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Background Note

February 2000

The WTO Agreement on Customs Valuation


Significance of the Agreement on Customs Valuation

Content of the Agreement on Customs Valuation

Sequential Application of Valuation Methods

Dispute Settlement. Rights and obligations of the parties. Right of appeal

Administration of the Agreement

Special and Differential Treatment



I. Introduction

1. The multilateral trade negotiations of the Uruguay Round, concluded in December 1993, resulted in the signing, in April 1994, of the Final Act of the Uruguay Round and the Marrakesh Agreement establishing the World Trade Organization (the WTO Agreement). The latter took over the technical, modernised and modified agreements of the General Agreement on Tariffs and Trade known as the "GATT 1947". Among these are the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (note 1).

2. In 1946, 23 of the 50 countries participating in the project for the creation of an International Trade Organization (ITO) decided to negotiate the reduction and consolidation of tariffs. They agreed to implement certain trade rules contained in the planned charter of the ITO (a project that was never realised, since its ratification by certain countries –in particular the United States proved impossible). These 23 countries thus became the founding Members of the GATT, which came into force in January 1948.

3. In 1950, in order to ensure a better harmonisation of the rules concerning Customs, 13 European governments devised the Brussels Definition of Value (BDV). This method is used for determining customs duties on the basis of "notional price" i.e. the usual market price, defined as the " the price for a commodity in a free market established between an unrelated buyer and seller". The Customs Co-operation Council (CCC), which has now become the World Customs Organization (WCO), is entrusted with the administration of the BDV.

4. At the beginning of the 70s, more than 100 countries, including many developing countries, were applying the BDV. The USA, Canada, Australia and New Zealand – important players in world trade - were against joining, because of differences between their national systems and the BDV. It is relevant that Art. VII of the GATT 1947 stipulated that the customs valuation of imported goods was to be based on real value. It did not however define how this figure was to be determined, with the result that there were numerous divergences in the practices of different countries.

5. As for the developing countries, they used both the BDV and the WTO Agreements (in particular GATT 1994) to resolve the problem of undervaluation and overvaluation of imported goods.

6. It was by joining the WTO that 135 countries effectively undertook to apply all the agreements, including the Agreement on Customs Valuation.

7. The situation in November 1999 was as follows: 57 developing country Members of the WTO were to implement the Agreement on Customs Valuation in 2000 or 2001 (see enclosed list).

8. The special and differential treatment enjoyed by developing countries allowed them to apply certain obligations with greater flexibility. This dispensation will progressively disappear, and in certain areas – such as customs valuation – developing countries will have to accept the same disciplines as the developed countries by 31 December 2000. Developing countries wishing to receive technical assistance may apply directly to the WTO Secretariat.

9. Technical assistance is provided by developed country Members, both at bilateral and regional levels. However, it is at the latter level that it has been more widely developed. The instances of this are the programmes by Spain for Latin American countries, by Austria for English-speaking Africa, by France for Francophone Africa or by the USA for the Caribbean countries. Technical assistance, moreover, is also provided for certain developing countries through regional trade agreements. This is particularly the case for APEC countries (programme developed by the United States, Canada, Australia and New Zealand), for ASEAN (programme financed by Japan), or for ACP countries (programme financed by the European Union). These various programmes of technical assistance range from simple courses on the presentation of the Agreement to seminars on implementation problems, or practical training programmes for customs officials.

II. Significance of the Agreement on Customs Valuation

10. Although governments impose tariffs in order to protect national production, they are often an important source of revenue. In developed countries, the proportion of revenue obtained from customs duties has considerably diminished, and they now rely on other sources of revenue. But for developing countries, particularly the least developed, these tariffs form an important part of the public revenue: between 45 and 65% for certain developing countries.

11. There is thus a lot at stake in customs valuation, and it is easy to understand why developing countries attach so much importance to calculating the value of imported goods and resort to precautionary measures, such as appraisal by preshipment inspection agencies in order to ensure an exact valuation of imported goods and to avoid underinvoicing and overinvoicing.

12. Customs duties are levied by the customs administration on an ad valorem basis (e.g. 20% of the value of the imported goods) or in the form of specific customs duties (e.g. a duty of US$ 1 per kilo or per litre). Combined or mixed duties are also levied on certain products (e.g. 10% on the value + US$ 2 per kilo).

