Customs Valuation and Transfer Pricing
Customs valuation is the price actually paid or payable for goods sold for export, adjusted under Article 8 of the WTO Customs Valuation Agreement. The exam tests the six sequential methods, the conditions for transaction value and related-party or transfer-pricing arrangements.
Transaction value and additions
Transaction value applies if there is a sale for export, no restrictions on disposal, no undeterminable condition, no proceeds returning to the seller, and the buyer and seller are unrelated or the relationship did not influence the price. Add selling commissions and brokerage, assists, royalties and licence fees that are a condition of sale, proceeds, packing, and transport and insurance to the place of importation where a CIF basis is used.
Sequence
If transaction value fails, use identical goods, similar goods, deductive value, computed value, then fallback. Fallback may be flexible but not arbitrary.
Worked example
Invoice is FOB 100,000. The buyer supplies a design assist valued at 2,000, pays a 3,000 royalty that is a condition of sale, and pays freight 1,500 and insurance 300. On a CIF basis: 100,000 + 2,000 + 3,000 + 1,500 + 300 = 106,800. On an FOB basis, exclude freight and insurance.
Traps
Adding post-importation costs; missing assists; treating all royalties as included or excluded; using fallback before deductive or computed value; assuming an advance pricing arrangement binds customs.