Accurate customs valuation is critical to ensuring smooth export and import customs procedures and keeping your goods moving efficiently. This tutorial will guide you through the essentials of customs value, making it easier to calculate accurately and sidestep common errors.
What is customs value?
Customs value represents the total worth of commodities imported into a country. This value typically includes the cost of the goods and transporting fees, insurance, and any additional charges incurred up to the port of entry. It’s often also called the CIF value, which stands for Cost, Insurance, and Freight.
For example, if you are importing a shipment of 100 items, each valued at $30, with no insurance and a freight cost of $500, the customs value would be calculated as follows: (100 x $30) + $0 + $500 = $3500.
Why is customs valuation important?
The primary purpose of customs valuation is to identify the amount of import duty the recipient must pay on a shipment.
Since customs duties and value-added tax (VAT) are calculated as a percentage of the customs value of goods, it also serves as the taxable amount for import VAT.
By accurately calculating the customs value, importers can ensure compliance with regulations and avoid potential issues with customs authorities.
How do I calculate it?
1. The transaction value method
The transaction value of imported goods method is the primary and most crucial customs valuation method. It is outlined in the Customs Valuation Agreement.
This method relies on the actual price paid or payable for the goods sold for import, as indicated on the invoice.
The total customs value usually equals the transaction value if there is evidence of a sale for export to the country of importation. Acceptable forms of evidence include commercial invoices for customs purposes only, contracts, or purchase orders.
2. Transaction value of identical goods method
If the first approach mentioned above cannot determine the accurate customs CIF value, you can use the transaction value of identical goods when:
- The goods have the same physical characteristics, quality, and reputation.
- The country of origin of the goods is the same as the valued goods.
- The producer of the goods is the same as the valued goods.
3. Transaction value of similar goods method
Apply this method when identical goods are unable to determine the transactional value. It involves using the value of goods that are similar to the valued ones, sold at the same time, and made in the same country.
These similar goods must be interchangeable, meaning they have similar components and serve a similar purpose. Furthermore, they must have the same level of quality and the same reputation as the maker.
4. Deductive value method
It involves subtracting certain costs, such as customs duties, taxes, and commissions, from the sale or resale value of the product. This final value is then used to establish the customs valuation.
5. Computed value method
This method starts with the total cost of manufacturing the goods in the country of origin, including the cost of materials, production, and additional processes.
Next, adding a markup for profit and the costs of shipping the goods to the border of the European Union.
It’s important to note that the customs CIF value does not include the cost of delivering the goods within the destination country.
6. The fall-back method
It usually needs cooperation between customs authorities and available data in the importing country to calculate the customs value. But this fall-back method is seldom used.
At Airsupply, we offer Delivery at Duty Paid (DDP) shipping options and can help you calculate accurate customs duties and clear the duty payment. Therefore, you can receive your goods at home hassle-free.
Are customs value and declared value similar?
The declared value of a shipment forms the basis for the customs department to impose duties and taxes. It means that the declared value and customs value are often the same.
In general, the customs value is the worth a customs officer assigns to a shipment, while the declared value is what the shipper states the shipment is worth; nevertheless, the two should always align.
What if the wrong customs value is declared?
If customs suspects the declared value is too low, they may hold the cargo until you provide proof of purchase. You may also have to pay additional taxes or face liability.
More seriously, you could face criminal penalties, including up to 20 years in prison, fines of $1 million per violation, or both.
What are the most asked questions?
Can the customs declared value be zero?
Yes, but only for freight such as documents or samples with no commercial value. For instance, you need to specify samples free of charge on the invoice.
How do I know if I have to pay customs?
If import duty is required for your shipment, the customs will notify you or your carrier automatically. They will inform you of the amount due and the payment deadline, so there’s no need to calculate it unless you suspect an error in your customs duty.
Should I declare the value of goods exempt from import duty?
Absolutely. Even if your goods are exempt from customs duty, you must still declare their value. It is essential for the accurate compilation of trade statistics.
Can I contest the customs valuation determined by authorities?
Yes, you have the right to dispute the values determined by customs authorities if they believe the incorrect methods used in calculating the customs value. In such instances, you can request a review.