III. Content of the Agreement on Customs Valuation

A. Aims

13. The agreement has the following general aims:

  • customs valuation must not hinder the free circulation of goods i.e. it must not constitute a technical obstacle to trade;

  • the need is for a fair, uniform and neutral customs valuation of goods, that excludes the use of arbitrary or fictitious customs valuations (Cf. General Introduction to the Agreement on Customs Valuation);

  • customs valuation should be established according to simple and equitable interests, compatible with commercial practice (Cf. General Introduction to the Agreement on Customs Valuation) ; and

  • customs valuation procedures should not be used as anti-dumping measures (Cf. General Introduction to the Agreement on Customs Valuation).

B. General presentation

14. Divided into 24 Articles followed by interpretative notes, the main part of the text is devoted to provisions concerning the norm, i.e. transaction value (key concept of Art. 1 of the Agreement). Considerations of more limited scope refer to the use of methods to be employed for customs valuation where this cannot be done according to the provisions of Article 1. Lastly, with the aim of establishing fair fiscal and administrative procedures, many Articles specify the rights and obligations of the parties in respect of dispute settlement procedures.

IV. Sequential Application of Valuation Methods

15. The basic rule of the Agreement is the accurate determination of the transaction value, i.e. the price actually paid or payable for the goods when sold for export to the country of importation, if necessary, in accordance with the provisions of Art. 8 of the Agreement. The invoice should reflect the actual conditions of the transaction (Cf. Art. 1.1 and 8.1 - 8.2).

16. Five methods are to be used successively in order to arrive at this (the order is imperative, a method may only be employed by customs if the preceding one is not applicable), as follows:

  • transaction value method

  • comparative method

  • deductive method

  • computed or reconstituted value method

  • method of last resort

1. The transaction value method

17. This method, introduced in the first Article of the Agreement, is the one most frequently used; the net invoice price to be paid being the essential element.

18. It does not apply in cases of free exchanges or donations (e.g. gifts, samples, loans, deposits).

19. It takes account of a possible relationship between buyer and seller. The existence of a subordinate relationship could provide grounds for contesting the declared value that might have been influenced by this association (e.g. discount, reduced invoice), depending on the national definition of related persons.

20. It is on the basis of the net price invoiced to the importer that the customs administration or the representatives of preshipment inspection agencies (when they have been mandated by a government) intervene in order to verify whether the provisions of Art. 8 have been respected. According to the latter, to determine the customs value the following items are included or excluded from the transaction value of the imported goods (Cf. Art. 1):

Items for inclusion appearing in Art. 8.1 and 8.2:

  • commissions and brokerage (except buying commissions);

  • cost of containers;

  • cost of packing;

  • goods and services provided by the buyer;

  • royalties and licence fees;

  • proceeds of any subsequent resale, disposal or use;

  • cost of transport;

  • loading, unloading and handling charges;

  • cost of insurance.

Items for exclusion appearing in Art. 8.2 and the note to Art. 1:

  • transport and insurance after importation;

  • buying commissions;

  • charges for construction, production, assembly, maintenance or technical assistance;

  • customs duties and taxes;

  • dividends or other payments from the buyer to the seller that do not relate to the imported goods.

21. As indicated in the general introduction to the Agreement, where the customs value cannot be determined under the provisions of Art. 1 there should normally be a process of consultation between the customs administration and the 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 imported goods which is not immediately available to the customs administration and vice versa. It is then that the concept of Shifting of the Burden of Proof is introduced.

22. At the conclusion of the Uruguay Round, a Decision was adopted: the Decision on Shifting of the Burden of Proof - SBP. According to the GATT 1947 norm, only the customs administration could determine that the dutiable value of imported goods could not be set according to the transaction value. The Decision changes this situation. In the case where the customs authorities have reasonable doubts concerning the declared transaction value, the burden of proof is then reversed and it is for to the importer to prove the accuracy of the value in question.

23. Where the explanation or complementary documents presented by the importer to justify the transaction value of the imported goods do not satisfy the customs administration, the latter may then decide that the customs value cannot be determined according to Art. 1 and proceed to determine it according to the methods in Art. 2 to 7, as in the following paragraphs.


