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					                                                  VALUATION METHODS AND PRACTICES

                     International Academy of Management & Economics
       In Affiliation with Llave Center For Continuing Academic Development, Inc.

                                  Graduate Program in Business Administration
                              MBA Major in International Trade & Traffic Management

I Course Title:              Valuation Methods and Practices

II Course Description:
          A three (3) units course in the Valuation Methods and Practices with focus in
the fundamentals, basic principles and application of customs valuation. It provides a
brief historical evolution of customs computation and rules in valuation in relation to
the essential function of the Bureau of Customs of collecting revenue. It also gives
description and comparative analysis of our Philippine Business Environment
covering our changing import and export trade structure, essentially computation
rules and regulations and how the present structure of World Trade Organization
(WTO) prescribed Transaction Value affects our national economy including trade
relations to other countries and membership to world economic organizations.

III. Course Objectives:

At the end of the course, masteral students are expected:
       1.     To know the historical evolution and different principles and stages of our
              early customs valuation de and its effect in our national economy.

       2.     To appreciate the importance of customs valuation in the efficient revenue
              collection drive of the government and its impact in our trade transactions
              with our neighboring countries.

       3.     To create an analytical thinking among students on the fundamentals of
              customs valuation, from concepts, principles and application; and

       4.     To formulate their own recommendation and feasible course of action on the
              current problems affecting the effective application of customs valuation in
              relation to an improved customs revenue.


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IV. Course Content

A. Foundation -Conceptualization:
       1.     Basic Foundation of Customs Valuation
       2.     Evolution of Customs Valuation
       3.     International Commercial (INCO) terms of shipments, theories and practices
       4.     Presentation of Basic Computation techniques and Formulas

B. Written and Oral Presentation in Case Studies involving any of the following:

       1.     Distinctions between the early customs valuation as compared against
              transaction value

       2.     Problems and Issues Affecting Customs Valuation under Transaction Value

       3.     Determination on the efficiency of customs valuation in maximizing customs
              revenue and combating smuggling and frauds

       4.     Supplemental Discussion on the following areas;

                      a.     Remedial Computations under the TCCP and NIRC
                      b.     Motor Vehicles Computation
                      c.     Computation of Excise Taxes
                      d.     Computation of Special Duties

V. MATERIALS AND REFERENCES:

       1.     Various laws, rules and regulations relevant to the Philippine Customs
              Administration and the Tariff and Customs Code of the Philippines (TCCP)
              including but not limited to the following:

              1.1            Republic Act No. 1937
                             The Tariff and Customs Code Act of 1975
              1.2            Presidential Decree No. 34
                             Tariff and Customs Code Revision Act of 1972
              1.3            Presidential Decree No. 1464
                             Tariff and Customs Code Revision Act 0f 1978
              1.4            Executive Order No. 127
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                             Reorganizing the Ministry of Finance
              1.5            Republic Act No. 7650
                             An Act Repealing Section 1404 and Amending Sections 1401 and
                             1403 of the Tariff and Customs Code of the Philippines, As
                             Amended, Relative to the Physical Examination of Imported
                             Articles,
              1.6            Republic Act No. 7651
                             An Act to Revitalize and Strengthen the Bureau of Customs,
                             Amending for the Purpose Certain Sections of the Tariff and
                             Customs Code of the Philippines, As Amended
              1.7            Republic Act No. 7843
                             An Act amending Section 301 Dumping Duty
              1.8            Republic Act No. 8181
                             An Act Changing the basis of Dutiable Value from Home
                             Consumption Value to Transaction Value
              1.9            Republic Act No. 8751
                             An Act amending Section 302 Countervailing Duty
              1.10           Republic Act No. 8752
                             An Act amending Section 301 Dumping Duty
              1.11           Republic Act No. 8800
                             An Act providing Safeguard Measure
              1.12           Republic Act No. 9135
                             An Act Amending Certain Provisions of Presidential Decree no.
                             1464, Otherwise known as the Tariff and Customs Code of the
                             Philippines, As Amended and for other purposes.

       2.     Customs Issuances in the form of CAO and CMO relating to basis of
              dutiable value and deriving the components of landed cost.

       3.     Fundamentals of Valuation.

       4.     National Internal Revenue Code (NIRC).




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                                     MODULE I
AGREEMENT ON IMPLEMENTATION OF ARTICLE VII OF THE
GENERAL AGREEMENT ON TARIFFS AND TRADE 1994


GENERAL INTRODUCTION COMMENTARY

       1.     The primary basis for customs value under this Agreement is “transaction
              value” as defined in Article 1. Article 1 is to be read together with Article 8
              which provides, inter alia, for adjustments to the price actually paid or
              payable in cases where certain specific elements which are considered to
              form a part of the value for customs purposes are incurred by the buyer but
              are not included in the price actually paid for payable for the imported
              goods. Article 8 also provides for the inclusion in the transaction value of
              certain considerations which may pass from the buyer to the seller in the
              form of specified goods or services rather than in the form of money.
              Articles 2 through 7 provide methods of determining the customs value
              whenever it cannot be determined under the provisions of Article 1.

       2.     Where the customs value cannot be determined under the provisions of
              Article 1 there should normally be a process of consultation between the
              customs administration and importer with a view to arriving at a basis of
              value under the provisions of Article 2 or 3. It may occur, for example, that
              the importer has information about the customs value of identical or similar
              importer goods which is not immediately available to the customs
              administration in the port of importation. On the other hand, the customs
              administration may have information about the customs value of identical or
              similar imported goods which is not readily available to the importer. A
              process of consultation between the two parties will enable information to be
              exchanged, subject to the requirements of commercial confidentiality, with a
              view to determining a proper basis of value for customs purposes.

       3.     Articles 5 and 6 provide two bases for determining the customs value where
              it cannot be determined on the basis of the transaction value of the imported
              goods or of identical or similar imported goods. Under paragraph 1 of
              Article 5 the customs value is determined on the basis of the price at which
              the goods are sold in the conditions as imported to an unrelated buyer in the
              country of importation. The importer also has the right to have goods which

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              are further processed after importation valued under the provisions of Article
              5 if the importer so requests. Under Article 6 the customs value is
              determined on the basis of the computed value. Both these methods present
              certain difficulties and because of this the importer is given the right, under
              the provisions of Article 4, to choose the order of application of the two
              methods.

       4.     Article 7 sets out how to determine the customs value in cases where it
              cannot be determined under the provisions of any of the preceding Articles.

Members,

Having regard to the Multilateral Trade Negotiations;

Desiring to further the objectives of GATT 1994 and to secure additional benefits for
the international trade of developing countries;

Recognizing the importance of the provisions of Article VII of GATT 1994 and
desiring to elaborate rules for their application in order to provide greater uniformity
and certainly in their implementation;

Recognizing the need for a fair, uniform and neutral system for the valuation of
goods for customs purposes that precludes the use of arbitrary or fictitious customs
values;

Recognizing that the basis for valuation of goods for customs purposes should, to
the greatest extent possible, be the transaction value of the goods being valued;

Recognizing that customs value should be based on simple and equitable criteria
consistent with commercial practices and that valuation procedures should be of
general application without distinction between sources of supply;

Recognizing that valuation procedures should not be used to combat dumping;




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MODULE II
RULES ON CUSTOMS VALUATION

Article 1

1.     The customs value of imported 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, provided:

       (a) That there are no restrictions as to the disposition or use of the goods by the
       buyer other than restrictions which:

                      (i)            are imposed or required by law or by the public authorities in
                                     the country or importation;

                      (ii)           limit the geographical area in which the goods may be resold;
                                     or

                      (iii)          do not substantially affect the value of the goods;

       (b) That the sale or price is not subject to some condition or consideration for
       which a value cannot be determined with respect to the goods being valued;

       (c) That 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 Article
       8; and

       (d) That the buyer and seller are not related, or where the buyer and seller are
       related, that the transaction value is acceptable for customs purposes under the
       provisions of paragraph 2.

2.     (a) In determining whether the transaction value is acceptable for the purposes of
       paragraph 1, the fact that the buyer and the seller are related within the meaning
       of Article 15 shall not in itself be grounds for regarding the transaction value as
       unacceptable. In such case the circumstances surrounding the sale shall be
       examined and the transaction value shall be accepted provided that the
       relationship did not influence the price. If, in the light of information provided

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       by the importer or otherwise, the customs administration has grounds for
       considering that the relationship influenced the price, it shall communicate its
       grounds to the importer and the importer shall be given a reasonable opportunity
       to respond. If the importer so requests, the communication of the grounds shall
       be in writing.

       (b) In sale between related persons, the transaction value shall be accepted and
       the goods valued in accordance with the provisions of paragraph 1 whenever the
       importer demonstrates that such value closely approximates to one of the
       following accruing at or about the same time:

           (i)        the transaction value in sales to unrelated buyers of identical or similar
                      goods for export to the same country of importation;

           (ii)       the customs value of identical or similar goods as determined under the
                      provisions of Article 5;

           (iii)      the customs value of identical or similar goods as determined under the
                      provisions of Article 6; in applying the foregoing tests, due account
                      shall be taken of demonstrated differences in commercial levels,
                      quantity levels, the elements enumerated in Article 8 and costs incurred
                      by the seller in sales in which the seller and the buyer are not related that
                      are not incurred by the seller in sales in which the seller and the buyer
                      are related.

       (c) The tests set forth in paragraph 2 (b) are to be used at the initiative of the
            importer and only for comparison purposes. Substitute values may not be
            established under the provisions of paragraph 2(b).

Note to Article 1

Price Actually Paid or Payable

1.     The price actually paid or payable is the total payment made or to be made by
       buyer to or for the benefit of the seller for the imported goods. The payment
       need not necessarily take the form of a transfer of money. Payment may be made
       by way of letter of credit or negotiable instruments. Payment may be made
       directly or indirectly. An example of an indirect payment would be the settlement by the buyer, whether
       in whole or in part, of a debt owed by the seller.


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2.     Activities undertaken by the buyer on the buyer‟s own account, other than those for which an adjustment is
       provided in Article 8, are not considered to be an indirect payment to the seller, even though they might
       be regarded as of benefit to the seller. The costs of such activities shall not, therefore, be added to the
       price actually paid or payable in determining the customs value.

3.     The customs value shall not include the following charges or costs, provided that they are distinguished from
       the price actually paid or payable for the imported goods:

              (a) charges for construction, erection, assembly, maintenance or technical assistance, undertaken after
              importation on imported goods such as industrial plant, machinery or equipment;

              (b) the cost of transport after importation;

              (c) duties and taxes of the country of importation.

4.     The price actually paid or payable refers to the price for the imported goods. Thus the flow if dividends or
       other payments from the buyer to the seller that do not relate to the imported goods are not part of the
       customs value.

Paragraph 1(a) (iii)

            Among restriction which would not render a price actually paid or payable unacceptable are restriction
which do not substantially affect the value of the goods. An example of such restrictions would be the case where
a seller requires a buyer of automobiles not to sell or exhibit them prior to a fixed date which represents the
beginning of a model year.

Paragraph 1(b)

1.     If the sale or price is subject to some condition or consideration for which a value cannot be determined
       with respect to the goods being valued, the transaction value shall not be acceptable for customs purposes.
       Some examples of this include:

              (a) the seller established the price of the imported goods on condition that the buyer will also buy
              other goods in specified quantities;

              (b) the price of the imported goods is dependent upon the price or prices at which the buyer of the
              imported goods sells other goods to the seller of the imported goods;


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              (c) the price established on the basis of a form of payment extraneous to the imported goods, such as
              where the imported goods are semi-finished goods which have been provided by the seller on
              condition that the seller will receive a specified quantity of the finished goods.

2.     However, conditions or consideration relating to the production or marketing of the imported goods shall not
       result in rejection of the transaction value. For example, the fact that the buyer furnishes the seller with
       engineering and plans undertaken in the country of importation shall not result in rejection of the
       transaction value for the purposes of Article 1. Likewise, if the buyer undertakes on the buyer‟s own
       account, even though by agreement with the seller, activities relating to the marketing of the imported
       goods, the value of these activities is not part of the customs value nor shall such activities result in
       rejection of the transaction value.

Paragraph 2

1.     Paragraph 2(a) and 2 (b) provide different means of establishing the acceptability of a transaction value.

2.     Paragraph 2 (a) provides that where the buyer and the seller are related, the circumstances surrounding the
       sale shall be examined and the transaction value shall be accepted as the customs value provided that the
       relationship did not influence the price. It is not intended that there should be an examination of the
       circumstances in all cases where the buyer and the seller are related. Such examination will only be
       required where there are doubts about the acceptability of the price. Where the customs administrations
       have no doubts about the acceptability of the price, it should be accepted without requesting further
       information from the importer. For example, the customs administration may have previously examined the
       concerning the buyer and the seller, and may already be satisfied from such examination or information that
       the relationship did not influence the price.

3.     Where the customs administration is unable to accept the transaction value without further inquiry, it should
       give the importer an opportunity to supply such further detailed information as may be necessary to enable
       it to examine the circumstances surrounding the sale. In this context, the customs administration should be
       prepared to examine relevant aspects of the transaction, including the way in which the buyer and seller
       organize their commercial relations and the way in which the price in question was arrived at, in order to
       determine whether the relationship influenced the price. Where it can be shown that the buyer and seller,
       although related under The provisions of Articles 15, buy from and sell to each other as it they were not
       related, this would demonstrate that the price had not been influenced by the relationship.


Article 2


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1.     (a) If the customs value of the imported goods cannot be determined under the
       provisions of article 1, the customs value shall be the transaction value of
       identical goods sold for export to the same country of importation and
       exportation and exported at or about the same time as the goods being valued.

       (b) In applying this article, the transaction value of identical goods in a sale at the
       same commercial level and is substantially the same quantity as the goods being
       valued shall be used to determine the customs value. Where no such be used to
       determine the customs value of identical goods sold at a different commercial
       level and/or to quantities, adjusted to take account of differences at attributable
       to commercial level and/or to quantity, shall be used, provided that such
       adjustments can be made on the basis of demonstrated evidence which clearly
       establishes, whether the adjustment leads to an increase or a decrease in the
       value.

2.     Where the costs and charges referred to in paragraph 2 of Article 8 are included
       in the transaction value, an adjustment shall be made to take account of
       significant differences in such costs and charges between the imported goods and
       the identical goods in question arising from differences and the identical goods in
       question arising from differences in distances and modes of transport.

3.     If, in applying this article, more than one transaction value of identical goods is
       found, the lowest such value shall be used to determine the customs value of the
       imported goods.

Note to Article 2

1.     In applying Article 2, the customs administration shall, wherever possible, use a
       sale of identical goods being valued. Where no such sale is found, a sale of
       identical goods that takes place under any one of the following three conditions
       may be used:

                      (a) a sale at the same commercial level but in different quantities;

                      (b) a sale at a different commercial level but in substantially the same
                          quantities; or

                (c) a sale at a different commercial level and in different quantities.
2.     Having found a sale under any one of these three conditions, adjustments will
       then be made, as the case may be, for;

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              (a) quantity factors only;

              (b) commercial level factors only; or

              (c) both commercial level and quantity factors.

3.     The expression “and/or” allows the flexibility to use the sales and make the
       necessary adjustment in any one of the three conditions described above.

4.     For the purposes of article 2, the transaction value of identical imported goods
       means a customs value, adjusted as provided for in paragraph 21 (b) and 2, which
       has already been accepted under article 1.

5.     A condition for adjustment because of different commercial levels or different
       quantities is that such adjustment, whether it leads to an increase or a decrease in
       the value, be made only on the basis of demonstrated evidence that clearly
       establishes the reasonableness and accuracy of the adjustment, e.g. valid price
       lists containing prices referring to different levels or different quantities. As an
       example of this, if the imported goods being valued consist of a shipment of 10
       units and the only identical imported goods for which a transaction value exists
       involved a sale of 500 units, and it is recognized that the seller grants quantity
       discounts, the required adjustment may be accomplished by resorting to the
       seller’s price list and using that price applicable to a sale of 10 units. This does
       not require that a sale has to be made in quantities of 10 as long as the price list
       has been established as being bona fide through sales at other quantities. In the
       absence of such an objective measure, however, the determination of a customs
       value under the provisions of article 2 is not appropriate.

Article 3

1.     (a) If the customs value of the imported goods cannot be determined under the
       provisions of Articles 1 and 2, the customs value shall be the transaction value of
       similar goods sold for export to the same country of importation and exported at
       or about the same time as the goods being valued.

       (b) In applying this Article, the transaction value of similar 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 customs value. Where no such sale is
       found, the transaction value of similar goods sold at a different commercial level
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       and/or in different quantities, adjusted to take account of differences attributable
       to commercial level and/or to quantity, shall be used, provided that such
       adjustments can be made on the basis of demonstrated evidence which clearly
       establishes the reasonableness and accuracy of the adjustment, whether the
       adjustment leads to an increase or a decrease in the value.

