addition of payments made by the buyer for the right to distribute or resell the 
imported goods, if such payments are a condition of the sale for export to the country of importation 
of the imported goods. The activities of distribution or reselling would take place after importation 
of the goods.  
 
Similarly, paragraph 3 of Notes to Article 8 allows addition to the price actually paid or payable, in 
a case where an imported good is mad e into a solution after import, if the addition is based only on 
the imported goods and can be readily quantified. This is another example of an activity carried out 
after importation of the goods.  
 G/VAL/Q/IND/2  
 
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  Question 4  
 
General Note 1 of the Schedule contains a pr ovision on "use of generally accepted accounting 
principles " that mirrors Paragraph 1 of the Interpretative Notes – General Notes, Use of Generally 
Accepted Accounting Principles, of the CVA.  
Has India also implemented Paragraph 2 of that General Note?  If  so, could India identify the 
measure that implements Paragraph 2?  
 
Response   
 
Paragraph 2 of the General Note under "Use of Generally Accepted Accounting Principles ", states 
that - for the purposes of this Agreement, the customs administration of each Mem ber shall utilize 
information prepared in a manner consistent with generally accepted accounting principles in the 
country which is appropriate for the Article in question.  
 
This provision has been given effect in the valuation rules of India. In the sched ule to the rules 
(under General Note: Use of Generally Accepted Accounting Principles) which corresponds to the 
interpretative notes of the ACV), the use of generally accepted accounting principles is provided.  
  
Illustratively, in case of cost determinat ion under computed method, the cost or value of materials 
used in the finished good is to be based upon the commercial accounts of the producer, provided 
that such accounts are consistent with the generally accepted accounting principles applied in the 
country where the goods are produced.  
 
In case of determination of the apportioned value of tools, dies, moulds and similar items used in 
the production of the imported goods; the apportionment of these elements should be made in a 
reasonable manner appropriate to the circumstances and in accordance with generally accepted 
accounting principles.  
 
Question 5  
 
With respect to Question 1(a)(ii) of G/VAL/N/2/IND/2, please clarify whether India considers 
evidence of an intercompany price as prima facie gr ounds for regarding the price as being influenced 
by the relationship between the buyer and the seller.        
 
Response   
 
The price is not considered as being influenced by the relationship between the buyer and the seller, 
on the basis of evidence of an intercompany price alone.  Even in such cases, the transaction value 
shall be accepted provided that the examination of the circumstances of the sale of the imported 
goods indicate that the relationship did not influence the price.  
 
Question 6  
 
With resp ect to Question 4 of G/VAL/N/2/IND/2, please identify the provision of India 's law that 
implements the language from Article 6(2) of the CVA, which states, in part, that "[n]o Member may 
require or compel any person not resident in its own territory to pro duce for examination, or to allow 
access to, any account or other record for purposes of determining a computed value. " 
 
Response   
 
Indian Customs does not compel any person not resident in India for access to accounts and or other 
records. Even under rules 11 and 12 of the Customs Valuation (Determination of Value of Imported 
Goods) Rules, 2007, Indian Customs seeks from the importer,  information or documents including 
an invoice of the manufacturer or producer of the imported goods for determination of the value of 
imported goods under these rules.  
 
In any case, there is no legal machinery for Indian Customs to exercise extra -territo rial jurisdiction 
for compelling a person not resident in India for providing information.  
 
 
 G/VAL/Q/IND/2  
 
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  Question 7  
 
With respect to Question 6 of G/VAL/N/2/IND/2, India notes that "the value of the goods shall include 
the elements of freight of the imported goods to the place of importation, insurance, and loading, 
unloading and handling charges associated with the delivery of the imported goods to the place of 
importation. " 
 
Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 , 
further explains that "where the cost of transport . . . is not ascertainable, such cost shall be twenty 
percent of the free on board value of the goods, " that the charges for loading, unloading, and 
handling "shall be one per cent of the free on board v alue of the goods, " and that where the cost of 
insurance is not ascertainable, "such cost shall be 1.125% of the free on board value of the goods. " 
Please explain Rule 10(2) in light of the recognized need under the CVA for a "fair, uniform and 
neutral sys tem for the valuation of goods for customs purposes that precludes the use of arbitrary 
or fictitious customs values, " and in light of Rule 10(3), which implements Article 8.3 of the CVA and 
states that "[a]dditions to the price actually paid or payable sh all be made under this rule on the 
basis of objective and quantifiable data. " 
 
Response  
 
It is made amply clear in the rules that the addition of a cost at the rate specified in the rules should 
be done,  only when such cost is not ascertainable.  
 
As such, customs officers have no power to ignore the actual cost of freight and insurance declared 
by the importer. However, in the circumstances where the importer is not able to declare the actual 
costs, to he lp in timely assessment of value and clearance of cargo, addition of such costs at an 
average rate has been provide d.  
 