2. Comparative method

24. If the customs value of imported goods cannot be determined under the provisions of Art. 1, Articles 2 and 3 allow reference to be made to comparisons with the price of identical (Cf. Art. 2) or similar (Article 3) goods sold for export to the same country of importation at or about the same time as the goods being valued; the goods to be compared are to be on sale at the same commercial level and in substantially the same quantity. In cases of variation between the latter elements, the prices are to be adjusted accordingly. Records kept by customs authorities often provide comparative data.


3. Deductive method

25. This method, contained in Art. 5, is based on the unit price at which the imported goods or identical or similar imported goods are sold, in the greatest aggregate quantity, within 90 days of importation.


4. Computed or reconstituted value method

26. According to Art. 6, computed value is obtained by adding to the cost of production of the goods to be valued "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". Constructive dialogue with the importer is important. Recourse may also be had to administrative assistance agreements.


5. The method of last resort

27. In accordance with Art. 7, the customs value will be determined by reasonable means consistent with the principles and general provisions of the Agreement on Customs Valuation and of Art. VII of the GATT 1994 and on the basis of data available in the country of importation. The article also enumerates the elements that are not to be used in defining the value, such as minimum customs values or arbitrary or fictitious values.

28. It is clear that the use of this method must be reserved for well-trained and well-informed customs officials.

29. As laid down in Art. 4, the importer may request the order of application of Articles 5 and 6 to be reversed, subject to reservation by a Member country duly notified to the WTO.

V. Dispute Settlement. Rights and obligations of the parties. Right of appeal.

A. Principles

30. The settlement of disputes is subject to the following principles:

  • confidentiality of the documents produced by the importer to justify his position or his statements;

  • a written explanation is required of the customs administration standpoint vis-à-vis the importer. This can then subsequently be used by the latter as an official document to justify his position before the administrative mediator during an appeal "without penalty" (Cf. Art. 11);

  • the customs administration may not require or compel any person not resident in its own territory to provide commercial information. All procedures of this nature must be submitted, after agreement with the interested party, for the approval of the authorities of the country to which he/she belongs.


B. The new procedure: the right of appeal

31. This is an appeal without penalty, and operates in two stages:


1. Appeal against decisions first takes place before a higher level in the customs administration. In order to reconcile the points of view, it is preceded by an examination of the background of the dossier. A special body consisting of representatives from the administration and commercial operators is sometimes created. A conciliation report is prepared;

2. then, after having been duly informed, the importers may appeal to the judiciary, and their sole liability in doing so will be the normal court costs and lawyers’ fees.

32. Once these stages have been completed, both the appellant and the administration may resort to judicial procedures envisaged by the Customs Code. This procedure also determines the fate of goods forming the object of litigation; goods may be withdrawn from the customs before the conclusion of proceedings, with an undertaking covering the ultimate payment of any customs duties.

VI. Administration of the Agreement

A. Committee on Customs Valuation

33. The Committee established in Art. 18, is composed of representatives from each of the Members. It elects its own Chairman and normally meets once a year. The WTO Secretariat acts as secretariat to the Committee.


B. Technical Committee on Customs Valuation and the WCO

34. In accordance with Art. 18, the Technical Committee is established under the auspices of the WCO with a view to ensuring, at the technical level, the interpretation and application of the Agreement on Customs Valuation.

35. The WCO, established in 1952 as the Customs Co-operation Council, is an independent intergovernmental body with world-wide membership whose mission is to enhance the effectiveness and efficiency of customs administrations. Some of the functions and objectives of the WCO are, for instance, to examine the technical aspects of customs systems, as well as the economic factors related thereto, with a view to proposing means of attaining the highest possible degree of harmony and uniformity, and to furnish interested governments, on its own initiative or on request, with information or advice on customs administration. The WCO is the only international organization exclusively devoted to customs matters. It provides a forum where delegates representing a large variety of Members can tackle customs issues on an equal footing. Each Member has one representative and one vote. (It is of interest that not all developing country Members of the WTO, with an obligation to implement the Agreement on Customs Valuation in 2000 or 2001, are Members of the WCO. Those countries are: Bahrain, Costa Rica, El Salvador and Honduras).