2.     Where the costs and charges referred to in paragraph 2 of Article 8 are included
       in the transaction value, an adjustment shall be made to take account of
       significant differences in such costs and charges between the imported goods and
       the similar goods in question arising from differences in distances and modes of
       transport.

3.     If, in applying this Article, more than one transaction value of similar goods is
       found, the lowest such value shall be used to determine the customs value of the
       imported goods.

Note to Article 3

1.     In applying Article 3, the customs administration shall, wherever possible, use a
       sale of similar goods at the same commercial level and in substantially the same
       quantities as the goods being valued. Where no such sale is found, a sale of
       similar goods that takes place under any one of the following three conditions
       may be used:

              (a) a sale at the same commercial level but in different quantities;

              (b) a sale a different commercial level but in substantially the same
              quantities; or

              (c) a sale at a different commercial level and in different quantities.

2.     Having found a sale under any one of these three conditions adjustments will
       then be made, as the case may be, for:

              (a) quantity factors only;

              (b) commercial level factors only; or

           (c) both commercial level and quantity factors.
3.     The expression “and/or” allows the flexibility to use the sales and make the
       necessary adjustment in any one of the three conditions described above.

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4.     For the purpose of Article 3, the transaction value of similar imported goods
       means a customs value, adjusted as provided for in paragraph 1 (b) and 2, which
       has already been accepted under Article 1.

5.     A condition for adjustment because of different commercial levels or different
       quantities is that such adjustment, whether it leads to an increase or a decrease in
       the value, be made only on the basis of demonstrated evidence that clearly
       establishes the reasonableness and accuracy of the adjustment, e.g. valid price
       lists containing prices referring to different levels or different quantities. As an
       example of this, if the imported goods being valued consist of a shipment of 10
       units, and the only similar imported goods for which a transaction value exists
       involved a sale of 500 units, and it is recognized that the seller grants quantity
       discounts, the required adjustment may be accomplished by resorting to the
       seller’s price list and using that price applicable to a sale of 10 units. This does
       not require that a sale had to have been made in quantities of 10 as long as the
       price list has been established as being bona fide through sales at other quantities.
       In the absence of such an objective measure, however, the determination of a
       customs value under the provisions of Article 3 is not appropriate.

Article 4
          If the customs value of the imported goods cannot be determined under the
provisions of Articles 1,2 and 3, the customs value shall be determined under the provision of
Article 5 or, when the customs value cannot be determined under that Article, under the
provisions of Article 6 except that, at the request of the importer, the order of application of
Articles 5 and 6 shall be reversed.

Article 5

1. (a) If the imported goods or identical or similar imported goods are sold in the
   country of importation in the condition as imported, the customs value of the
   imported goods under the provisions of this Article shall be based on the unit price
   at which the imported goods or Identical or similar imported goods are so sold in
   the greatest aggregate quantity, at or about the time of the importation of the goods
   being valued, to persons who are not related to the persons from whom they buy
   such goods, subject to deductions for the following:




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     (i)      either the commissions usually paid or agreed to be paid or the additions
              usually made for profit and general expenses in connection with sales in such
              country of imported goods of the same class or kind;

     (ii)     the usual costs of transport and insurance and associated costs incurred
              within the country of importation;

     (iii)    where appropriate, the costs and charges referred to in paragraph 2 of Article
              8; and

     (iv)     the custom duties and other national taxes payable in the country of
              importation by reason of the importation or sale of the goods.

     (b) If neither the imported goods nor identical nor similar imported of the goods are
     sold at or about the time of importation of the goods being valued, the customs
     value shall, subject otherwise to the provisions of paragraph 1(a), be based on the
     unit price at which the imported goods or identical or similar imported goods are
     sold in the country of importation in the condition as imported at the earliest date
     after the importation of the goods being valued but before the expiration of 90 days
     after such importation.

2.      If neither the imported goods nor identical nor similar imported goods are sold in
        the country of importation in the condition as imported, then, if the importer so
        request, the customs 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 in the country of importation who are not related to the persons from
        whom they buy such goods, due allowance being made for the value added by
        such processing and the deductions provided for in paragraph 1 (a).

Note to Article 5

1. The term “unit price which … goods are sold in the greatest aggregate quantity”
means the price at which greatest number of units is sold in sales to persons who are
not related to the persons from whom they buy such goods at the first commercial
level after importation at which such sales takes places.
As an example of this, goods are sold from a price list which grants favorable unit
price for purchases made in larger quantities.




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        Sale quantity                       Unit price              Number of sales Total quantity sold

    1 – 10 units                            100                     10 sales of 5 units
65                                                                              5 sales          of       3
units

       11 – 25 units                        95                      5 sales of 11 units
55

       over 25 units                        90                      1 sale of 30 units
           80
                                                                    1 sale of 50 units

 The greatest number of units sold at a price is 80;
therefore, the unit price in the greatest aggregate
quantity is 90.

3. As another example of this, two sales occur. In the first sale 500 units are sold at a
    price of 95 currency units each. In the second sale 400 units are sold at a price of
    90 currency units each. In this example, the greatest number of units sold at a
    particular price is 500; therefore, the unit price in the greatest aggregate quantity
    is 95.

4. A third example would be the following situations
   where various quantities are sold at various prices.

              (a) Sales


Sale quantity                                                       Unit price
              40 units                                                         100
              30 units                                                         90
              15 units                                                         100
              50 units                                                         95
              25 units                                                         105
              35 units                                                         100
              5 units                                                          90
              (b) Totals


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Total quantity sold                                      Unit price
                65                100
                50                90
                60                100
                25                95
       In this example, the greatest number of units sold at
       a particular price is 65; the unit price in the
       greatest aggregate quantity is 90.

5. Any sale in the importing country, as described in
   paragraph 1 above, to a person who supplies directly
   of indirectly free of charge or at reduced cost for
   use in connection with the production and sale for
   export of the imported goods any of the elements
   specified in paragraph 1 (b) of Article 8, should not
   be taken into account in establishing the unit price
   for the purpose of Article 5.

6. It should be noted that “profit and general expenses”
   referred to in paragraph 1 of Article 5 should be
   taken as a whole. The figure for the purposes of this
   deduction should be determined on the basis of
   information supplied by or on behalf of the importer
   unless the importer‟s figures are inconsistent with
   those obtained in sales in the country of importation
   of imported goods of the same class or kind.     Where
   the importer‟s are inconsistent with such figures, the
   amount for profit and general expenses may be based by
   or on behalf of the importer.

7. The “general expenses” include the direct and indirect
   cost of marketing the goods in question.

8. Local taxes payable by reason of the sale of the goods
   for which a deduction is not made under the provision
   of paragraph 1 (a) (iv) of Article 5 shall be deducted
   under the provisions of paragraph 1 (a0 (i0 of Article
   5.



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9. In determining either the commissions or the usual
   profits and general expenses under the provision not
   paragraph 1 of Article 5, the question whether certain
   goods are “of the same class or kind” as other goods
   must be determined on a case-by-case basis by
   reference to the circumstances involved. Sales in the
   country of importation of the narrowest group of range
   of imported goods of the same class or kind, which
   includes the goods being valued, for which the
   necessary information can be provided, should be
   examined, for the purposes of Article 5, “goods of the
   same class or kind” includes goods imported from the
   same country as the goods being valued as well as
   goods imported from each other countries.

10.       For the purposes of paragraph 1(b) of Article 5,
       the „earliest date” shall be the date by which sales
       of the imported goods or of identical or similar
       imported goods are made in sufficient quantity to
       establish the unit price.

11.       Where the method in paragraph 2 of Article 5 is
       used, deduction made for the value added by further
       processing    shall  be   based    on   objective   and
       quantifiable data relating to the cost of such work.
       Accepted   industry  formulas,   recipes,   methods  of
       construction, and other industry practices would form
       from the basis of the calculations.

12.       It is recognized that the methods of valuation
       provided for in paragraph 2 of Article 5 would
       normally not be applicable when, as a result of the
       further processing, the imported goods lose their
       identity.    However, there can be instances where,
       although the identity of the imported goods is lost,
       the value added by the processing can be determined
       accurately without unreasonable difficulty.     On the
       other hand, there can also be instances where the
       imported goods maintain their identity but from such a
       minor element in the goods sold in the country of
       importation that the use of this valuation method

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             would be unjustified, in view of the above, each
             situation of this type must be considered on a case-
             by-case basis.

Article 6

             1. The customs value of imported goods under the provisions of this Article

             shall be based on a computed value. Computed value 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 the
             country of importation;

             (c)          the cost or value of all other expenses
                    necessary to reflect the valuation option chosen by
                    the Member under paragraph 2 of Article 8.

               2. No matter may require or compel any person not resident in its own

             territory to produce for examination, or to allow access to, any account or

             other record for the purposes of determining a computed value. However,

             information supplied by the producer of the goods for the purposes of

             determining the customs value under the provisions of this Article may be

             verified in another country by the authorities of the country of importation

             with the agreement of the producer and provided they give sufficient


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       advance notice to the government of the country in question and the latter

       does not object to the investigation.



Note to Article 6

        1. As a general rule, customs value is determined under this Agreement on

       the basis of information readily available in the country of importation. In

       order to determine a computed value, however, it may be necessary to

       examine the costs of producing the goods being valued and other

       information which has to be obtained from outside the country of

       importation. Furthermore, in most cases the producer of the goods will be

       outside the jurisdiction of the authorities of the country of importation.

       The use of the computed value method will generally be limited to these

       cases where the buyer and seller are related, and the producer is prepared to

       supply to the authorities of the country of importation the necessary castings

       and to provide facilities for any subsequent verification which may be

       necessary.



        2. The “cost or value” referred to in paragraph 1 (a) of Article 6 is to be

       determined on the basis of information relating to the production of the

       goods being valued supplied by or on behalf of the producer. It is to be

       based upon the commercial accounts of the producer, provided that such

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       accounts are consistent with the                        generally accepted accounting principles

       applied in the country where the goods are produced.


3. The “cost or value” shall included the cost of
   elements specified in paragraph 1(a)(iii) of Article
   8.   It shall also included the value, apportioned as
   appropriate under the provisions of the relevant note
   to Article 8, of any element specified in paragraph
   1(b) of Article 8 which has been supplied directly or
   indirectly by the buyer for use in connection with the
   production of the imported goods.    The value of the
   elements specified in paragraph 1(b)(iv) of Article 8
   which are undertaken in the country of importation
   shall be included only to the extent that such
   elements are charged to the producer.     It is to be
   understood that no cost or value of the elements
   referred to in this paragraph shall be counted twice
   in determining the computed value.

4. The “amount for profit and general expenses” referred
   to in paragraph 1(b) of Article 6 is to be determined
   on the basis of information supplied by or on behalf
   of the producer unless the producer‟s figures are
   inconsistent with those 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
   importation for export to the country of importation.

5. It should be noted in this context that the “amount
   for profit and general expenses” has to be taken as a
   whole.   It follows that if, in any particular case,
   the producer‟s profit figure is low and the producer‟s
   general expenses are high, the producer‟s profit and
   general expenses taken together may nevertheless be
   consistent with that usually reflected in sales of
   goods of the same class or kind.     Such a situation
   might occur; for example, if a product were being
   launched in the country of importation and the

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       producer accepted a nil or low profit to offset high
       general expenses associated with the launch.     Where
       the producer can demonstrate a low profit on sales of
       the imported goods because of particular commercial
       circumstances, the producer‟s actual profit figures
       should be taken into account provided that the
       producer has valid commercial reasons to justify them
       and the producer‟s pricing policy reflects usual
       pricing policies in the branch of industry concerned.
       Such a situation might occur, for example, where
       producers have been forced to lower prices temporarily
       because of an unforeseeable drop in demand, or where
       they sell goods to complement a range of goods being
       produced in the country of importation and accept a
       low profit to maintain competitively.       Where the
       producer‟s own figures for profit and general expenses
       are not consistent with those usually reflected in
       sales of goods of the same class or kind as the goods
       being values which are made by producers in the
       country of exportation for export to the country of
       importation, the amount for profit and general
       expenses may be based upon relevant information other
       than that supplied by or on behalf of the producer of
       the goods.

6. 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 imported, if the
   latter so request, of the source of such information,
   the data used and the calculations based upon such
   data, subject to the provisions of Article 10.

7. The “general expenses” referred to in paragraph 19b)
   of Article 6 covers the direct and indirect cost of
   producing and selling the goods for export which are
   not included under paragraph 1 (a) of article 6.

8. Whether certain goods are “of the same class or kind”
   as other goods must be determined on a case-by-case
   basis with reference to the circumstances involved.

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       In determining the usual profits and general expenses
       under the provisions of Article 6, sales for export to
       the country of importation of the narrowest group or
       range of goods, which includes the goods being valued,
       for which the necessary information can be provided,
       should   be examined.  For the purposes of Article 6,
       “goods of the same class or kind” must be from the
       same country as the goods being valued.


Article 7

1. If the customs value of the imported goods cannot be determined under the

   provisions of Article 1 through 6, inclusive, the customs value shall be

   determined              using reasonable means consistent with the principles and

   general provisions of                     this Agreement and the Article VII of GATT 1994 and

   on the basis of data                  available in the country of importation.



2. No customs value shall be determined under the provisions of this Article on the
   basis of:

              (a) the selling price in the country of importation
              of goods produced in such country;

              (b) a system which provides for the acceptance for
              customs purposes of the higher of two alternative
              values;

              (c) the price goods on the domestic market of the
              country of exportation;

              (d) the cost of production other than computed
              values which have been determined for identical or



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              similar goods in accordance with the provisions of
              Article 6;

              (e) the price of the goods for export to a country
              other than the country of importation;

              (f) minimum customs values; or

              (g) arbitrary or fictitious values.

        3. If the importer so request, the importer shall be informed in writing of

       the customs value determined under the provisions of this Article and the

       method used to determine such value.



              Note to Article 7
        1. Customs values determined under the provision of Article 7 should, to

       the greatest extent possible, be based on previously determined customs

       values.



        2. The methods of valuation to be employed under Article 7 should be

       those laid           down in Article 1 through 6 but a reasonable flexibility in the

       application of such                  methods would be in conformity with the aims and

       provisions of Article 7.


 3.      Some                     example                of   reasonable            flexibility   are   as
follows:



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       (a)      Identical goods – the requirement that the
       identical goods should be exported at or about the
       same time as the goods being valued could be flexibly
       interpreted; identical imported goods produced in a
       country other than the country of exportation of the
       goods being valued could be the basis for customs
       valuation; customs values of identical imported goods
       already determined under the provisions of Articles 5
       and 6 could be used.

       (b) Similar goods – the requirement that the similar
       goods should be exported at or about the same time as
       the goods being valued could be flexibly interpreted;
       similar imported goods produced in a country other
       than the country of exportation of the goods being
       valued could be the basis for customs valuation;
       customs values of similar imported goods already
       determined under the provisions of Article 5 and 6
       could be used.

       (c) Deductive method – the requirement that the goods
       shall have been sold in the “conditions imported” in
       paragraph 1 (a) of Article 5 could be flexibly
       interpreted; the “90 days” requirement could be
       administered flexibly.


Article 8

              1.     In determining the customs value under the
              provisions of Article 1, there shall be    added to
              the price actually paid or payable for the imported
              goods:

              (a) the following, to the extent that they are
              incurred by the buyer but are not included in the
              price actually paid or payable for the goods:
                      (i)            commissions and brokerage, except buying
                                     commissions;


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                 (ii) the cost of containers which are treated as
              being one for customs
                    purposes with the goods in question;
                 (iii) the cost of packing whether for labor or
                 materials;

              (b) the value, apportioned as appropriate, of the
              following   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 and sale for export of the imported
              goods, to the extent that such value has not been
              included in the price actually paid or payable:

                      (i)          material, components, parts and similar
                             items incorporated in the imported goods;

                      (ii)     tools, dies, moulds and similar items
                         used in the production of the imported goods;

                      (iii) materials consumed in the production of
                         the imported goods;

                      (iv) engineering, development, artwork, design
                         work, and plans and sketches undertaken
                         elsewhere than in the country of importation
                         and necessary for the production of the
                         imported goods;

              (c) royalties and license fees related to the goods
              being valued that the buyer must pay, either
              directly of indirectly, as a condition of sale of
              the goods being valued, to the extent that such
              royalties and fees are not included in the price
              actually paid or payable;

              (d) the value of any part of the proceeds of any
              subsequent resale, disposal or use of the imported
              goods that accurse directly or indirectly to the
              seller.


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              2.    In framing its legislation, each Member shall
              provide for the inclusion in or the       exclusion
              from the customs value, in while or in part, of the
              following:

              (a)        the cost of transport of the imported goods
                      to the port or place of importation;

              (b)        loading,   unloading  and   handling   charges
                      associated with the transport of the     imported
                      goods to the port or place of importation; and

              (c)            the cost of insurance

 3. Additions to the price actually paid or payable shall be made under this Article
    on the basis of objectives and quantifiable data.

