Exporters get four weeks to know new valuation rules
September, 17th 2007
The finance ministry has notified the new Customs Valuation Rules, 2007 separate for imported items and export goods. The new rules will come into effect on October 10, 2007. For importers, life is likely to get easier but for exporters, life can get difficult.
The government had proposed amendments to the Customs Valuation Law in the Finance Bill, 2007. The draft of the new separate rules for valuation of imported goods and export goods were put upon the website in April 2007. Now the government has decided to implement the changes with effect from October 10, 2007.
For importers, the essence of the change is that Section 14 of the Customs Act, 1962, now prescribes the transaction value instead of the earlier deemed value. The transaction value concept is what the GATT Valuation Rules prescribe. So, now the Indian valuation laws are more similar to the Agreement on Valuation at the WTO and the valuation methods that other countries adopt for imported goods.
The four additional conditions for acceptance of the transaction value, introduced on September 7, 2001, are being removed. These four conditions were not part of the GATT Valuation Rules. The four conditions included sale under fully competitive conditions, absence of abnormal discount from the ordinary competitive price, absence of special discounts for exclusive dealers and availability of quantifiable data for adjustments (loading) under Rule 9. They now find mention in the rule dealing with discretion of the Customs officers to reject the declaration of the importers.
The amended version of Section 14 now prescribes certain additions to the transaction value. Most of these additions were already mentioned in the rules for valuation and find a place even in the new rules. The loading on account of ship demurrage, lighterage and barge charges are more specific in the new rules.
There were no rules for valuation of export goods earlier and the government found it difficult to deal with over-invoicing of exports, with a view to claiming higher entitlements of duty drawback or duty credits against exports. So, now the government has armed itself with rules and powers.
The export valuation rules now give Customs officers the powers to reject the declared value and determine it by adopting the prescribed methods. The value declared can be rejected on the ground that goods of similar kind and quantity are being exported at or about the same time in same or similar commercial or quantity levels at a lower or higher price, or that the exporter has mis-declared the description of the goods etc. This power can so easily be misused against exporters who do not bow to the wishes of the Customs.
Once a Customs officer rejects the declared value of exports, he can determine the value by comparison with the price at which similar goods are being exported. If that method is not appropriate, he may compute the value on a cost-plus basis and if enough data is not available to adopt that method, he may use the residual method i.e, reasonable means on the basis of available data but he can not adopt local market price of the export goods as the basis. Exporters now have 4 weeks to get familiar with new valuation rules.