When shipping goods into a country, Customs Value refers to the total value of all merchandise included in the shipment. This value is used to calculate import duty, which must be paid in order for the goods to clear Customs and be released for delivery. For example, if you are shipping ten items, and each item has a value of $20 USD, then the Customs Value of your shipment would be $200 USD.
Customs valuation is important for a number of reasons. It helps ensure that commercial policy measures are applied correctly, provides data for economic and commercial policy analysis, and ensures that import and export statistics are accurate. Proper collection of duties and taxes also relies on having an accurate measure of Customs Value.
There are a number of factors that can affect Customs Value, including the transaction value of the goods, the value of any processing that has been done on the goods, and the value of any materials used in packaging or shipping. In some cases, the Customs Value may be different from the price actually paid for the goods.
If you’re shipping internationally, it’s important to be familiar with Customs Value and how it affects duties and taxes. Understanding how Customs valuation works can help you ensure that your shipments are properly valued and that you’re paying the correct amount of duty and tax.
Determining Customs Value
Customs value is a term used by customs authorities to determine the value of imported goods. It is also used to calculate tariffs and other taxes payable on imports.
There are six methods of calculating customs value, as set out by the World Customs Organization:
1. Transaction value method – this is the most commonly used method, and uses the price actually paid or payable for the goods being valued, including any costs incurred in transporting the goods to the place of importation.
2. Deductive value method – this method starts with the transaction value of similar goods (i.e. those that are identical or similar in nature and functions), and then makes adjustments to arrive at the customs value of the goods being valued.
3. Computed value method – this method calculates the customs value based on the cost of production of the goods being valued, including the profit and general expenses reflected in sales of similarly classified goods.
4. Residual value method – this method does not identify specific requirements for determining customs value, but rather relies on one of the other methods and involves very little adjustment. The final value can be influenced by factors such as the relationship between the parties involved, whether the goods were provided to the consignee at no charge, and what additions or deductions are allowable to the value of the goods.
5. Unit price method – this method is used where there is a large volume of identical or similar goods being imported (e.g. a shipment of 10,000 widgets), and the customs value is determined by taking the total invoice value and dividing it by the number of units being imported.
6. Build-up method – this method is used where there are no comparable sales of the goods being valued, and Customs will calculate the value by adding together the cost of materials, labor and overhead expenses incurred in producing the goods.
Customs value is an important consideration for businesses that import goods into a country, as it affects the amount of taxes and duties payable on those imports. It is therefore important to be familiar with the different methods of calculation, and to choose the most appropriate method for each transaction.
Difference between Customs Value and Declared Value
There can be some confusion around the terms customs value and declared value – so let’s clear that up. Customs value is the actual financial value of your shipment, while declared value is the selling price or replacement cost of your shipment’s contents, as stated by its shipper. It’s important to note that the declared value is used for limiting the carrier’s liability in case of delays, loss or damage. The customs value, on the other hand, is used for customs clearance and may affect transit time.
In short: Customs value is what your shipment is worth, while declared value is what you say it’s worth. Make sure you know the difference to avoid any delays or problems down the line.
Disagreeing with the values determined by the customs authorities
Importers can challenge the values determined by customs officials if they believe the proper techniques were not used to arrive at the customs value. They may request a reconsideration in such a scenario.
Under-declaring customs value
If you give a lower value for customs without providing adequate evidence, the authorities can calculate the goods’ worth and charge a higher fee based on their estimate. In that instance, you could end up paying considerably more for the undervalued items declared to customs and perhaps face a penalty for tax evasion.
Can the customs value be zero?
Yes, but only for objects or samples with no commercial worth. On the invoice, you must identify the free samples provided.
Is the shipping cost included in the customs value?
The customs value is the total value of all goods in a shipment, including shipping costs, based on the transaction’s commercial terms or incoterms.