 4. No additions shall be made to the price actually paid or payable in determining
    the customs value except as provided in this Article.

              Note to Article 8
Paragraph 1 (a)(i)

The term “buying commissions” means fees paid by an
imported to the importer‟s agent for the service of
representing importer abroad in the purchase of the goods
being valued.

Paragraph 1 (b)(ii)

       1. There are two factors involved in the apportionment of the elements

       specified in             paragraph 1(b)(ii) of Article 8 to the imported goods – the

       value of the element itself                       and the way in which that value is to be

       apportioned to the imported goods. The apportionment of these elements



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       should be made in a reasonable manner appropriate to the circumstances

       and in accordance with generally accepted                             accounting principles.



       2. Concerning the value of the element, if the importer acquires the element

       from a seller not related to the importer at a given cost, the value of the

       element is that cost. If the element was produced by the imported or by a

       person related to the importer, 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, the importer may request that the value be apportioned over the

       entire anticipated production where contracts or firm commitments exist for



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       that       production. The method of apportionment used will depend upon the

       documentation provided by the importer.



       4. 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 the produce to buy 10,000 units. By the time of arrival of the first

       shipment of 1,000 units, the produce has already produced 4,000 units. The

       importer may request the customs administration to apportion the value of

       the mould over 1,000 units. 4,000 units or 10,000 units.


Paragraph 1(b) (iv)

       1. Additions for the elements specified in paragraph 1(b)(iv) of Article 8

       should be            based on objective and quantifiable data. In order to minimize

       the burden for both the importer and customs administration 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 of the

       lease. No addition shall                          be made for those elements available in the public

       domain, other than the cost of obtaining copies of them.


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       3. The ease 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 center

       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 appropriate be made under the provisions of Article 8.



       5. In another case, a firm may carry the cost of the design center outside

       the country of importation as a general overhead expenses without

       allocation to specific products. In this instance, an appropriate adjustment

       could be made under the provisions of Article 8 with respect to the imported

       goods by apportioning total design center costs                              over total production

       benefiting from the design center and adding such apportioned cost on a

       unit basis to imports.



       6. Variation in the above circumstances will, of course, require different

       factors to be considered in determining the proper method of allocation.



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       7. In cases where the production of the element in question involves a

       number of countries and over a period of time, the adjustment should be

       limited to the value actually added to that element outside the country of

       importation.


Paragraph 1 (c)

       1. The royalties and license fees referred to in paragraph 1 (c) of Article 8

       may include, among other things, payments in respect to patents,

       trademarks and copyrights. However, the charges for the right to

       reproduce the imported goods in the country of                               importation shall not be

       added to the price actually paid or payable for the imported goods in

       determining the customs value.



       2. Payments made by the buyer for the right to distribute or resell the

       imported goods shall not be added to the price actually paid or payable for

       the imported goods if such                        payments are not a condition of the sale for

       export to the country of importation of the imported goods.



              Paragraph 3
Where objective and quantifiable data do not exist with
regard to the additions required to be made under the

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provisions of Article 8, the transaction value cannot be
determined under the provisions of Article 1.       As an
illustration of this, a royalty is paid on the basis of
the price in a sale in the importing country of a litre
of a particular product that was imported by the kilogram
and made up into a solution after importation.     If the
royalty is based partially on the imported goods and
partially on other factors which have nothing to do with
the imported goods (such as when the imported goods are
mixed with domestic ingredients and are no longer
separately identifiable, or when the royalty cannot be
distinguished from special financial arrangement between
the buyer and the seller). It would be inappropriate to
attempt to make an addition for the royalty. However, if
the amount of this royalty is based only on the imported
goods and can be readily quantified, an addition to the
price actually paid or payable can be made.


Article 9

       1. Where the conversion of currency is necessary for the determination of

       the customs value, the rate of exchange to be used shall be that duly

       published by the competent authorities of the country of importation

       concerned and shall reflect as effectively as possible. In respect of the period

       covered by each such document of publication, the                            current value of such

       currency in commercial transactions in terms of the currency of the country

       of importation.



       2. The conversion rate to be used shall be that in effect at the time of

       exportation or the                  time of importation, as provided by each Member.

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              Note to Article 9
For the purposes of Article 9, “time of importation” may
include the time of entry for customs purposes.


Article 10

All information which is by nature confidential or which
is provided on a confidential basis for the purposes of
customs   valuation   shall   be  treated   as   strictly
confidential by the authorities concerned who shall not
disclose it without the specific permission of the person
or government providing such information, except to the
extent that it may be required to be disclosed in the
context of judicial proceedings.


Article 11

       1. The Legislation of each Member shall provide in regard to a

       determination of customs value for the right of appeal, without penalty, by

       the importer or any other person                         liable for the payment of the duty.



       2. An initial right of appeal without penalty may be to an authority within

       the customs administration or to an independent body, but the legislation of

       each Member shall provide for the right of appeal without penalty to a

       judicial authority.




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3.     Notice of the decision on appeal shall be given to the appellant and the
       reason for such decision shall be provided in writing. The appellant shall
       also be informed of any rights of further appeal.




              Note of Article II
       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.




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       3. However, nothing in Article 11 shall prevent a Member from requiring

       full payment of assessed customs duties prior to an appeal.




Article 12

Laws, regulations, judicial decisions and administrative
rulings of general application giving effect to this
Agreement shall be published in conformity with Article X
of GATT 1994 by the country of importation concerned.


Article 13

If, in the course of determining the customs value of
imported goods, it becomes necessary to delay the final
determination of such customs value, the importer of the
goods shall nevertheless be able to withdraw them from
customs if, where so required, the importer provides
sufficient guarantee in the form of a surety, a deposit
or some other appropriate instrument, covering the
ultimate payment of customs duties for which the goods
may be liable. The legislation of each Member shall make
provisions for such circumstances.


Article 14

The notes at annex I to this Agreement form an integral
part of this Agreement and the Article of this Agreement
are to be read and applied in conjunction with their
respective notes.     Annexes II and III also from an
integral part of this Agreement.


Article 15

1.        In this Agreement:

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       (b)          “customs value of imported goods” means the
              value of goods for the purposes of levying ad
              valorem duties of customs on imported goods;

       (b)          “country of importation” means                                    country   or
              customs territory of importation; and

       (c)                   “produced” includes                          grown, manufactured and
       mined.

2.        In this Agreement:

      (a) “identical goods” means goods which are the same in
          all respects, including physical characteristics,
          quality   and  reputation.  Minor   differences  in
          appearance would not preclude goods otherwise
          conforming to the definition from being regarded as
          identical;

       (b) “similar goods” means good which, although not alike in all respects,
       have like characteristics and like component materials which enable them to
       perform the same functions and to be commercially interchangeable. The
       quality of the goods, their reputation and the existence of a trademark are
       among the factors to be considered in determining whether goods are
       similar;

       (c) the terms “identical goods” and “similar goods” do not include, as the
       case may be, goods which incorporate or reflect engineering, development,
       artwork, design work, and plans and sketches for which no adjustment has
       been made under paragraph 1(b)(iv) of Article 8 because such elements were
       undertaken in the country of importation;

       (d) goods shall not be regarded as “identical goods” or “similar goods”
       unless they were produced in the same country as the goods being valued;




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       3.     In this Agreement “goods of the same class or kind” mean goods which

       fall within a group or range of goods produced by a particular industry or

       industry sector, and includes identical or similar goods.


4.    For the purposes of this Agreement, person shall be
deemed to be related only if:

       (a)      they   are   officers                                        or     director     of     one
       another‟s businesses;

       (b)       they                        are         legally         recognized      partners        in
       business;

       (c)                   they are employer and employee;

       (d) any person directly or indirectly owns, controls or hold 5 percent or
       more of the outstanding voting stock or chares of both of them;

       (e)      one of them directly or indirectly controls
       the other;

       (f)      both of them are                                          directly      or     indirectly
       controlled by third person;

       (g)      together they directly or indirectly control
       a third person; or

       (h) they are members of the same family.

5. Person who are associated in business with one another
   in that one is the sole agent, sole distributor or
   sole concessionaire, however described, of the other
   shall be     deemed to be related for the purposes of
   this Agreement if they fall within the criteria     of
   paragraph 4.


Notes to Article 15

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Paragraph 4

For the purposes of Article 15, the term                                            “persons”
includes a legal person, where appropriate.

Paragraph 4 (e)

For the purposes of this Agreement, one person shall be
deemed to control another when the former is legally or
operationally in a position to exercise restraint or
direction over the latter.


    Article 16
Upon written request, the importer shall have the right
to   an   explanation  in   writing   from   the   customs
administration of the country of importation as to how
the customs value of the importer‟s goods was determined.


Article 17

Nothing in this Agreement shall be construed as restricting or calling into
question the right of customs administrations to satisfy themselves as to the truth
or accuracy of any statement, document or declaration presented for customs
valuation purposes.




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                                                    MODULE III

      ADMINISTRATION, CONSULTATIONS AND
                   DISPUTE
                                                               Article 18
Institutions
1. There is hereby established a Committee on Customs
   Valuation (referred to in this Agreement as “the
   Committee”) composed of representatives from each of
   the Members. The Committee shall elect its own
   Chairman and shall normally meet once a year, or as is
   otherwise envisaged by the relevant provisions of this
   Agreement, for the purpose of affording Members the
   opportunity to consult on matters relating to the
   administration of the customs valuation system by any
   Member as it might affect the operation of this
   Agreement or the furtherance of its objectives and
   carrying out such other responsibilities as may be
   assigned to it by the Members. The WTO Secretariat
   shall act as the secretariat to the Committee.
2. There shall be established a Technical Committee on
   Customs Valuation (referred to in this Agreement as “
   the Technical Committee”) under the auspices of the
   Customs Co-operation Council (referred to in this
   Agreement as “the CCT”), which shall carry out the
   responsibilities described in Annex II to this
   Agreement and shall operate in accordance with the
   rules of procedure contained therein.
                                                               Article 19

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Consultations and Dispute Settlement
1. Except as otherwise provided herein, the Dispute
   Settlement    Understanding   is   applicable   to
   consultations and the settlement of disputes under
   this Agreement.
2. If any Member considers that any benefit accruing to
   it, directly or indirectly, under this Agreement is
   being nullified or impaired, or that the achievement
   of any objective of this Agreement is being impeded,
   as a result of the actions of another Member or of
   other Members, it may, with a view to reaching a
   mutually satisfactory solution of this matter, request
   consultations with the Member or Members in question.
   Each Member shall afford consideration to any request
   from another Member for consultations.
3. The Technical Committee shall provide, upon request,
   advice   and    assistance   to  Members   engaged  in
   consultations.
4. At the request of a party to the dispute, or on its
   own initiative, a panel established to examine a
   dispute relating to the provisions of this Agreement
   may request the Technical Committee to carry out an
   examination of any questions requiring technical
   consideration. The panel shall determine the terms of
   reference   of    the  Technical  Committee   for  the
   particular dispute and set a time period for receipt
   of the report of the Technical Committee. The panel
   shall take into consideration the report of the
   Technical Committee. In the event that the Technical
   Committee is unable to reach consensus on a matter
   referred to it pursuant to this paragraph, the panel
   should   afford    the  parties  to   the  dispute  an
   opportunity to present their views on the matter to
   the panel.
5. Confidential information provided to the panel shall
   not be disclosed without formal authorization from the
   person, body or authority providing such information.
   Where such information is requested from the panel but
   release of such information by the panel is not

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       authorized, a non- confidential summary of this
       information, authorized by the person, body or
       authority   providing the information, shall be
       provided.

                                                               Article 20
1. Developing country Members not party to the Agreement
   on Implementation of Article VII of the General
   Agreement on Tariffs and Trade done on 12 April 1979
   may delay application of the provisions of this
   Agreement for a period not exceeding five years from
   the date of entry into force of the WTO Agreement for
   such Members. Developing country Members who choose to
   delay application of this Agreement shall notify the
   Director-General of the WTO accordingly.
2. In addition to paragraph 1, developing country Members
   not party to the Agreement on Implementation of
   Article VII of the General Agreement on Tariffs and
   Trade done on 12 April 1979 may delay application of
   paragraph 2 (b)(iii) of the Article 1 and Article 6
   for a period not exceeding three years following their
   application of all other provisions of the Agreement.
   Developing country Members that choose to delay
   application of the provisions specified in this
   paragraph shall notify the Director-General of the WTO
   accordingly.
3. Developed country Members shall furnish, on mutually
   agreed terms, technical assistance to developing
   country Members that so request. On this basis
   developed country Members shall draw up programmers of
   technical assistance which may include, inter alia,
   training   of   personnel,  assistance   in   preparing
   implementation   measures,   access   to   sources   of
   information regarding customs valuation methodology,
   and advice on the application of the provisions of
   this Agreement.




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                                                         MODULE IV


                                               FINAL PROVISIONS


Article 21
Reservations

Reservations may not be entered in respect of any of the
provisions of this Agreement without the consent of the
other Members.

Article 22
National Legislation

1. Each Member shall ensure, not                                            later than the date of
   application of the provisions                                             of this Agreement for
   it, the conformity of its                                                laws, regulations and
   administrative procedures with                                            the provisions of the
   Agreement.

2. Each Member shall inform the Committee of any changes
   in its laws and regulations relevant to this Agreement
   and   in   the  administration   of   such  laws   and
   regulations.

Article 23
Review

The Committee shall review annually the implementation
and operation of this Agreement taking into account the
objectives thereof. The Committee shall annually inform
the Council for Trade in Goods of developments during the
period covered by such reviews.



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Article 24
Secretariat

This Agreement shall be serviced by the WTO Secretariat
except in regard to those responsibilities specifically
assigned to the Technical Committee, which will be
serviced by the CCC Secretariat.




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                                                            MODULE V

INTERPRETATIVE NOTES

General Note

Sequential Application of Valuation Methods

       1.     Articles 1 through 7 define the customs value of imported goods is to be
              determined under the provisions of this Agreement. The methods of
              valuation are set out in a sequential order of application. The primary
              methos for customs valuation is defined in Article 1 and imported goods are
              to be valued in accordancce with the provisions of this Article whenever the
              conditions prescribed therein are fulfilled.

       2.     Where the customs value cannot be determined under the provisions of
              Article 1. it is to be determined by proceeding sequentially through the
              succeeding Articles to the first such Article under which the customs value
              can be determined. Except as provided in Article 4, it is only when the
              customs value cannot be determined under the provisions of a particular
              Article that the provisions of the next Article in the sequence can be used.

       3.     If the importer does not request that the order of Articles 5 and 6 be reversed,
              the normal order of the sequence is to be followed. If the importer does so
              request but is then proves impossible to determine the customs value under
              the provisions of Article 6, the customs value is to be determined under the
              provisions of Article 5, if it can be so determined.

       4.     Where the customs value cannot be determined under the provisions of
              Articles 1 through 6 it is to be determined under the provisions of Article 7.

Use of Generally Accepted Accounting Principles

       1.     “Generally accepted accounting principles” refers to the recognized
              consensus or substantial authorities support within a country at a particular
              time sa to which economic resources and obligations should be recorded as
              assets and liabilities, which changes in assests and liabilities should be
              recorded, how the assets and liabilities and changes in them should be

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              measured, what information should be disclosed and how it should be
              Disclosed, and which financial statements should be prepared. These
              standards may be broad guideliness of general application as well as detailed
              practices and procedures.

       2.     For the purposes of this Agreement, the customs administration of each
              Member shall utilize information prepared in a manner consistent with
              generally accepted accounting principles in the country which is appropriate
              for the Article in question. For example, the determination of usual profit
              and general expenses under the provisions of Article 5 would be carried out
              utilizing information prepared in a manner consistent with generally
              accepted accounting principles of the country of importation. On the other
              hand, the determination of usual profit and general expenses under the
              provisions of Article 6 would be carried out utilizing information measured
              in consistent with generally accepted accounting principles of the country of
              production. As a further example, the determination of an element provided
              for in paragraph 1 (b)(ii) of Article 8 undertaken to the country of
              importation would be carried out utilizing information in a manner consistent
              with the generally accepted accounting principles of that country.




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                                                           MODULE VI

                                    TECHNICAL COMMITTEE ON CUSTOMS VALUATION

       1.     In accordance with Article 18 of this Agreement, the Technical Committee
              shall be established under the auspices of the CCC with a view to ensuring,
              at the technical level, uniformity in interpretation and application of this
              Agreement.

