Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

3 · Determination of the method of valuation - (1) Subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10; (2) Value of imported goods under sub-rule (1) shall be accepted: Provided that (a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which are imposed or required by law or by the public authorities in India; or limit the geographical area in which the goods may be resold; or (iii) do not substantially affect the value of the goods; (b) the sale or price is not subject to some condition or consideration for which a value cannot be determined in respect of the goods being valued; (c) no part of the proceeds of any subsequent resale; disposal or use of the goods by the buyer will accrue directly or indirectly to the seller , unless an appropriate adjustment can be made in accordance with the provisions of rule 10 of these rules; and (d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below: (3) (a) Where the buyer and seller are related, 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. (b) In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time_ the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India; the deductive value for identical goods or similar goods; the computed value for identical goods or similar goods: Provided that in applying the values used for comparison; due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are not related; (c) substitute values shall not be established under the provisions of clause (b) of this sub-rule: (4) if the value cannot be determined under the provisions of sub-rule (1), the value shall be determined by proceeding sequentially through rule 4 to 9. 4. Transaction value of identical goods: (1)(a)Subject to the provisions of rule 3, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued; Provided that such transaction value shall not be the value of the goods provisionally assessed under section 18 of the Customs Act; 1962. (b) In applying this rule, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods: (c) Where no sale referred to in clause (b) of sub-rule (1), is found; the transaction value of identical goods sold at a different commercial level or in different quantities or both; adjusted to take account of the difference attributable to commercial level or to the quantity or both; shall be used, provided that such adjustments shall be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustments, whether such adjustment leads to an increase or decrease in the value (2) Where the costs and charges referred to in sub-rule (2) of rule 10 of these rules are included in the transaction value of identical goods, an adjustment shall be made; if there are significant differences in such costs and charges between the goods being valued and the identical goods in question arising from differences in distances and means of transport: (3) In applying this rule, if more than one transaction value of identical goods is found; the lowest such value shall be used to determine the value f imported goods: 5. Transaction value of similar goods:"

7 · Deductive value:- (1) Subject to the provisions of rule 3, if the goods being valued or identical or similar imported goods are sold in India; in the condition as imported at or about the time at which the declaration for determination of value is presented, the value of imported goods shall be based on the unit price at which the imported goods or identical or similar imported goods are sold in the greatest aggregate quantity to persons who are not related to the sellers in India; subject to the following deductions either the commission usually paid or agreed to be paid or the additions usually made for profits and general expenses in connection with sales in India of imported goods of the same class or kind; the usual costs of transport and insurance and associated costs incurred within India; the customs duties and other taxes payable in India by reason of importation or sale of the goods_ (2) If neither the imported goods nor identical nor similar imported goods are sold at or about the same time of importation of the goods being valued, the value of imported goods shall, subject otherwise to the provisions of sub-rule (1), be based on the unit price at which the imported goods or identical or similar imported goods are sold in India, at the earliest date after importation but before the expiry of ninety days after such importation: (3) (a) If neither the imported goods nor identical nor similar imported goods are sold in India in the condition as imported; then, the value shall be based on the unit price at which the imported goods, after further processing, are sold in the greatest aggregate quantity to persons who are not related to the seller in India. (b) In such determination; due allowance shall be made for the value added by processing and the deductions provided for in items () to (iii) of sub-rule (1). 8. Computed value. Subject to the provisions of rule 3, the value of imported goods shall be based on a computed value; which shall consist of the sum of: - (a) the cost or value of materials and fabrication or other processing employed in producing the imported goods; (b) an amount for profit and general expenses equal to that usually reflected in sales of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to India; (c) the cost or value of all other expenses under sub-rule (2) of rule 10. 9. Residual method - (1) Subject to the provisions of rule 3, where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and on the basis of data available in India; Provided 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 (2) No value shall be determined under the provisions of" this rule on the basis of the selling price in India of the goods produced in India; system which provides for the acceptance for customs purposes of the highest of the two alternative values;

12 · Rejection of declared value: (1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer; the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3_ (2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard; before taking a final decision under sub-rule (1). Explanation:-(1) For the removal of doubts, it is hereby declared that: - This rule by itself does not provide a method for determination of value; it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with rules 4 to 9. (ii) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers: (iii) The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include (a) the significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed; (b) the sale involves an abnormal discount or abnormal reduction from the ordinary competitive price; (c) the sale involves special discounts limited to exclusive agents; (d) the misdeclaration of goods in parameters such as description;, quality, quantity, country of origin, year of manufacture or production; (e) the non declaration of parameters such as brand; grade, specifications that have relevance to value;

2 · Concerning the value of the element; if the importer acquires the element from a seller not related to him at given cost, the value of the element is that cost. If the element was produced by the importer or by a person related to him; its value would be the cost of producing it: If the element had been previously used by the importer, regardless of whether it had been acquired or produced by such importer; the original cost of acquisition or production would have to be adjusted downward to reflect its use in order to arrive at the value of the element 3_ Once a value has been determined for the element it is necessary to apportion that value to the imported goods. Various possibilities exist: For example; the value might be apportioned to the first shipment if the importer wishes to pay duty on the entire value at one time. As another example, the importer may request that the value be apportioned over the number of units produced up to the time of the first shipment: As a further example; he may request that the value be apportioned over the entire anticipated production where contracts or firm commitments exist for that production: The method of apportionment used will depend upon the documentation provided by the importer. As an illustration of the above, an importer provides the producer with a mould to be used in the production of the imported goods and contracts with him to buy 10000 units. By the time of arrival of the first shipment of 1000 units, the producer has already produced 4,000 units_ The importer may request the proper officer of customs to apportion the value of the mould over 1,000 units, 4,000 units or 10,000 units. Rule 10()(b)(iv) Additions for the elements specified in rule 10()(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 the 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 10. 5_ In another case, a firm may carry the cost of the design centre outside the country of importation as a general overhead expense without allocation to specific products. In this instance, an appropriate adjustment could be made under the provisions of rule 10 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 cases where the production of the element in question involves a number of countries and over period of time; the adjustment should be limited to the value actually added to that element outside the country of importation: Rule 10()(c)