This provision is to be used only in cases where the importer is not able to comply with the valuation 
law and declare a value inclusive  of cost, insurance and freight [CIF value], that is based on actual 
cost or quantifiable data.      
 
Question 8  
 
With respect to Question 8 of G/VAL/N/2/IND/2, please provide additional information on domestic 
legislation that ensures the confidentiality  of information submitted for purposes of customs 
valuation.  For example, does India 's law include provisions that allow for the disclosure of such 
information, and, if so, under what circumstances?  
 
Response  
 
The information provided on a confidential basis is treated as confidential. The information received 
for the purpose of customs valuation is used for such purposes only. If an officer discloses such 
information, in a manner that is not permitted by law, h e is liable to be punished.  
 
Question 9  
 
In response to Question 13 of G/VAL/N/2/IND/2, India states that "[t]he interpretative notes to the 
Agreement have been included in the body of the Customs Valuation (Determination of Price of 
Imported Goods) Rule s 2007 as amended, as a schedule to the rules. " 
 
Please confirm that all the interpretative notes have been included in this instrument. Are 
paragraph  6 to the Interpretative Note to Article 6, as well as the Interpretative  Notes to Articles 9 
and 11, incl uded?  
 
Response  
 
Paragraph 6 to the Interpretative Note to Article 6 states that, "Where information other than that 
supplied by or on behalf of the producer is used for the purposes of determining a computed value, 
the authorities of the importing country  shall inform the importer, if the latter so requests, of the 
source of such information, the data used and the calculations based upon such data, subject to the 
provisions of Article 10. ". G/VAL/Q/IND/2  
 
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  This provision requires sharing of all information that is relied on to determine the value. This 
principle is a basic legal tenet in India. Any document, information or other evidence used to 
determine value has to be shared with the importer, along with the reasons for such determination. 
Moreover, the concerned custom s officer has to pass  a speaking order on the re -assessment.  
 
Note to Article 9 of the ACV states that, "For the purposes of Article 9, "time of importation" may 
include the time of entry for customs purposes .". 
 
It is confirmed that in India, the conversion rate for currency shall be that prevalent at the time of 
filing the entry for customs purposes.  
 
Note to Article 11 of the ACV is as below:  
 
"1.  Article 11 provides the importer with the right to appeal against a valuation 
determination made by the customs administration for the goods being valued. Appeal 
may first be to a higher level in the customs administration, but the importer shall have 
the right in the final instance to appeal to the judiciary.  
2.  "Without penalty" means that the importer shall not be subject to a fine or threat of fine 
merely because the importer chose to exercise the right of appeal. Payment of normal 
court costs and lawyers' fees shall not be considered to be a fine.  
3.  Howeve r, nothing in Article 11 shall prevent a Member from requiring full payment of 
assessed customs duties prior to an appeal .".  
 
It is conf irmed that in India, there is a right to appeal against a value determination. The right to 
appeal starts with an appel late authority in customs, and subsequently, to the judiciary.   
 
No fine or penalty is payable merely because the importer chose to exercise the right of appeal.  
 
Question 10  
 
Please identify the administrative instructions that implement the Decision of  26 April 1984 on the 
Treatment of Interest Charges in the Customs Value of Imported Goods.  
 
Response  
 
The decision on the treatment of interest charges in the Customs Value of Imported Goods has been 
implemented through Circular 20/1997 -Customs dated 17.06.1997.  
 
Question 11  
 
Please identify the administrative instructions, including the official gazette citation, that implement 
the Decision of 24 September 1984 on the Valuation of Carrier Media Bearing Software for Data 
Processin g Equipment.  
 
Response  
 
The Government of India notified the provisions of this paragraph by publishing it in its official 
gazette. For such goods, the transaction value is equal to the aggregate of the cost of carrier medium 
and the freight and insurance charges incurred in respect of the carrier medium. The value of motion 
pictures, music, gaming software for use on gaming consoles printed or recorded on media falling 
under chapter headings 3706 or 8523 is not to be included in the transaction v alue. However, this 
is not applicable in case of motion pictures, music or gaming software in a pre -packaged form for 
retail sale.  
 
The above have been implemented through Notification in the official Gazette of India vide 
Notification 27/2010 -Customs date d 27th February 2010. Th is notification was superseded vide 
Notification no. 30/2017 -Customs dated 30th June, 
2017.  https://www .cbic.gov.in/resources//htdocs -cbec/customs/cs -act/notifications/notfns -
2010/cs -tarr2010/cs27 -2k10.pdf   and https://www.cbic.g ov.in/resources//htdocs -
cbec/customs/cs -act/notifications/notfns -2017/cs -tarr2017/cs30 -2017.pdf . 
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