       2.     The responsibilities of the Technical committee shall include the following:

              (a) to example specific technical problems arising in the day-to-day-
              administration of the customs valuation system of Members and to give
              advisory opinions on appropriate solutions based upon the facts presented;
              (b) to study, as requested, valuation laws, procedures and practices as they
              relate to this Agreement and to prepare reports on the results of such studies;
              (c) to prepare and circulate annual reports on the technical aspects of the
              operation and status of this Agreement;
              (d) to furnish such information and advice on any matters concerning the
              valuation of imported goods for customs purposes as may be requested by
              any Member or the Committee. Such information and advice may take the
              form of advisory opinions, commentaries or explanatory notes;
              (e) to facilitate, as requested technical assistance to Members with a view to
              furthering the international acceptance of this Agreement;
              (f) to carry out an examination of a matter referred to it by a panel under
              Article 19 of this Agreement; and
              (g) to exercise such other responsibilities as the Committee may assign to it.

                                                                 General
       3.     The Technical Committee shall attempt to conclude its work on specific
              matters, especially those referred to it by Members, the Committee or a
              panel, in a reasonably short period of time. As provided in paragraph 4 of
              Article 19, a panel shall set a specific time period for receipt of a report of
              the Technical Committee and the Technical Committee shall provide its
              report within that period.

       4.     The techinical committee shall be assisted as appropriate in its activities by
              the CCC Secretariat

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       5.     Each Member shall have the right to be represented on the Technical
              Committee. Each Member may nominate one delegate and one or more
              alternates to be its representatives on the Technical Committee is referred to
              in this Annex as a “member of the Technical Committee”. Representatives
              of members of the Technical Committee may be assisted by advisers. The
              WTO Secrertariat may also attend such meetings with observer status.

       6.     Members of the CCC which are not Members of the WTO may be
              represented at meetings of the Technical Committee by one delegate and one
              or more alternates. Such representatives shall attend meetings of the
              Techncal Committee as observers.

       7.     Subject to the approval of the Chairman of the Technical Committee, the
              Secretary-General of the CCC (referred to representatives of governements
              whch are neither Members of the WTO nor governmental and trade
              organizations to attend meetings of the Technical Committee as observers.

       8.     Nominatings of delegates, alternates and advisers to meetings of the
              Technical Committee shall be made to the Secretary-General.

Technical Committee Meetings

       9.     The Technical Committee shall meet as necessary but at lest two times a
              year. The date of each meeting shall be fixed by the Technical Committee at
              its preceding session. The date of the meeting may be varied either at the
              request of any member of the Technical Committee concurred in by a simple
              majority of the members of the Technical Committee or, in case requiring
              urgent attention, at the request of the Chairman. Notwithstanding the
              provisions in sentence 1 of this paragraph, the Technical Committee shall
              meet as necessary to consider matter referred to it by a panel under the
              provisions of Article 19 of this Agreement.

       10. The meetings of the Technical Committee shall be held at the headquarters
           of the CCC unless otherwise decided.

       11. The Secretary-General shall inform all members of the Technical Committee
           and those included under paragraph 6 and 7 at least 30 days in advance,
           except in urgent cases, of the opening date of each session of the Technical
           Committee.


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Agenda

       12. A provisional agenda for each session be drawn up by the Secretary-General
           and circulated to the members of the Technical Committee and to those
           included under paragraph 6 and 7 at least 30 days in advance of the session,
           except in urgent cases. This agenda shall comprise all items whose inclusion
           has been approved by the Technical Committee during its preceding session,
           all items included by the Chairman on the Chairman’s own initiative, and all
           items whose inclusion has been requested by the Secretary-General, by the
           Committee or by any member of the Technical Committee.

       13. The Technical Committee shall determine its agenda at the opening of each
           session. During the session the agenda may be altered ay any time by the
           Technical Committee.

Officers and Conduct of Business

       14. The Technical Committee shall elect from among the delegates of its
           members a Chairman and one or more Vice-Chairman. The Chairman and
           Vice-Cahirman shall each hold office for a period of one year. The retiring
           Cahirman and Vice-Cahirman are eligible for re-election. The mandate of a
           Chairman or Vice-chairman who no longer represents a member of
           theTechnical Committee shall terminate automatically.

       15. If the Chairman is about from any meeting or part thereof, a Vice-Chairman
           shall preside. In that event, the latter shall have the same powers and duties
           as the Chairman.

       16. The Chairman of the meetings shall participate in the proceedings of the
           Technical Committee as such and not as the representative of a member of
           the Technical Committee.

       17. In addition to exercising the other powers conferred upon the Chairman by
           these rules, the Cahirman shall declare the opening and closing of each
           meeting, direct the discussion, accord the right to speak, and, pursuant to
           these rules, have control of the proceedings. The Chairman may also call a
           speaker to order if the speaker’s remarks are not relevant.




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       18. During discussion of any matter a delegation may raise a point of order. In
           this event, the Cahirman shall immedialtely state a ruling. If this ruling is
           challenged, the Cahirman shall submit it to the meeting for decision and it
           shall stand unless overruled.

       19. The Secretary-General, or officers of the CCC Secretariat designated by the
           Seretary-General, shall perform the secretarial work of meeting of the
           Technical Committee.

       Quorum and Voting

       20. Representatives of a simple majority of the members of the Technical
           Committee shall constitute a quorume.

       21. Each member of the Technical Committee shall have one vote. A decision
           of the Technical Committee shall be taken by majority compromising at least
           two thirds of the members present. Regardless of the outcome of the vote on
           a particular matter. The Technical Committee shall be free to make a full
           report to the Committee and to the CCC on that matter indicating the
           different views expressed in the relevant discussion. Notwithstanding the
           above provisions of this paragraph, on matter referred to its by a panel, the
           Techinical Committee shall take decision by consensus. Where no
           agreement is reached in the Technical Committee on the question referred to
           it by a panel, the Technical Committee shall provide a report detailing the
           facts of the matter and indicating the views of the members.

Languages and Records
       22. The official languages of the Technical Committee shall be English, French
           and Spanish. Speeches or statements made in any of these three languages
           shall be immediately translated into the other official languages unless all
           delegations agree to dispense with translation. Speeches or statements made
           in any other language shall be translated into English, French and Spanish,
           subject to the same conditions, but in that event the delegation concerned
           shall provide the translation into English, French or Spanish. Only English,
           French and Spanish shall be used for the official documents of the Technical
           Committee, Memoranda and Committee must be presented in one of the
           official languages.



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       23. The Technical Committee shall draw up a report of all its sessions and, if the
           Chairman considers it necessary, minutes or summary records of its
           meetings. The Chairman or a designee of the Chairman shall report on the
           work of the Technical Committee at each meeting of the Committee and at
           each meeting of the CCC.

                                                            ANNEX III

       1.     The five-year delay in the application of the provisions of the Agreement by
              developing country members provided for in paragraph 1 of Article 20 may,
              in practice, be insufficient for certain developing country Member may
              request before the end of the period referred to in paragraph 1 of Article 20
              an extension of such period, it being understood that the Members will give
              sympathetic consideration to such a request in cases where the developing
              country Member in question can show good cause.

       2.     Developing countries which currently value goods on the basis of officially
              established minimum values may wish to make a reservation to enable them
              to retain such values on a limited and transitional basis under such terms and
              conditions as may be agreed to by the Members.

       3.     Developing countries which consider that the reversal of the sequential order
              att he request of the importer provided for in Article 4 of the Agreement may
              give rise to real difficulties for them may wish to make a rservation to
              Article 4 in the following terms:
                        “The Governemt of …reserves the right to provide that the relevant
              provisions of Article 4 of the Agreement shall apply only when the customs
              authorities agree to the request to reverse the order of Articles 5 and 6.”
                        If developing countries make such a reservation, the Member shall
              consent to it under Article 21 of the Agreement.

       4.     Developing countries may wish to make a reservation with respect to
              paragraph 2 of Article 5 of the Agreement in the following terms:
                        “The Government of…reserves the right to provide that paragraph 2
                        of
              Article 5 of the Agreement shall be applied in accordance with the
              provisions of the relevant note thereto whether or not the importer so
              request.”
                        If developing countries make such a reservation, the Members shall
              consent to it under Article 21 of the Agreement.

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       5.     Certain developing countries may have problems in the implementation of
              Article 1 of the Agreement indofar as it relates to importation into their
              countries by sole agents, sole distributors and sole concessionaires. If such
              problem arise in practice in developing country Members applying the
              Agreement, a study of this question shall be made, at the request of such
              Members, with a view to finding appropriate solutions.

       6.     Article 17 recognizes that in applying the Agreement, customs
              administration may need to make enquiries concerning the truth or accuracy
              of any statement, document or declaration presented to them for customs
              valuation purposes. The Article thus acknowledges that enquiries may be
              made which are, for example, aimed at verifying that the elements of value
              declared or presented to customs in connection with a determination of
              customs value are complete and correct. Members, subject to their national
              laws and procedures, have the right to expect the full cooperation of
              importers in these enquiries.

       7.     The price actually paid or payable includes all payment actually made or to
              be made as 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.




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                                                           MODULE VII

                                    CASES WHERE CUSTOMS ADMINISTRATIONS HAVE
                                    REASON TO DOUBT THE TRUTH OR ACCURAY OF
                                               THE DECLARED VALUE


The Committee on Customs Valuation

          Reaffirming that the transaction value is the primary basis of valuation under
the Agreement on Implementation of Article VII of GATT 1994 (hereinafter referred
to as the Agreement”);

         Recognizing that the customs administration may have to address cases
where it has reason to doubt the truth or accuracy of the particulars or of documents
produced by traders in support of a declared value.

         Emphasizing that in so, doing the custom administration should not
prejudice the legitimate commercial interests of traders;

         Taking into account Article 17 of the Agreement, paragraph 6 of Annex III
to the Agreement, and the relevant decisions of the Technical Committee on Customs
Valuation;

Decides as follows:

       1.     When a declaration has been presented and where the customs
              administration has reason to doubt the truth or accuracy of the particular or
              of documents produced in support of this declaration, the customs
              administration including documents or other evidence, that the declared
              value represents the total amount actually paid or payable for the imported
              goods, adjusted in accordance with the provisions of Article 8, after
              receiving further information, or in the absence of a response, the customs
              administration still has reasonable doubts about the truth or accuracy of the
              declared value, it may bearing in mind the provisions of Article 11, be
              deemed that the customs value of the imported goods cannot be determined
              under the provisions of Article 1. before taking a final decision, the customs
              administration shall communicate to the importer, in writing if requested, its

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              ground for doubting the truth or accuracy of the particulars or documents
              produced and the importer shall be given a reasonable opportunity to
              respond. When a final decision is made, the customs administration shall
              communicate to the importer in writing its decision and the ground therefor.

              It is entirely appropriate in applying the Agreement for one Member to assist
              another Member on mutually agreed terms.

Article 2

       (a) If the customs value of the imported goods cannot be determined under

       the provisions of article 1, the customs value shall be the transaction value of

       identical goods sold for export and exportation at or about the same time as

       the goods being valued.



              (b) In applying this article, the transaction value of identical goods in a sale
              at the same commercial level and is substantially the same quantity as the
              goods being valued shall be used to determine the customs value. Where no
              such be used to determine the customs value of identical goods sold at a
              different commercial level and/or in different attributable to commercial
              level and/or to quantity, shall be used, provided that such adjustment can be
              made on the basis of demonstrated evidence which clearly establishes the
              reasonableness and accuracy of the adjustment, whether the adjustment leads
              to an increase or a decrease in the value.

       2.     Where the cost and charges referred to in paragraph 2 of article 8 are
              included in the transaction value, an adjustment shall be made to take
              account of significant differences in such costs and charges between the
              imported goods and the identical goods in question arising from difference in
              distances and modes of transport.

       3.     If, in applying this article, more than one transaction value of identical goods
              is found, the lowest such value shall be used to determine the customs value
              of the imported goods.


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Note to Article 2

              In applying Article 2, the customs administration shall, wherever possible,
              use a sale of identical goods being valued. Where no such sale is found, a
              sale of identical goods that takes place under any one of the following three
              condition may used:

              (a) a sale at the same commercial level but in different quantities;
              (b) a sale at a different commercial level but in substantially the same
                  quantities; or
              (c) a sale at a different commercial level and in different quantities.

2.             Having found a sale under any one of these three conditions, adjustments
               will then be made, as the case may be, for;

              (a) quantity factors only;

              (b) commercial level only; or

              (c) both commercial level and quantity factors.

                             3.          The expression “an/or” allows the flexibility to use the sales and make the
                             necessary adjustments in any one of the three conditions described above.

       4.     For the purpose of article 2, the transaction value of identical imported goods
              means a customs value, adjusted as provided for in paragraph 21 (b) and 2,
              which has already been accepted under article 1.

       5.     A condition for adjustment because of different commercial levels or
              different quantities is that such adjustment, whether it leads to an increase or
              a decrease in the value, be made only on the basis of demonstrated evidence
              that clearly establishes the reasonableness and accuracy of the adjustment,
              e.g. valid price lists containing prices referring to different levels or different
              quantities. As an example of this, if the imported goods being valued consist
              of a shipment of 10 units and the only identical imported goods for which a
              transaction value exists involved a sale of 500 units, ands it is recognized
              that the seller grants quantity discounts, the required adjustment may be
              accomplished by resorting to the seller’s price list and using that price
              applicable to a sale of 10 units. This does not require that a sale has to be
              made in quantities as being bona fide through sales at other quantities of 10

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              as long as the price list has been established as being bona fide through sales
              at other quantities. In the absence of such an objective measure, however,
              the determination of a customs value under the provision of article 2 is not
              appropriate.




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                                                           MODULE VIII

                                                         INCOTERMS 2000

          Before proceeding to actual customs computation, it is essential for one to
know the importance of International commercial terms of shipments or Incoterms for
short to be able to fully determine the various information needed for computations.

             Effective January 1, 2000 the Incoterms have been revised as follows:

EXW-EX WORKS (…named place)
The seller delivers when he places the goods at the disposal of the buyer at the seller’s
premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for
export and not loaded on any collecting vehicle. This term should not be used when
the buyer cannot carry the export formalities directly or indirectly.

FCA-FREE CARRIER (…named place)
The seller delivers the goods, cleared for export, to the carrier nominated by the
buyer at the named place. If delivery occurs at the seller’s premises, the seller is
responsible for loading. If delivery occurs at any other place, the seller is not
responsible for unloading. This term may be used irrespective of the mode of
transport, including multimodal transport.

FAS-FREE ALONGSIDE SHIP (…named port of shipment)
The seller delivers when the goods are placed alongside the vessel at the named
port of shipment. The FAS terms requires the seller to clear the goods for export.
This term can be used only for sea or inland waterway transport.

FOB-FREE ON BOARD (…named port of shipment)
The seller delivers when the goods pass the ship’s rail at the named port of
shipment. The FOB term requires the seller to clear the goods for export. This
term can be used only for sea or inland waterway transport. If the parties do not
intend to deliver the goods across the ship’s rail, the FCA term should be used.

CFR-COST AND FREIGHT (…named port of destination)
The seller delivers when the goods pass the ship’s rail in the port of shipment.
The seller must pay the cost and freight necessary to bring the goods to the
named port of destination BUT the risk of loss of or damage to the goods, as well

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as any additional cost due to events occurring after the time of delivery, are
transferred form the seller to the buyer. The CFR term requires the seller to
clear the goods for export. This term can be used only for sea and inland
waterway transport.

CIF-COST INSURANCE AND FREIGHT (… named port of destination)
The seller delivers when the goods pass the ship’s rail in the port of shipment.
The seller must pay the cost and freight necessary to bring the goods to the
named port of destination BUT the risk of loss and damage to the goods, as well
as any additional cost due to events occurring after the time of delivery, are
transferred from the seller to the buyer. However, in CIF the seller also has to
procure marine insurance against the buyer’s risk of loss or damage to the goods
during the carriage. The CIF term requires the seller to clear the goods for
export. This term can be used only for sea and inland waterway transport.

CPT-CARRIAGE PAID TO (… named place of destination)
The seller delivers the goods to the carrier nominated by him but the seller must in addition
pay the cost of carriage necessary to bring the goods to the named destination. The CPT term
requires the seller to clear the goods for export. This term may be used irrespective of the
mode of transport including multimodal transport.

CIP-CARRIAGE AND INSURANCE PAID TO (…named place of destination)
The seller delivers the goods to the carrier nominated by him, but the seller must in
addition pay the cost of carriage necessary to bring the goods to the named
destination. In CIP the seller also has to procure insurance against the buyer’s risk of
loss of or damage to the goods during the carriage. This term may be used irrespective
of the mode of transport, including multimodal transport.

DAF-DELIVERED AT FRONTIER (…named place)
The seller delivers when the goods are placed at the disposal of the buyer on the
arriving means of transport not unloaded, cleared for export, but not cleared for
import at the named point and place at the frontier. The frontier in question must be
defined precisely by always naming the point and place in the term. This term may be
used irrespective of the mode of transport when goods are to be delivered by sea.