36. Art. 19 of the Agreement specifies that, except as otherwise provided therein, the Dispute Settlement Understanding is applicable to consultations and to the settlement of disputes where a Member considers that any advantage accruing to it under the Agreement on Customs Valuation is being nullified or impaired as a result of the action of another Member or of other Members. Members wishing to hold consultations may request the advice and assistance of the Technical Committee. The functions of this Committee are set forth in Annex II of the Agreement and include the provision of technical assistance.

VII. Special and Differential Treatment

37. Art. 20 and Annex III of the Agreement lay down the provisions concerning special and differential treatment enjoyed by developing countries. The principal points are:

  • provision according to Art. 20 for a five-year delay in the application of the provisions of the Agreement for certain developing country Members;

  • possible extension of the 5-year delay;

  • possible reservation to enable developing country Members to retain established minimum values on a limited and transitional basis;

  • reservation for Art. 4 (inversion of the order of application);

  • reservation for Art. 5 (special application of the deductive method);

  • technical assistance.

38. In this respect, the adoption of the Decision relative to the reversal of the burden of proof was one of the most positive results of the Uruguay Round, particularly for developing countries. It was also important that some developing countries were able to take part in the discussions with the meetings of experts during the final phase of the negotiations, which contributed to a better understanding of the problems faced by developing country Members from the undervaluation or overvaluation of imported goods.

39. It is relevant that the problem of undervaluation or overvaluation of imported goods can be eased by the computerisation of customs procedures, the creation of databases enabling the invoiced prices of similar or identical goods to be compared, and the use of specialised software.

VIII. Annex



Article 20.1 (delayed application of the provisions of the Agreement), Article 20.2 (delayed application of the computed value method), paragraph 2 of Annex III (reservation concerning minimum values), paragraph 3 of Annex III (reservation concerning reversal of sequential order of Articles 5 and 6), and paragraph 4 of Annex III (reservation concerning application of Article 5.2 whether or not the importer so requests) of the Agreement are special provisions available to developing country Members. Listed below are those developing country Members which have invoked some or all of the above provisions, with the date of entry into force of the WTO Agreement for the Member concerned indicated in brackets. Those Members that are applying the Agreement are noted.

For those countries who became WTO Members on 1 January 1995, the five year delay period expires on 31 December 1999. For original GATT Contracting Parties who became WTO Members after 1 January 1995, the five-year delay period starts the date on which their membership became effective. For acceding developing countries, unless otherwise specified in the Accession Protocol, the delay period begins on their date of accession and runs for a full five-year period.


Bahrain (1.1.95)

El Salvador (7.5.95)

Myanmar (1.1.95)

Bangladesh (1.1.95)

Gabon (applying)

Nicaragua (3.9.95)

Benin (22.2.96)

Ghana (1.1.95)

Niger ()

Bolivia (13.9.95)

Guatemala (21.7.95)

Nigeria (1.1.95)

Brunei Darussalam (1.1.95)

Guyana (1.1.95)

Pakistan (1.1.95)

Burkina Faso (3.6.95)

Haiti (30.1.96)

Paraguay (1.1.95)

Burundi (23.7.95)

Honduras (1.1.95)

Philippines (1.1.95)

Cameroon ()

Indonesia (1.1.95)

Senegal (1.1.95)

Central African Rep. (31.5.95)

Israel (applying)

Singapore (applying)

Chad ()

Jamaica (9.3.95)

Sri Lanka (1.1.95)

Chile (1.1.95)

Kenya (1.1.95)

Thailand (1.1.95)

Colombia (30.4.95)

Kuwait (1.1.95)

Togo (31.5.95)

Costa Rica (1.1.95)

Madagascar ()

Tunisia (29.3.95)

Côte d’Ivoire (1.1.95)

Malaysia (1.1.95)

Tanzania (1.1.95)

Cuba (20.4.95)

Maldives (31.5.95)

Uganda (1.1.95)

Djibouti (31.5.95)

Mali (31.5.95)

United Arab Emirates (10.4.96)

Dominican Republic (9.3.95)

Malta (1.1.95)

Uruguay (1.1.95)

Ecuador (21.1.96)

Mauritania (31.5.95)

Venezuela (1.1.95)

Egypt (30.6.95)

Mauritius (1.1.95)

Zambia (1.1.95)



Note 1 : This agreement is also called : Agreement on Customs Valuation, Code on Customs Valuation, and supersedes the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (1979). (return to texte)


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