DES-DELIVERED EX SHIP (… named port of destination)
The seller delivers when the goods are placed at the disposal of the buyer on board the
ship not cleared for import at the named port of destination. The seller has to bear all
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the costs and risk involved in bringing the goods to the named port of destination
before discharging. This term can be used only when the goods are to be delivered by
sea.

DEQ-DELIVERED EX QUAY (…named port of destination)
The seller delivers when the goods are placed at the disposal of the buyer not cleared
for import on the quay (wharf) at the name port of destination. The seller has to bear
cost and risk involved in bringing the goods to the named port of destination and
discharging the goods on the quay (wharf). The DEQ term requires the buyer to clear
the goods for import and to pay for all formalities, duties, taxes and other charges
upon import. This term can be used only when the goods are to be delivered by sea.

DDU-DELIVERED DUTY UNPAID (…named place of destination)
The seller delivers the goods to the buyer, not cleared for import, and not
unloaded from any arriving means of transport at the named port of destination.
The seller has to bear the cost and risks involved in bringing the goods thereto,
other than, where applicable, any duty (which term includes the responsibility
for and the risks of the carrying out of customs formalities). This term may be
used irrespective of the mode of transport.

DDP-DELIVERED DUTY PAID (…named place of destination)
The seller delivers the goods to the buyer, cleared for import, and not unloaded from
any arriving means of transport at the name port of destination. The seller has to bear
all the cost and risks involved in bringing the goods thereto including, where
applicable, any duty (which term includes the responsibility for and the risks of the
carrying out of customs formalities and the payment of formalities, customs duties,
taxes and other charges) for import in the country of destination. This term should not
be used if the seller is unable directly or indirectly to obtain the import license. This
term may be used irrespective of the mode of transport.




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Introduction to the Fundamentals of Computation



                                                     1. DERIVING CUSTOMS VALUE
                                                           COST OR FOB

              Note:          The word Customs Value in practice maybe considered as the FOB value or cost on a case
                             to case basis and depending on the given information per situation. But technically
                             speaking, the term “customs value” refers only to naked value of the goods without other
                             charges, freight and insurance premium.

1.1           If the given Term of Shipment is Cost, Insurance and Freight (CIF)

                       To determine the customs value of a shipment under a CIF Term of
              Shipment, it is a requirement that all charges indicated in the commercial
              invoice and other shipping documents must be deducted from the CIF Value.

              FORMULA:
                                                          CIF Value               US$ x,xxx.xx
                                            Less:         All Charges    -      xxx.xx
                                                          Cost/FOB                          xxx.xx

              Sample Computation 1.Without other charges

                             Given :        CIF Value $3,000.00
                                            Freight        300.00
                                            Insurance        15.00

                             Solution:
                                                          CIF Value                $3,000.00
                                            Less:         All Charges        315.00
                                                          Cost/FOB                 $2,685.00

              Sample Computation 2. With other charges



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                             Given :        CIF Value                   $ 3,000.00
                                            Freight                                      300.00
                                            Insurance                           15.00
                                            Other Charges                       10.00

                             Solution:
                                                          CIF Value                $3,000.00
                                            Less:         All Charges        325.00
                                                          Cost/FOB                 $2,675.00

           Note:          Under the WTO Methods of Valuation, the determination of other charges (i.e., commissions,

                          assists, packing charges, etc.) must be treated on a case to case basis and must not be

                          applied on compulsory approach to simply satisfy the components for the value of other

                          charges.




1.2           If the given Term of Shipment is Cost and Freight (CFR)

                       To determine the Customs Value/ Cost or FOB under a C&F (CFR)
              Term of Shipment, all charges must be deducted from the invoiced CFR
              Value. It is understood that the Insurance Premium is not among these
              charges.

                             FORMULA:                     C&F (CFR) Value                      US$ x,xxx.xx
                                                          Less:      All Charges____             -      xxx.xx
                                                                     Customs Value                       xxx.xx
                             Sample Computation 1. Without other charges

                             Given :        C&F Value                   $3,000.00
                                            Freight                                     300.00
                             Solution:
                                                          C&F Value                $3,000.00
                                            Less:         All Charges        300.00
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                                                                      Cost/       FOB        $2,700.00
                             Sample Computation 2. With other charges

                             Given :        C&F Value                 $3,000.00
                                            Freight                                     300.00
                                            Other Charges                     10.00
                             Solution:
                                                   C&F Value               $3,000.00
                                            Less:  All Charges       310.00
                                                   Cost/       FOB         $2,690.00
              Note:          Whenever the term/word “Insurance” is indicated under a CFR ( or C&F) or FOB/FAS term

                             of shipment, it will be treated merely as Internal Insurance which is part of other charges

                             (under CMO No. 32-87) and not as the Marine Insurance Premium.




1.3           If the given Term of Shipment is Free on Board (FOB) or Free Along
              Side (FAS)

              It is understood that the FOB/FAS Value shall be automatically adopted

       as your Customs Value. In the event that the FOB/ FAS value provides

       other charges, it may or may not be deducted based on the given

       circumstances.




                             FORMULA:                     FOB/FAS = Customs Value

                             Sample Computation :

                             Given :        FOB Value $3,000.00

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                                            Freight                 300.00

                             Solution:
                                            FOB Value $3,000.00 = Customs Value or Cost

              Note:          If the FOB/FAS Term of Shipment is adopted as the Customs Value (Cost), the other

                             dutiable charges shall already be deemed included in the FOB invoice unless otherwise

                             stated in the invoice itself, pursuant to CMO No. 43-93 as amended by the Principles of

                             Transaction Value.



                                                2. DERIVING INSURANCE PREMIUM

              Note:          The term Insurance Premium refers to the amount incurred in securing the safety of the
                             goods against maritime perils during transportation from the country of exportation until
                             the same reaches the country of destination.




2.1           Deriving Insurance Premium If the Term of Shipment is CIF

              Principle:

                      If the Term of Shipment is CIF, the Insurance Premium for
              purposes of assessment, shall be the amount appearing in the invoice, but in
              no case shall the Insurance Premium be less than ½ of 1% or .005 of
              Customs Value/ FOB value whatever is applicable.

                             Sample Computation

                             Given :        CIF Value               $3,000.00
                                            Freight                      300.00
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                                            Ins. Premium                       10.00

                             Solution:
                                                           CIF Value      $3,000.00
                                            Less:         All Charges           310.00
                                                          Cost/FOB          $2,690.00

                                                          Cost/FOB      $2,690.00
                                                                            X .005 (Minimum requirement of Insurance
                                                                           $ 13.45 Premium for CIF T/S)

              Rule : CIF Term of Shipment
               Actual Ins. Premium vs. ½ of 1% or .005 of Cost /FOB whichever is higher

2.2           Deriving Insurance Premium If the given Term of Shipment is Non CIF
              But with Local Insurance Premium Payment

              Principle: Applicable for CFR, FOB, FAS and other Non CIF Incoterms

                       The amount of Insurance Premium to be declared must be the
              premium actually paid or ½ of 1% or .005 of Customs Value /FOB
              whichever is higher, A certification as to the premium actually paid must be
              attached to the entry.




                             Sample Computation

                             Given :                      C&F Value                           $3,000.00
                                                          Freight                                300.00
                                                          Local Ins. Premium                  P 600.00
                                                          R/E                                 P 38.00 = $ 1.00

                             Solution:
                                                          C&F Value                            $3,000.00
                                                          Less: Freight                             300.00
                                                                  Cost/FOB                     $2,700.00 x .005 = $13.5

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                                                                   Local Ins. Premium            P 600.00/38.00 = $15.79

              Rule: For Local Insurance with certification
              * Actual Local Insurance Paid or ½ of 1% or vs. .005 of Customs Value/ FOB, whichever                        is
              higher

2.3           Deriving Insurance Premium If the given Term of Shipment is Non CIF
              Without Local Insurance Premium.

              Principle:

                       If the term of shipment is Non CIF and no certification from the
              local insurance/surety firm can be presented, the Insurance Premium shall be
              computed at 4% of Customs Value/FOB.

                             Sample Computation

                             Given :        C&F Value                  $3,000.00
                                            Freight                                     300.00

                             Solution:
                                                          C&F Value                $3,000.00
                                            Less:         Freight                       300.00
                                                          Cost/FOB                 $2,700.00
                                                                                   X           .04
                                                          Ins. Prem.               $ 108.00 (4% of Cost/FOB)

                                               REMEDIAL COMPUTATION IN DETERMINING
                                                        INSURANCE PREMIUM

2.4           Deriving Insurance Premium If the given Term of Shipment is CIF
              without indicating the actual amount.

                      The covering commercial invoice and other verifiable shipping
              Documents do not actually quote or indicate the exact amount of the
              Insurance Premium.


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                             Sample Computation

                             Given:         CIF Value                 $3,000.00
                                            Freight                               300.00

                             Solution:
                                                          CIF Value $3,000.00
                                            Less:         Freight         300.00
                                                          C&I        $2,700.00
                                                                          1.005
                                                          Cost/      FOB        $2,686.57
                                                                                X         .005
                                                          Ins. Prem.            $     13.43

              Note: Always apply the minimum Ins. Prem. for CIF T/S

                                                3. DERIVING FREIGHT CHARGES

              Note: Freight charges or otherwise known as transport costs includes expenses for the transportation of
                          goods (main carriage only) whether by sea, air or land from the country of export or
                          origin to the country of destination.

3.1           When to use the Actual Freight

              Principle:
                      The application of the actual freight even though lower than 70% of
                      the Gross Conference Freight, shall be made when computing for
                      the Customs Value or FOB Value.

                             Sample Computation

                             Given:         C&F Value                                           $3,000.00
                                            Freight as per Bill of Lading                            300.00
                                            Freight as per Gross Conference Freight               1,000.00

                             Solution:
                                                          C&F Value               $3,000.00
                                            Less:         Freight                      300.00

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                                                          Cost/FOB               $2,700.00

3.2           When to use the Higher Freight

              Principle:

                      The application of the higher freight (Bill of Lading vs. 70% of
              Gross Conference Freight, whichever is higher) shall be made when
              computing for the Dutiable Value.

                             Sample Computation

                             Given:         C&F Value           $3,000.00        CV/FOB            $ 2,700.00
                                            Freight (BL)             300.00      + Frt                 700.00
                                            Freight (GCF)         1,000.00       (70% of GCF)
                                                                                 + Ins. Prem.           108.00
                             Solution:                                           Dutiable Value $ 3,508.00
                                                          C&F Value $3,000.00
                                            Less:         Freight        300.00
                                                          CV/FOB     $2,700.00

                                                 4. ALTERNATIVE DUTIABLE VALUE

Note:         Alternative dutiable value, often times referred to as the backward approach in computation utilizes
              the value base on the aggregate sales in the Philippines of the goods being valued or of identical or
              similar imported goods, less certain specified expenses resulting from the importation and sale of the
              goods.




                             FORMULA:
                             1. Divide by 1.20 to change domestic retail value to domestic wholesale value (Retail
                                 Value divide 1.20 = Domestic Wholesale Value)
                             2. Divide by 1.25 to remove profit and expenses (DWSV/1.25 = Buyer‟s Price)
                             3. Divide 1.10 to remove Value Added Tax – VAT (Buyer‟s Price/1.10 = Landed Cost)


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                             4.     Divide 1. rate of duty to remove CUD. (Landed Cost/ 1. rate of duty = Dutiable
                                    Value in PhP).
                             5.     Divide the Dutiable Value in peso by the rate of exchange to convert peso to dollar.
                                    (DV in PhP/RoE = DV in $)

              Sample Computation:

                                         A ball bearing is under appraisal by the Bureau of Customs, the article has a
                             canvass retail value of P50.00/unit and subject to 3% ad valorem with exchange rate of
                             P50.00 to $1.00. Compute the Alternative Dutiable Value.



              Solution:

                                            1.     Retail Value to Wholesale Value
                                                   P50.00/1.20 = P41.67
                                            2.     Wholesale Value to Buyer‟s Price
                                                   P41.67/1.25 = P33.33
                                            3.     Buyer‟s Price to Landed Cost
                                                   P33.33/1.10 = P30.30
                                            4.     Landed Cost to Dutiable Value in Pesos
                                                   P30.30/1.03 = P29.42
                                            5.     Dutiable Value in Peso to Dutiable Value in $
                                                   P29.42/50 = $0.59

                                                    5. PRO-RATIO COMPUTATION

Note:         Pro-ration Computation is an approach to determine the individual customs value, freight, insurance
              premium etc. whenever an import entry consist of several items under different tariff headings and
              rates of duty

Important consideration: When pro-rating, the item to be pro-rated is always assumed the numerator and total
term of shipment becomes the denominator. Whatever is the factor will be multiplied by the individual term of
shipment or customs value whenever applicable.

5.1           To derive individual Customs Value/FOB


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                             FORMULA (Long Method):

                Total CV/FOB
                                        = Factor x Ind. T/S = Ind. FOB
            Total T/S

                             Sample:

                                         A shipment of 1 x 20‟ cntr. STC 5 units of industrial machinery parts & 1,000
                             units of portable heater valued at (1) $5,000 & (2) $10,000 CIF Manila, charges indicated
                             as follows:

                             Ocean Freight                $1,500.00
                             Ins. Premium                     75.00

              Solution:
                                            CIF                         $15,000.00 (Total T/S)
                                            Less:    A/C                    1,575.00
                                            = CV/FOB                    $13,425.00

                             a.) Long Method Computation:

                                            Item 1:
                                                         $13,425.00
                                                                                  =.895 x $5,000.00 = $4,475.00
                                                         $15,000.00
                                            Item 2:
                                                            $13,425.00
                                                                                 = .895 x $10,000.00 = $8,950.00
                                                            $15,000.00
                             b.) Short-cut Method Computation:

                                                             Ind. T/S
                                                                         = Factor x Total FOB = Ind. FOB
                                                      Total T/S

                                            Item1:
                                                     $5,000.00
                                                                         X $13,425.00 = $4,474.99 or $4,475.00
                                                     $15,000.00
                                            Item2:
                                                     $10,000.00          X $13,425.00 = $8,949.99 or $8,950.00

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                                                    $15,000.00

              Note:          To fast track pro-ration simply divide Individual Term of shipment by the total term of
                             shipment then multiply the quotient by the value to be pro-rated.

                                          6.       INTERNAL REVENUE TAX COMPUTATION

6.1           To compute for Bank Charges:

              FORMULA:

                             Dutiable/Taxable Value x 1/8 of 1% or .00125 = Bank Charges (BC)

              Sample Computation:

                                            (DV) P10, 000.00 x 1/8 of 1% or .00125 = P12.50 (BC)

       Note: Bank Charges shall no longer be computed if the shipment is non LC (Letter of Credit) or made
       without any participation of the AAB (Authorized Agent Bank)


6.2           To Compute for Wharfage Dues (For assessment purposes only
              pursuant to CMO No. 26-95, as amended):

              *based on gross weight or measurement, whichever is higher

              If based on Weight

              No. of Lbs.            = No of Kgs. a.)         P17.00 per Metric Ton – Shipside Cargo
                     2.2               b.)     P34.00 per Metric Ton – Pierside Cargo
                                         (or declared fee if higher)
                 No. of kgs.        = RT
                   1,000



              If based on Measurement


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              No. of Cbm x 35.31445                 = No. of cu. ft No. of cu. ft. = MT
                                                                            40
                Sample Computation:

                                                    a.1          Shipside Discharging = 100MT x P17.00 = P1,700.00
                                                    b.1           Pierside Discharging = 100MT x P34.00 = P3,400.00

                     Actual Wharfage ( Import Charges )

                             1.    LCL Cargo                              P 71.00/RT
                             2.    20‟                                    P519.35
                             3.    40‟                                    P779.05
                             4.    45‟                                    P916.50

6.3           To Compute for Arrastre Charge (For assessment purposes only
              pursuant to CMO No. 26-95, as amended):

                             a.)            P8.00 per metric/ revenue ton       7– Shipside Cargo
                             b.)            P110.00 per metric/ revenue ton – Pierside Cargo
                                                 (or declared charge if higher )

Actual Arrastre Charge Effective January 12, 2002 (Without Value Added Tax)

                                                               IMPORT
                                                                   NEW RATES
                                                          (effective January 12, 2002)

                                       ARRASTRE                WHARFAGE                  TOTAL      REEFER       STORAGE
                                                                                                  (PER HOUR)    (PER DAY)
       Without VAT                      With VAT
  1 x 20‟ (2,310.00)               2,541.00                 519.35               3,060.35        48.40         264.72
  1 x 40‟ (5,300.00)               5,830.00                 779.05               6,609.05        113.30        529.43
  1 x 45‟ (5,300.00)               5,830.00                 916.50               6,746.50        113.30        595.58




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LCL/BBC CARGO (Exclusive of VAT)

General Cargo                         GC                    Revenue Ton               94.00
Palletized                            GCP                   Revenue Ton               74.00
Steel Products                        SP                    Metric Ton               110.00
Checking charges                      CC                    Revenue Ton               11.00
Heavy Lift
    1 = 5 –15                         H1                    Metric Ton               226.00
    2 = 15 – 20                       H2                    Metric Ton               374.00
    3 = 20 above                      H3                    Metric Ton               526.00
Logs/Lumber                           LG/LU                 Metric Bd Ft             143.00
Bagged Cargo                          BC                    Revenue Ton              167.00
Unpacked Fish                         BUF                   Metric Ton               626.00
Fish in Ctns                          BFC                   Revenue Ton              418.00

6.4           To Compute for Brokerage Fee:

                                                    As per box rate under CAO No. 1 – 2001

                                Dutiable Value of Shipments                                   Brokerage Fee
                Up to P10,000.00                                                                   P1,300.00
                Over P10,000 to P20,000.00                                                          2,000.00
                Over P20,000 to P30,000.00                                                          2,700.00
                Over P30,000 to P40,000.00                                                          3,300.00
                Over P40,000 to P50,000.00                                                          3,600.00
                Over P50,000 to P60,000.00                                                          4,000.00
                Over P60,000 to P100,000.00                                                         4,700.00
                Over P100,000 to P200,000.00                                                        5,300.00

              Note:          To determine the Brokerage Fee of a Shipment with a Dutiable Value of more than
                             P200,000.00, simply deduct P200,000.00 from the given dutiable value thereof and
                             multiply the difference by .00125 then add P5,300 (maximum brokerage fee).

                             Sample Computation 1:

                                            Dutiable Value           P150,000.00
                                            Brokerage Fee =           P 5,300.00



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                             Sample Computation 2:

                                            Dutiable Value           P1,000,000.00

                             Solution:

                                              DV                                          P1,000,000.00
                                                                                       -     200,000.00
                                                                                             800,000.00
                                                                                       X .00125
                                                                                                I,000.00
                                                                                     +         5,300.00
                                              Brokerage Fee                                   P6,300.00

6.5           To Compute for Customs Documentary Stamp

                                            Fixed Amount of P265.00

6.6           To Compute for the Import Processing Fee

       Note:             Import Processing Fee (IPF) of P250.00 required for the importation whose Dutiable Value
       is P5, 000.00 and above. The graduated scale of the IPF is not applicable for warehousing entry as
       prescribed under CMO No. 11-2001.


                             New Box rates for the Import Processing Fee
                             (Pursuant to CAO 2-2001)

                                Dutiable Value of Shipments                                  IPF per entry
                Up to P250,000.00                                                                   P250.00
                Over P250,000 to P500,000.00                                                         500.00
                Over P500,000 to P750,000.00                                                         750.00
                Over P750,000.00                                                                   1,000.00

                                                     7. DERIVING LANDED COST
The sum total of the following:


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           Dutiable/Taxable Value                                                    DV
           Bank Charge                                                               BC
           Customs Duty                                                             CUD
           Brokerage Fee                                                             BF
           Arrastre Charge                                                           AC
           Wharfage Due                                                             WD
           Customs Documentary Stamp                                                CDS
           Import Processing Fee                                                          IPF
           Landed Cost                                                                     LC

                                            8. COMPUTATION OF VALUE ADDED TAX
              Note: Pursuant to Section 107 of the NIRC as amended

              a. In General. – There shall be levied, assessed and collected on every importation of goods a value-
                                        added tax equivalent to ten percent (10%) based on the total value used
                                        by the Bureau of Customs in determining tariff and customs duties, plus
                                        customs duties, excise taxes, if any, and other charges, such tax to be paid
                                        by the importer prior to the release of such goods from customs custody:
                                        Provided, That where the customs duties are determined on the basis of the
                                        quantity or volume of the goods, the value-added tax shall be based on the
                                        landed cost plus excise taxes, if any.

8.1           Normal Computation

              FORMULA: Landed Cost (LC) x VAT rate of 10% = Value Added Tax

              Sample Computation

                                         A shipment with P100, 000.00 Dutiable Value subject to 10% rate of duty
                             with gross weight of 100 Metric Tons.
                                            Solution:
                                              DV                                          P100,000.00
                                              BC                                               125.00
                                              CUD                                           10,000.00
                                              BF                                             4,700.00
                                              AC                                             1,100.00
                                              WD                                               340.00
                                              CDS                                              265.00

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                                               IPF                                              250.00
                                               LC                                             P116,780
                                               Vat rate                              X 10%
                                               VAT                                           P11,678.00
8.2           Computation of VAT for Motor Vehicles

                                            FORMULA:

                                                                        Landed Cost
                                                          +             Ad Valorem Tax
                                                          =             VAT Base
                                                          X             10% rate of VAT
                                                          =             VAT

                                            Sample Computation:

                          A Toyota SE 3 Liter with LC of P200, 000.00 and AVT of P125, 000.00 arrived at the
               Port of Manila. Compute the Value Added Tax.

                                            Solution:
                                                          LC                           P200,000.00
                                                          AVT                         + 125,000.00
                                                          VAT BASE                     P325,000.00
                                                          VAT rate                  X         10%
                                                          VAT                           P32,500.00

8.3           Complex Computation (Article subject to excise tax):

              Note:          Excise taxes herein imposed and based on weight or volume capacity or any other physical
                             unit of measurement shall be referred to as specific tax and an excise tax herein imposed
                             and based on selling price or other specified value of the good shall be referred to as „ad
                             valorem tax‟.
                                            FORMULA:
                             Dutiable Value
                             Bank Charge
                             Customs Duty
                             Brokerage Fee
                             Arrastre Charge
                             Wharfage Dues


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                             Customs Documentary Stamp
                             Import Processing Fee
                             Landed Cost
                             + Excise Tax
                             Value Added Tax BASE
                                            X 10% Rate of Value Added Tax
                             Value Added Tax
Sample Computation
              100,000 bottles of Chivas Regal with Dutiable Value of P50, 000.00 subject to 40% rate of duty and
           with P6, 000.00 specific tax. Arrastre Charge is P2, 000.00 and Wharfage due is P700.00.

                                            Solution:
                                                          DV                              P50,000.00
                                                          BC                                   62.50
                                                          CUD                              20,000.00
                                                          BF                                3,600.00
                                                          AC                                2,000.00
                                                          WD                                  700.00
                                                          CDS                                 265.00
                                                          IPF                                 250.00
                                                          LC                              P76,877.50
                                                          EXC                               6,000.00
                                                          VAT Base                        P82,877.50
                                                          VAT rate                  X   10%
                                                          VAT                              P8,287.75

                                                9. MOTOR VEHICLES COMPUTATION

              Note: Pursuant to BIR Revenue Regulations No. 14-99 implementing Section 149 of the NIRC, as
                      amended..

                             AUTOMOBILE shall be defined as a four (4) or more wheeled vehicle other than trucks or
              passenger jeepneys, as defined under R.A. 4136 and R.A. 1138, which is propelled by gasoline, diesel,
              electricity or any other motive power, and specially designed to transport persons and not primarily to
              transport freight or merchandise. It shall include utility or light commercial vehicles designed for
              passengers use with seats for less than ten (10) passengers, including the driver. The number of seats
              shall be determined in accordance with the rules stated under said regulation.

                             FORMULA

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                                                   Book Value (If quoted in 3rd foreign currency)




X    Rate of Exchange
                                                  Book Value in US$
                                            + Accessories (if any)
                                             Total Car Value
                                            Less: Depreciation (based on year model and cc*)
                                            Depreciated Value
                                             X             .80 (less: 20% Wholesale Allowance/ fixed)
                                            Cost or Customs Value
                                            X      1.04              (4% of Insurance – fixed)
                                            +        Freight_ (based on actual freight, if none, use arbitrary freight**)
                                            Dutiable Value in US$

X    Rate of Exchange
                                               Dutiable Value in PHP
                                            X Rate of Duty (based on the Harmonized System)
                                               Customs Duty
                                            + Dutiable Value in PHP
                                            + Miscellaneous ***
                                               Landed Cost
                                            X 1.10_______
                                               Ad Valorem Tax Base
                                            X Rate of Ad Valorem Tax ****
                                               Ad Valorem Tax
                                            + Landed Cost
                                               Value Added Tax Base

X    Rate of Value Added Tax __
                                            Value Added
                                            Summary:
                                            Customs       Value Added Tax
                                            Excise Tax (if any)
                                            Import Processing
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           *DEPRECIATION TABLE FOR MOTOR VEHICLES

Note:      The application of the rates of depreciation for motor vehicles shall be allowed only for used and/or
           second hand personally owned vehicles (POVs) of returning residents. Other commercial importation of
           used motor vehicles shall be treated as normal importation without depreciation.
                                                2,000 cc or 2.0 liter and      More than 2,000 cc or 2.0
                                                         below                            liter
 Current year                                               0                               0
 1 year-old model                                          15                              10
 2 year-old model                                          30                              20
 3 year-old model                                          40                              30
 4 year-old model                                          50                              40
 5 year-old model                                          60                          50        (max. dep.)
 6 year-old model                                      70          (max. dep.)

             ARBITRARY FREIGHT CHARGES

    Note: When the bill of Lading does not indicate the actual freight or in case of local purchase scheme.

              1.             Motor Vehicles, Cars

                           a. From Germany & other Euro Countries                                 $920.00
                           b. From Japan & other ASEAN Countries                                  $600.00
                           c. From United States of America
                                              c.1. US West Coast                                 $1,002.00
                                              c.2. US East Coast                                 $2,004.00
                           d. From Middle East                                                    $600.00

              2.             Motorcycles and Scooters

                               2.1. 550 cc and below
                        a. From Germany & other Euro Countries                                   $184.00
                        b. From Japan & other ASEAN Countries                                    $120.00
                        c. From United States of America
                                           c.1. US West Coast                                    $200.40
                                           c.2. US East Coast                                    $400.80

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                        d. From Middle East                                                       $120.00




                      2.2. above 550 cc

                 a. From Germany & other Euro Countries                                           $276.00
                 b. From Japan & other ASEAN Countries                                            $180.00
                 c. From United States of America
                                    c.1. US West Coast                                            $300.60
                                    c.2. US East Coast                                            $601.20
                 d. From Middle East                                                              $180.00

               MISCELLANEOUS EXPENSES
                       a. Vehicles / Automobiles                                            P1,800.00
                       b. Motorcycles / Scooters                                               265.00
                       c. Local Purchase                                                       265.00

             ADVALOREM TAX FOR MOTOR VEHICLES

          AD VALOREM TAX FOR MOTOR VEHICLES UNDER THE NEW LAW RA NO. 9224
          Net Manufacturer's / Importer's Selling Price    Tax Rate

          Up to P 600,000.00                                                                 2%
          Over P 600,000.00 to P 1,100,000.00                              P 12,000.00 plus 20% of the
                                                                           Value in excess of P 600,000.00
          Over P 1,100,000.00 to P 2,100,000.00                            P 112,000.00 plus 40 % of the
                                                                           Value in excess of P 1,100,000.00
          Over P 2,100,000.00                                              P 512, 000.00 plus 60% of the
                                                                           Value in excess of P 2,100,000.00

                             OTHER IMPORTANT DETAILS

                             1. Exempted from Ad Valorem Tax:
                                     1.a. Motorcycles and Scooters
                                     1.b. Utility vans

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                                            1.c. Ten (10)-seating capacity, including the driver

                             2. Percentage of Penalties – CAO No. 4-94



9.1           Computation of Ad Valorem Tax for Motor Vehicles

              Sample Computation 1

                                                       A Mercedez Benz 300 SE Model 1994 was assessed a Customs Duty
                                            of P750, 000.00, compute the Ad Valorem Tax.


                                            Solution:

                                              Customs Duty                                         P750,000.00
                                              Rate of Duty
                                                                                                  .30
                                              Dutiable Value                                       P2,500,000.00
                                              Customs Duty                                       + 750,000.00
                                              Miscellaneous                                    +        1,800.00
                                              Landed Cost                                          P3,251,800.00
                                              Mark-up                                          X     1.10
                                              AVT Base                                             P3,756,980.00
                                              Rate               of             AVT                 2,100,000.00
                                              Less
                                              Ad Valorem Tax                                      P1,656,980.00
                                              AVT Rate inexcess of 2.1 M                   x               60%
                                              AVT in excess of 2.1 M                                 994,188.00
                                              Ad Valorem Tax for 2.1 M                          + 512,000.00
                                              Total AVT                                          P 1,506,188.00

              Sample Computation 2

                                                       Compute for the ad valorem tax of a car with 2.3 liter engine and
                                            a landed cost of P175, 000.00. Pursuant to RA No. 9224.


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                                            Solution:

                                              LC                                               P175,000.00
                                              Mark-up                                          X       1.10
                                              AVT Base                                         P192,500.00
                                              AVT Rate                                          X       2%
                                              AVT                                                 P3,850.00




9.2           Computation of Motor Vehicles Exempted from Ad Valorem Tax

              Sample Computation

                                         A funeral coach (hearse) with 2.5 liter engine was assessed a VAT of P56,
                             100.00 If the other charges in arriving at the landed cost amounted to     P1, 000.00.
                             Compute the duty of the funeral coach (CD – 30%)

                             Solution:

                                              VAT                                             P56,100.00
                                              VAT rate                                              10%
                                              VAT Base =                                     P561,000.00
                                              (Backward Approach)
                                              VAT Base                                       P561,000.00
                                              Miscellaneous                              -      1,000.00
                                              DV & CUD                                       P560,000.00
                                              Rate of Duty                                          1.30
                                              DV                                             P430,769.23
                                              Rate of Duty                                   X       .30
                                              CUD                                            P129,230.77
                                              To Check:
                                              DV                                             P430,769.23
                                              CUD                                             129,230.77
                                              Miscellaneous                                     1,000.00
                                              VAT Base                                       P561,000.00



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9.3           Computation of Penalty for Motor Vehicle

                              FORMULA: Landed Cost X Rate of Penalty (Pursuant to CAO No. 4-94)

                              Sample Computation:

                                                        A returning resident brought home an unregistered, used 1992
                                             Toyota Car without the BIS authority to import. The ad valorem tax is P136,
                                             812.50. Compute the penalty before the car can be released.


                                              Solution (Backward Approach):
                                              AVT                                                            P136,812.5
                                                                                                            0
                                              AVT Rate                                                     .50
                                              AVT Base                                                       P273,625.0
                                                                                                            0
                                              Mark-up                                                     1.10
                                              Landed Cost                                              P248,750.00
                                              Rate of Penalty (CAO 4-94)                                          X
                                                                                                           .30
                                              Amount of Penalty                                         P74,625.00

                                             10.         COMPUTATION OF SPECIFIC
                                                         TAX FOR DISTILLED SPIRITS

              Spirits or distilled spirits‟ is the substance known as alcohol, ethanol or spirits of wine, including all
              dilutions, purifications and mixtures thereof, from whatever source, by whatever process produced, and
              shall include whisky, brandy, rum, gin, and vodka, and other similar products or mixtures.
                                                              FORMULA:

                                      (VC)
                                                             = no. of liters x no. of bottles
                                    Factor
                                                             = GL x proof of AC
                                                             = PL x rate of ST per NRP of 750 ML
                                                             = Specific Tax

                   Symbols:

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                                     VC                      Volume Capacity
                                     GL                      Gauge Liter
                                     PL                      Proof Liter
                                     AC                      Alcohol Content
                                    NRP                      Net Retail Price
                         ST          Specific Tax
                   Consideration : RA No. 8424 (Effective January 1, 2000)
                   Rate of ST for distilled spirits/750ml NRP
                   a. Less than P250.00                                                               =       P84/pl
                   b. P250 – P675                                                                     =      P168/pl
                   c. over P675                                                                       =      P336/pl

                   Volume Capacity as converted to no. of liters:
                   a. cc / 1000 = no. of liters
                   b. ml / 1000 = no. of liters
                   c. cl / 100 = no. of liters
                   d. dl / 10 = no. of liters
               Note:          The net retail price shall mean the price at which the fermented liquor is sold on retail
                              in twenty (20) major markets in Metro Manila (for brands of fermented liquor marketed
                              nationally), excluding the amount intended to cover the applicable excise tax and the
                              value-added tax. For brands which are marketed only outside Metro Manila. The net retail
                              price shall mean the price at which the fermented liquor is sold in five (5) major
                              supermarkets in the region excluding the amount intended to cover the applicable excise
                              tax and the value-added tax.

                                          To determine the Net Retail Price per 750ml, if the Volume Capacity expressed
                             is either higher or lower than 750ml or .75 liter or any equivalent.

                             Remedial Computation: Determining the NRP per 750 ml.

                                          To determine the Net Retail Price per 750ml, if the Volume Capacity expressed
                             is either higher or lower than 750ml or .75 liter or any equivalent.

                             Remedial Computation: Determining the NRP per 750 ml.

                             FORMULA:
                                                         NRP
                                                                    = Factor x 750 ml = NRP / 750ml
                                                          VC


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                             Sample Computation:

                                                      Compute the amount of ST of 1 bottle of Chivas Regal with an AC
                                            of 35% and VC of 1.5 liter and NRP of P2, 000.00.

                                            Solution:

                             1. Determine first the NRP per 750 ml or any equivalent representation.
                                                  P2,000
                                                                  = P1.33 x 750 = P1,000.00 (ST is P336)
                                                   1,500

                             2. Proceed with the computation of specific tax.
                                          ST          =    1.5 liter x 1 bottle
                                                      =    1.5 gl x .70 (35% x 2 / 100) AC
                                                      =    1.05 pl x P336.00
                                          ST          =    P352.00

                             Sample Computation (To determine Alcohol Content)

                                            Given : ST P315.00, 1.5 gl, Rate of ST P336.00

                                            Solution : (Backward Approach)

                                                                                            P315
                                               ST
                                                                                      .00
                                               Rate of ST                          P336.00
                                                                                   .9375 pl
                                                                                     1.5 gl
                                               Volume of AC                    .625 x 100 / 2
                                               Volume of AC                         31.25%

                                                    11.      COMPUTATION OF SPECIFIC
                                                              TAX FOR WINES

                             FORMULA:

                                           (VC)              = no. of liters x no. of bottles

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                                          Factor
                                                           = GL x rate of Specific Tax per Liter
                                                           = Specific Tax

                             Considerations:

                             1.      Sparkling Wines: Champagne
                                                a. NRP up to P500.00, rate of ST is P112.00
                                                b. More than P500.00 NRP, rate of ST is P336.00

                             2.     Still wines with an AC of 14% or less, rate of ST is P13.44/gl
                             3.     Still wines with an AC of more than 14% up to 25%, rate of ST is
                                    P26.88/gl.
                             4.     Fortified wines with an AC of more than 25% shall be considered as Distilled Spirits.

                             Sample Computation (Sparkling Wine):

                                                       Compute the ST of 1 bottle of champagne with an AC of 14%,
                                            with an NRP of P1, 000.00.
                                            Solution:

                                              ST         = 1 liter x 1 bottle
                                                         = 1 gl x P336.00
                                              ST         = P336.00

                             Sample Computation (Still Wine 1)

                                                       Compute the ST of 1 bottle Mompo Altar Wine with an AC of 12%
                                            with a VC of 1.5 liter.

                                              ST         = 1.5 liter x 1 bottle
                                                         = 1.5 gl x P13.44
                                              ST         = P20.16

                             Sample Computation (Still Wine 2)

                                                         Compute the ST of 1 bottle Still Wine with an AC of 16% with a
                                            VC of 2 liters.

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                                              ST          = 2 liters x 1 bottle
                                                          = 2 gl x P26.88
                                              ST          = P53.76

                                              12.         COMPUTATION OF SPECIFIC TAX
                                                            FOR FERMENTED LIQUOR

Note:         Pursuant to Section 143 of the NIRC as amended.

              There shall be levied, assessed and collected an excise tax on beer, larger beer, ale, porter and other
              fermented liquors except tube, basi, tapuy and similar domestic fermented liquors xxxx .

                             FORMULA:

                                                      (VC)
                                                                     = no. of liters x no. of bottles
                                                     Factor
                                                                     = gl x rate of ST
                                                                     = Specific Tax

                             Considerations:

                             a. NRP / liter of VC less than P14.50, rate of ST is P6.89/gl
                             b. NRP / liter of VC is P14.50 up to P22.00, rate of ST is P10.25/gl
                             c. NRP / liter of VC is more than P22.00, rate of ST is P13.61/gl

                             Sample Computation:

                                Compute the ST of 1 bottle of beer with an AC of 16%, NRP / 235 ml is P8.00.

                                                     235 ml
                                                                     = .235 liter x 1 bottle
                                                      1000
                                                                     = .235 gl x P6.89
                                                         ST          = P1.62

                                                   13.        COMPUTATION OF SPECIFIC TAX
                                                              FOR CIGAR AND CIGARETTES.

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                             Considerations:

                                            a. Cigars, rate of ST is P1.12/cigar
                                            b. Cigarettes packed by machines:

                                                               b.1. NRP is above P10.00/pack, rate of ST is P13.44/pack .
                                                                b.2. NRP is more than P6.50 up to P10.00, rate of ST is
                                                               P8.96/pack
                                                                b.3. NRP is P5.00 up to P6.50, rate of ST is
                                                               P5.60/pack
                                                                b.4. NRP is below P5.00, rate of ST P1.12/pack

                             Sample Computation:

                                                        Determine the ST of one (1) pack of Salem Cigarette (Machine
                                            press) with NRP of P22.00.

                                            Solution:

                                                          ST            = 1 pack x P13.44
                                                                        = P13.44

                                          14.            COMPUTATION OF SPECIFIC TAX FOR
                                                            CINEMATOGRAPHIC FILMS.

Note:          Specific tax for cinematographic films has been deleted under Republic Act No. 8424. However for
              purposes of discussion, the previous valuation is hereby illustrated.

                                            FORMULA:

                                            Linear Meter (LM) x P.70 ( Rate of ST for cinema films)

                                            Consideration:

                                            1.     Deriving LM, if measurement is expressed in inches.



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                                                     No. of inches
                                                                           = no. of feet x .3048 = LM
                                                    12

                                            2.      Deriving LM, if measurement is expressed in yard.

                                   No. of yards                         No. of inches
                                                               =                              = no. of feet x .3048 = LM
                                        36                                   12

                                            3.      Deriving LM, if measurement is expressed in feet.

                                                 No. of feet x .3048 = LM

                             Sample Computation

                                                       Compute the specific tax of a 10,000 inches of exposed
                                            cinematographic film.

                                                               10,000 inches
                                                                                  = 833 feet x .3048 = 254 LM
                                                               12
                                                               ST                 = 254 LM x P.70
                                                                                  = P117.80




                                              15.        COMPUTATION OF SPECIFIC
                                                           TAX FOR FIRECRACKERS
              Note:          Specific tax for fire crackers has been deleted under Republic Act No. 8424. However, for
                             purposes of discussion, the previous valuation is hereby illustrated.
                                            FORMULA:
                                            Total no. of kgs x P30.00
                                            Sample Computation:
                                                              Determine the Specific tax of 10,000 kgs of firecrackers.
                                                         ST             = 10,000 kgs. x P30.00

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                                                                           = P300,000.00
                                                   16.        OTHER IMPORTED ARTICLES
                                                              SUBJECT TO EXCISE TAX
              Tobacco Product                                                                                 ¢0.75 per kilogram
              On tobacco specially prepared for chewing
                                                                                                              ¢0.60 per kilogram
              Lubricating oils, greases, including but not limited to, basestock for lube oils and greases,
              high vacuum distillates, aromatic extracts and other similar preparations, and additives for
              lubricating of oils and greases.


                                                                                                              P4.50 per kilogram
              Processed gas                                                                                   ¢0.50 per liter volume
              Waxes and Petroleum                                                                             P3.50 per kilogram
              On denatured alcohol                                                                            ¢0.05 per liter of volume
              Naphtha, regular gasoline and other similar products of distillation
                                                                                                              P4.80 per liter volume
              Leaded premium gasoline                                                                         P5.35 per liter of volume
              Unleaded premium gasoline                                                                       P4.35 per liter of volume
              Aviation turbo jet fuel                                                                         P3.67 per liter of volume
              Kerosene                                                                                        ¢0.60 per liter of volume
              Diesel fuel oil                                                                                 P1.63 per liter of volume
              Liquefied petroleum gas.
              Except used for motive power                                                                    P0.00 per liter.
              Asphalts                                                                                        ¢0.56 per kilogram
              Bunker fuel oil & similar fuel oils having more or less the same generating power               ¢0.30 per liter of volume
              On coal and coke                                                                                P10.00 per metric ton
              Nonmetallic minerals and quarry resources                                                       2% of actual market value
              Non essential commodities such as jewelry, perfume and toilet waters , yacht and other
              vessels intended for pleasure or sports                                                         20% of dutiable value


                                                 17. REMEDIAL COMPUTATION FOR
                                                 UNDERVALUATION, MISCLASSIFICATION
                                                       AND MISDECLARATION.

17.1          Deriving Percentage Difference in Undervaluation.

                              FORMULA:

                                                               Value ASF – Value ASD
                                                                                                              X 100 = PoD
                                                                      Value ASF

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                                                                       ASF = As Found
                                                                       ASD = As Declared
                                                                       PoD = Percentage of Discrepancy

                             Sample Computation:

                                            Given:                     Entered Value         $10,000.00
                                                                       Appraised Value         13,000.00
                                                                       Compute the PoD

                                            Solution:

                                                         $13,000.00-$10,000.00
                                                                                     X 100 = 23% PoD
                                                                 $13,000.00

7.2           Deriving Value as Found in Undervaluation
                             FORMULA:

                                            Entered value divide by 100% less PoD
                                            thus, entered value = Value as Found
                                                  (100% - PoD)

                             Sample Computation:

                             Given:                         Entered Value                    $10,000.00
                                                            PoD                                     17%
                                                            Compute the Appraised Value

                             Solution A. Using Customs Formula

                             Step 1.

                                               $10,000__
                                            (100%-17%)

                             Step 2.

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                                            $10,000 = $12,048.19
                                                83%

                             Solution: B. Using Algebraic Expression

                                                                    Let X = ASF

                                              X - $10,000.00
                                                                                        = .17
                                                           X
                                1. Cross Multiply
                                                                                        = .17x
                                                                    x - $10,000.00
                                2. Apply Law on Transposition
                                                                                        = $10,000.00
                                                                           x - .17x
                                3. Deduct Variable x, Note that Coefficient of x is 1
                                                                                        = $10,000.00
                                                                                .83x
                                                                                        = $10,000.00
                                                                                    x            .83
                                                                                        = $12,048.19
                                                                                    x

                                                                    To Check:

                                                  $12,048.19-$10,000.00
                                                                            X 100 = 17% PoD
                                                          $12,048.19

17.3          Deriving Value as Declared in Undervaluation

                             FORMULA:

                                            Value as Found multiply by 100% less percentage of difference
                                            Thus, value as found x (100%- PoD) = Value as Found



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                             Sample Computation:

                                            Given:                    Appraised Value        $15,000.00
                                                                      PoD                          26%
                                                                      Compute the Entered Value

                                            Solution A. Using Customs Computation

                                            Step 1.      $15,000 x (100%-26%)

                                            Step 2.      $15,000 x 74% = $11,100

                                            Solution: B. Using Algebraic Expression

                                                                      Let X = ASD

                                                           $15,000.00 – X
                                                                              = .26
                                                      $15,000.00
                      1. Cross Multiply
                                            T                                 = .26($15,000.00)
                             o                            $15,000.00 - X
                      2. Apply Law on Transposition
                             C                                                = $15,000.00 - $3,900.00
                             T                                          X
                             o
                                                                              = $11,100.00
                             C                                          X
                             heck:

                                                          $15,000.00-$11,100.00
                                                                                      X 100 = 26% PoD
                                                         $15,000.00

17.4          Deriving Percentage Difference in Misclassification.

                  FORMULA:

                                                            RoD ASF – RoD ASD
                                                                                    X 100 = PoD
                                                           Rod ASF

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                                            ASF = As Found
                                            ASD = As Declared
                                            PoD = Percentage of Discrepancy
                                            RoD = Rate of Duty

              Sample Computation:

                                            Given:                  Rate of Duty as Declared       5%
                                                                    Rate of Duty as Found 10%
                                                                    Compute the PoD
                                            Solution:
                                                               10% - 5%
                                                                             X 100 = 50% PoD
                                                         10%
              Solution: a. Using Algebraic Expression

                                            Let X = ASF

                                                                           X - .03
                                                                                     = .40
                                                                       X
                                       1. Cross Multiply
                                                                                     = .40X
                                                                           X - .03
                                       2. Apply Law on Transposition
                                                                                     = .03
                                                                        X - .40X
                                       3. Deduct Variable X, Note that Coefficient of X is 1
                                                                                     = .03
                                                                             .60X
                                                                                     = ___.03___
                                                                                X          .60
                                                                                     = .05
                                                                                X

                                            To Check:
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                                                              .05 - .03_____
                                                                                    X 100 = 40% PoD
                                                                   .05

17.5          Deriving Rate of Duty as Declared in Misclassification

              FORMULA:
                             Rate of duty as found multiply by 100% less PoD
                             Thus rate of duty as found x (100%-Pod) = Rate of duty as declared
              Sample computation:
                             Given:                      RoD As Found             10%
                                                         PoD                                50%
                                                         Compute RoD As Entered
                             Solution A. Using Customs Formula

                                            Step 1. 10% x (100%-50%)

                                            Step 2. 10% x 50% = 5%

                             Solution: B. Using Algebraic Expression

                                            Let X = ASD

                                                  ___.10 – X___
                                                                                    = .50
                                                        .10
                                  1. Cross Multiply
                                                                                    = .50(.10)
                                                                        .10 - X
                                  2. Apply Law on Transposition
                                                                                    = .10 - .05
                                                                              X
                                                                                    = .05
                                                                              X

                                            To Check:


Syllabus of Valuation Methods and Practices
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                                               ___.10 - .05___
                                                                      X 100 = 50% PoD
                                                         .05

17.6          Deriving Percentage of Difference in Misdeclaration.

              FORMULA:

                                                           QWM ASF – QWM ASD
                                                                                    X 100 = PoD
                                                         QWM ASD

                                            ASF = As Found
                                            ASD = As Declared
                                            PoD = Percentage of Discrepancy
                                            QWM = Quantity, Weight or Measurement

                             Sample Computation:

                                            Given:                   QWM as declared        10,000.00
                                                                     QWM as found           13,000.00
                                                                     Compute the PoD
                                            Solution:

                                                      13,000.00-10,000.00
                                                                            X 100 = 30% PoD
                                                     10,000.00

17.7          Deriving Quantity as Found in Misdeclaration

              FORMULA:

                             1. Entered Quantity multiply by Percentage of Difference = Diff. In Quantity
                             2. Diff. In Quantity + Entered Quantity = Quantity as Found

                                            Given:                   Entered Quantity       12,150.00
                                                                     PoD                        22 %
                                                                     Compute Quantity ASF

                             Solution A. Using Customs Formula


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                                                  VALUATION METHODS AND PRACTICES

                                            Step 1. 12,150 x 22% = 2,673

                                            Step 2. 12,150 + 2,673 = 14,823

                             Solution: B. Using Algebraic Expression

                                            Let X = ASF

                                                             X – 12,150
                                                                           = .22
                                             12,150
                    1. Cross Multiply
                                                                           = .22(12,150)
                                                          X – 12,150.00
                    2. Apply Law on Transposition
                                                                           = 12,150 + 2,673
                                                                       X
                                                                           = 14,823
                                                                       X

                                            To Check:

                                                               14,823 -12,150
                                                                                    X 100 = 22% PoD
                                                 12,150


17.8          Deriving Quantity as Declared in Misdeclaration

              FORMULA:

                             Quantity as Found divide by 1. PoD
                             Thus Quantity as Found
                                               1. PoD

                                            Given:                  Quantity ASF                      2,345
                                                                    PoD                                  13%

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                                                  VALUATION METHODS AND PRACTICES

                                                                    Compute Entered Quantity

                             Solution A. Using Customs Formula

                                            Step 1.

                                            2,345 = 2,075 quantity as entered
                                             1.13

                             Solution: B. Using Algebraic Expression

                                            Let X = ASD

                                                                 2,345 – X
                                                                             = .13
                                                             X
                              1. Cross Multiply
                                                                             = .13X
                                                                 2,345 - X
                              2. Apply Law on Transposition
                                                                             = 2,345
                                                                 X + 13X
                              3. Deduct Variable X, Note that Coefficient of X is 1
                                                                             = 2,345
                                                                    1.13X
                                                                             = 2,345
                                                                        X       1.13
                                                                             = 2,075
                                                                        X

                                            To Check:

                                                  __2,345 – 2,075_
                                                                        X 100 = 13% PoD
                                                         2,075

17.9          Computation of Surcharge for Undervaluation, Misclassification, and Misdeclaration.


Syllabus of Valuation Methods and Practices
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                                                  VALUATION METHODS AND PRACTICES

              FORMULA:

                             CUD ASF less CUD ASD x percentage of surcharge

                                            Consideration:

             a. Less than 10% difference                                  =   No surcharge
             b. 10% - 20% PoD                                             =   1 x surcharge (100%)
             c. 21% - 30% PoD                                             =   2 x surcharge (200%)
             d. more than 30% PoD                                         =   seizure (if w/out fraud, subject
                                                                               to fine under CAO 4-94)

                             Sample Computation 1. Undervaluation:

                                            Given:                  DV as declared                  P100,000.00
                                                                    DV as found             130,000.00
                                                                    RoD                                       10%
                                                                    Compute the amount of Surcharge

                                            Solution:

                                            a. Determine the PoD.

                                            P130,000.00-P100,000.00
                                                                                     X 100 = 23.07% PoD
                                                  130,000.00

                                            b. Determine the Difference of CUD ASF and CUD ASD.

                                                                        ASF                               ASD
                                   DV                                    P130,000.00                 P100,000.00
                                   RoD                                   X       10%                 X       10%
                                   CUD                                     P13,000.00                  P10,000.00

                                                 Difference = P3, 000.00


                                            c. Compute the Surcharge.


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                                                         Surcharge = P3,000.00 x 2
                                                                            = P6,000.00

                             Sample Computation 2. Misclassification:

                                            Given:                  DV as declared        P10,000.00
                                                                    DV as found 10,000.00
                                                                    RoD as declared           15% a.v.
                                                                    RoD as found              20% a.v.
                                                                    Compute the amount of Surcharge

                                            Solution:

                                            a. Determine the PoD.

                                            20% - 15%
                                                                        X 100 = 25% PoD
                                               20%

                                            b. Determine the Difference of CUD ASF and CUD ASD.
                                                                       ASF                           ASD
                                  DV                                    P10,000.00                P10,000.00
                                  RoD                                X        20%          X            15%
                                  CUD                                    P2,000.00                 P1,500.00

                             Difference = P500.00

                                            c. Compute the Surcharge.

                                                         Surcharge = P500.00 x 2 (2 times surcharge)
                                                                            = P1,000.00

                             Sample Computation 3. Misdeclaration:

                                                        A shipment with a declared quantity of 1,598 pcs. was found to
                                            contain a total of 1,836 pcs. if the articles has a DV of $2.00 per price at
                                            20% ad valorem, Compute for the surcharge imposed against the shipments
                                            Rate of Exchange (RoE) : P50.00 = US 1.00


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                                                  VALUATION METHODS AND PRACTICES

                             Solution:

                                            a. Determine the PoD.

                                    1,836 pcs. – 1,598 pcs.
                                                                           X 100 = 14.8% PoD
                                          1,598 pcs.

                                            b. Determine the Difference of CUD ASF and CUD ASD.

                                                                                 ASF                              ASD
                               No. of pcs.                                             1,836                         1,598
                               Price                                                 X $2.00                       X $2.00
                               DV in $                                            $ 3,672.00                     $3,196.00
                               RoE                                               X 50.00                        X 50.00
                               DV                                               P183,600.00                    P159,800.00
                               RoD                                           X          20%                X          20%
                               CUD                                               P36,720.00                     P31,960.00
                                                                Difference = P4, 760.00

                                            c. Compute the Surcharge.

                                                            Surcharge = P4,760.00 x 1 (one time surcharge)
                                                                               = P4,760.00

                                                18.          REMEDIAL COMPUTATION OF
                                                         FINES, SURCHARGES UNDER TCCP.

18.1          Section 2501. Failure to pay Liquidated Charges.

                                            a. For failure to pay liquidated charges within 10 working
                                                days upon receipt of demand letter.
                                               - 10% of total amount due.


                                            b. For failure to pay liquidated charges after one (1) year.
                                               - 25% of the total amount due.



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                                                  VALUATION METHODS AND PRACTICES




              Sample Computation (1):

                                       Corporation X finally paid a notice of liquidation amounting to P62, 500.00
                           representing errors in the use of CUD rate from 20% to 25%. The notice was received 13
                           months before. How much will Corporation X pay for its full payment,

                             Solution:

                                       Amount of liquidated charges unpaid x 25% (unpaid after one (1) year +
                           amount of liquidated charges.

                                            P62,500.00 x 25% = P15,625.00
                                                                + 62,500.00
                                                                  P78,125.00

                             Sample Computation (2)

                                                        Corporation D paid a long overdue amount based on a notice of
                                            liquidated dated a ½ years ago. If the amount paid was P112,500.00.
                                            Compute how much was the original amount exclusive of the surcharge under
                                            sec. 2501.

                                            Solution:

                                       112,500.00
                                                             = P 90,000 (Original amount w/o surcharge)
                                          1.25

                                            To Check: P90, 000.00 x 25% = P22,500.00
                                                                            +90,000.00
                                                                           P112,500.00

18.2          Sec. 2501.A. Unauthorized Withdrawal of Imported Articles from Bonded Warehouse.

                                          Unauthorized withdrawal of imported articles in a customs bonded warehouse,
                             a surcharge of 50% of duties, taxes and customs fees and charges. Increased by 25%
                             annually, if the delinquency lasts for more than a year.

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                             Sample Computation :

                                                        Corporation A was penalized by the BOC for illegal withdrawal of
                                            raw materials from a CBW. The unpaid duties and taxes amounted to
                                            P50,000.00. Compute for the surcharge, if the duties and taxes were paid
                                            only after 13 months.

                                            Solution:

                                                         50% + 25% = 75% (Payment of delinquency for more than a year)

                                                                    P50,000.00
                                                                    X          75%
                                                                    P37,500.00

18.3          Sec. 2504. Failure or Refusal of Party to Give Evidence or Submit documents for
              examination.

                             FORMULA:

                                            Dutiable Value in Peso multiplied by the rate of surcharge (20% a.v.)

                             Sample Computation:

                                                       Company A was penalized by the BOC for its failure to submit
                                            commercial invoice in its importation valued at P100, 000.00 and subject to
                                            10% ad valorem. Compute the surcharge.

                                            Solution:

                                                         P100,000.00 x 20% = P20,000.00

18.4          Sec. 2505. Failure to Declare Baggage.

                                            Treble the appraised value + duties, taxes & other charges.


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                                                  VALUATION METHODS AND PRACTICES

                             Sample Computation:

                                                        Mr. A, an arriving passenger was penalized by the duty collector of
                                            customs for his failure to declare his dutiable baggage valued at P5, 000.00
                                            and subject to 10% ad valorem. Compute the surcharge if the total amount
                                            for Bureau of Customs.

                                            Solution:

                                              DV                                                    P5,000.00
                                              CUD (DV x .10 RoD)                                       500.00
                                              Other Charges                                          2,000.00
                                              LC                                                    P7,500.00
                                              VAT Rate                                             ____10%
                                              VAT                                                  P 750.00

                                              Summary:
                                              DV P5,000.00 x 3                                     P15,000.00
                                              CUD                                                      500.00
                                              IPF                                                      250.00
                                              VAT                                                  ___750.00
                                              Total Surcharges                                     P16,500.00

                                                19.      COMPUTATION OF ASEAN PTA
                                                            RATE OF DUTY

A.            Deriving Margin of Preference and Applicable Asean PTA duty rate.

                                     FORMULA:
                                            MFN Rate x 100% - MOP rate = Applicable duty rate

                                     Sample Computation:

                                        A shipment from Singapore, duly covered with certificate of origin Form C with
                             a Dutiable Value of P500,000.00 & a regular duty of 20% was released with a 40%
                             Margin of Preference. Compute the applicable customs duty.


Syllabus of Valuation Methods and Practices
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                                            Solution:
                                                         Applicable duty rate     = 20% x (100% - 40%)
                                                                                  = 20% x 60%
                                                                                  = 12%
                   Dutiable Value               P500, 000.00 x .12 = P60, 000.00 (Customs Duty)
                                                   20.     AFTA-CEPT COMPUTATION

              Principle in the application of AFTA-CEPT rate

                             A.      TARIFF BANDING

                                     1.     If the CEPT rates of both the exporting and importing countries are within
                                            20% and below, apply the CEPT rate of the importing country.

                                     2.     If the CEPT rates of both the exporting and importing countries are above
                                            20%, apply the CEPT rate of the importing country.
                                            Note: Unless the MFN rate is lower.

                             B.      NON-TARIFF BANDING

                                     1.    If the CEPT rate of the exporting country is 20% and below,
                                            and the CEPT rate of the importing country is above 20%, apply the CEPT
                                            rate of the importing country.

                                            Exception: Unless the MFN rate is lower.

                                     2. If the CEPT rate of the exporting country is above 20%, and the CEPT rate of
                                          the importing country is 20% or below, apply the MFN rate in the importing
                                          country, regardless whether the MFN is actually higher or lower than the CEPT.

                                     Sample Computation:

                                            A. Tariff Banding both 20% and below

                                                  A product from Malaysia, with a DV of P1, 500,000.00 is under process
                                            with the Bureau, This product is included in the list of Product and Tariff
                                            Reduction Program and is subject to 30% and 20% MFN and CEPT rate

Syllabus of Valuation Methods and Practices
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                                            respectively in Malaysia. In the Philippines, the same article is subject to 40%
                                            and 20% MFN and CEPT rate respectively. How much is the Customs Duty?




                                     Solution:

                                                                                 Malaysia                   Philippines
                                      CEPT rate                               20%                         20%
                                      MFN rate                                30%                         10%

                                            Applicable rate: 20%, CEPT rate is lower than the MFN rate, hence apply the
                                            CEPT rate over the MFN rate.

                                            DV P1, 500,000.00 x 10% = P150, 000.00 (CUD)

                                            B. Tariff Banding - both above 20%

                                            Situation 1:

                                                                                 Malaysia                   Philippines
                                      CEPT rate                               25%                         22%
                                      MFN rate                                30%                         40%

                                            Solution:

                                            Applicable rate: 22%, CEPT rate

                                            DV P1, 500,000.00 x 22% = P330, 000.00 (CUD)

                                            Situation 2: Lower MFN

                                                                                 Malaysia                   Philippines
                                      CEPT rate                               25%                         22%
                                      MFN rate                                30%                         10%

                                            Solution:

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                                            Applicable rate: 10%, MFN rate

                                            DV P1, 500,000.00 x 10% = P150, 000.00 (CUD)

                                            C. Non-Tariff Banding – the CEPT rate in the exporting country is 20% or
                                                                                  below

                                            Situation 1:

                                                                                 Malaysia                Philippines
                                      CEPT rate                               20%                      25%
                                      MFN rate                                30%                      40%

                                            Solution:

                                            Applicable rate: 25%, CEPT rate

                                            DV P1, 500,000.00 x 25% = P375, 000.00 (CUD)

                                            D. Non-Tariff Banding – the CEPT rate in the exporting country is above 20%

                                            Situation 1:

                                                                                 Malaysia                Philippines
                                      CEPT rate                               25%                      20%
                                      MFN rate                                30%                      15%

                                            Solution:

                                            Applicable rate: 15%, MFN rate

                                            DV P1, 500,000.00 x 15% = P225, 000.00 (CUD)

                                            Situation 2:

                                                                                 Malaysia                Philippines
                                      CEPT rate                               25%                      15%

Syllabus of Valuation Methods and Practices
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                                                  VALUATION METHODS AND PRACTICES

                                      MFN rate                                30%                 20%

                                            Solution:

                                            Applicable rate: 20%, CEPT rate

                                            DV P1, 500,000.00 x 20% = P300, 000.00 (CUD)


                                            21.          COMPUTATION OF SPECIAL DUTIES

COMPUTATION IN DUMPING CASE:

21.1 CASH (ANTI-DUMPING) BOND

              FORMULA:

                             Normal Value (Prior Investigation by the Tariff Commission less Declared Value = Anti-
                             Dumping Bond

       Note: The Anti Dumping Bond shall be taken from the price difference between the normal value of the
       article less the declared actual export or purchase price. The Anti-dumping Bond is merely a provisional
       measure and the actual anti-dumping duty may be higher or lower than the provisionally estimated dumping
       bond dependent on the findings of the Tariff Commission on the determination of the final normal value.


              Sample Computation:

                                          In a Dumping case before the Sec. of Finance, the Tariff Commission after
                             review of documents on hand, recommended the normal export value of bond paper at
                             P50,000.00 per MT from the original normal export value in the protest of P60,000.00
                             per MT versus P20,000.00 as the entered export value of the shipments under
                             consideration, The case was resolved by the Tariff Commission. Shipment is subject to
                             10% tariff rate. Use P5,000.00 for freight and insurance.

                                            Solution:

                                   Original Normal Export Value                                      P60,000.00

Syllabus of Valuation Methods and Practices
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                                                  VALUATION METHODS AND PRACTICES

                                   Less: Entered Export Value                                                 20,000.00
                                   Amount of Cash Bond                                                       P40,000.00

21.2          Computation of Dumping Duty

                                   Final Normal Value                                                        P50,000.00
                                   Less: Entered Export Value                                                 20,000.00
                                   Amount of Dumping Duty                                                    P30,000.00

21.3          Computation of Re-export Bond in Dumping Case.

                             FORMULA:

                                            Margin of Dumping (Normal Value Less Declared Value Plus: Computed Customs
                                            Duty

              Solution:

     Margin of Dumping                                                                                       P40,000.00
     (Note: Less the original Normal value)
     Plus: CUD as Ascertained in Entered Value, hence
     Entered Export Value                                                           20,000.00
     Freight and Insurance                                                           5,000.00
     Dutiable Value                                                                 25,000.00
     Rate of Duty                                                                        10%
     Customs Duty                                                                    2,500.00                  2,500.00
     Amount of Re-export Bond                                                                                P42,500.00

21.4          Computation of Marking Duty

                             Sample Computation:

                                                        Co. A was assessed a customs duty of P10,000.00 (20%.av.),
                                            however, when the shipment is about to be released from customs custody an
                                            alert order was received by the District Collector of Customs alleging the goods
                                            are improperly marked. A spot checker was ordered and upon verification, it



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Llave Center for Continuing Academic Development, Inc.
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                                                  VALUATION METHODS AND PRACTICES

                                            was noted that the shipment failed to indicated the country of origin, hence a
                                            marking duty was imposed. Compute for the amount of the marking duty.

                             Solution:

                                Customs Duty
                                                                                           P10,000.00
                                Rate of Duty                                                 20%
                                Dutiable Value                                             50,000.00
                                Rate of Marking Duty                                            X       5%
                                Marking Duty                                               P2,500.00

                                               22.    COMPUTATION OF CASH BOND
                                                   (GUARANTEE) FOR TENTATIVE
                                               RELEASE UNDER THE WTO VALUATION
              Note :         The guarantee requirement for tentatively released importation under the WTO Methods of
                             Valuation shall be based on the amount of the difference in Customs duty and tax. Recent
                             Legislation under R.A. 9135 and its implementing regulations under CAO No. 5-2001 and
                             CMO No. 37-2001 have done away with the plus 25% requirement.
                             Sample Computation:
                                                        An importation of agricultural machineries worth P500, 000.00
                                            dutiable value and subject to 3% rate of duty was challenged by the VCRC
                                            Valuation Screen. A computer generated value indicated the amount of P750,
                                            000.00 for identical shipment. The importer asked the VCRC for tentative
                                            release and was eventually allowed to do so. Assuming that the other
                                            components to arrive the landed cost is 10% of the dutiable value (i.e., bank
                                            charge, CDS, arrastre, etc.). Compute the amount of cash bond.
                             Solution:
                                                                             As Found                        As Declared

                        Dutiable Value                                        P750,000.00                     P500,000.00
                        Rate of Duty                                 X       3%                         X     3%
                        Customs Duty                                            22,500.00                       15,000.00

                        Difference in CUD                                               P7,500.00



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                                                  VALUATION METHODS AND PRACTICES

                        Dutiable Value                                        P750,000.00                  P500,000.00
                        Customs Duty                                            22,500.00                    15,000.00
                        Est. Other Charges                                      75,000.00                    50,000.00
                        Landed Cost                                           P847,500.00                  P565,000.00
                        VAT rate                                             ______10%                   _______10%
                        VAT                                                    P84,750.00                   P56,500.00

                        Difference in VAT                                           P28,250.00

                        Summary:
                        Difference in CUD                                                    P7,500.00
                        Difference in VAT                                                    28,250.00
                        Total                                                               P35,750.00
                                      23. DETERMINATION OF GROSS UNDERVALUATION
                                         FOR GOVERNMENT‟S RIGHT OF COMPULSORY
                                            ACQUISITION UNDER WTO VALUATION

Note:         Under the WTO evaluation, a provision has been introduced for the government‟s right of compulsory
              acquisition of goods that are grossly undervalued for this purpose there is gross undervaluation when
              the discrepancy between the declared customs value and any of the test value enumerated in Section
              II. B paragraph 2.6 2.6.2 i to iii hereof is two hundred percent (200%) or higher using the following
              formula, pursuant to CAO No. 5-2001.

                      FORMULA:

                             Difference between test value and declared value x 100
                                                     Declared value

                      Sample Computation:

                             Given:
                                             Customs (test value)   $1,000
                                             Declared Value                    $    300

                             Solution:
                                             $1,000 - $300 = $700
                                             $700 x 100 = $70,000



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