Customs Tariff Valuations
Customs valuations are an important aspect of importing goods in South Africa and arises when SARS disputes the values provided by an importer when it declares its goods for importation into the country.
In terms of the General Agreement on Tariffs and Trade, the way SARS is entitled to dispute values declared by an importer is in terms of Article VII of the Agreement.
The Six Methods For Goods Valuations.
The first method, refers to the transaction value of any goods imported into the country.
This is the price actually or payable in respect of imported goods, and includes all payments made as a condition of sale for the imported goods by the buyer to the seller.
This is the valuation that should be used on most transactions.
From the price actually paid or payable certain adjustments are allowed to be made, such as including certain commissions but excluding buying commissions, and including packing costs, royalties, or deducting costs such as insurance and freight (that occur after the FOB point) on a contract of sale including CIF.
When using this method of valuation, the sale should be at arm’s length and the buyer and seller should not be related, unless the relationship did not influence the price or the transaction value approximates a test value.
To make use of this method, the following conditions are required to be fulfilled:
1. There must be evidence of a sale.
This can be confirmed by commercial invoices, contracts, and purchase orders.
2. No Restriction Of Disposition
There must be no restriction on the disposition or use of the goods by the buyer, other than: restrictions imposed or required by law in the country of importation; are limited in geographic area in which goods may be resold; or do not substantially affect the value of the goods.
3. No Additional Conditions Or Considerations
The sale cannot be subject to additional conditions or considerations for which a value cannot be determined.
Some examples are provided such as the seller establishing the price of the imported goods on the condition that the buyer will also buy other goods in specified quantities; the price of the imported goods is dependent on the price at which the buyer sells other goods to the seller; or the price is established on the basis of a form of payment extraneous to the imported goods.
In many instances SARS, as a customs authority, may dispute the transaction value, but is required to follow the methods of valuation as set out in the GATT Agreement, which methods of valuation are also set out in the Customs and Excise Act, No 91 of 1964.
The issue, however, is not that SARS can dispute the transaction value, but the way SARS conducts the valuation process, which often leads to incorrect values being attributed to goods imported into the country.
When the transaction value is disputed, SARS as a customs authority must apply the remaining methods sequentially. This requires SARS to consult with an importer with a view to arriving at a value in terms of methods of valuation 2 and 3, as set out in the Implementation Agreement to Article VII of the GATT Agreement.
Goods Valuation Methods 2- 6
When the transaction value is disputed, SARS as a customs authority must apply the remaining methods sequentially.
This requires SARS to consult with an importer with a view to arriving at a value in terms of methods of valuation 2 and 3, as set out in the Implementation Agreement to Article VII of the GATT Agreement.
Methods 2 and 3, refer to identical and similar goods, and the reasoning behind the Implementation Agreement, is to achieve a simple and open resolution to a valuation dispute on the basis that a value previously accepted for either an identical or similar good is then used to value goods where the transaction value is disputed.
While these methods are set out in the Customs and Excise Act, SARS tends to ignore its responsibility in resolving matters simply and tends not provide information on previous imports for either similar or identical goods, rather seeking to rely on the remaining methods of valuation.
The remaining methods of valuation, whether it is Method 4 (the deductive value), Method 5 (the computed value) or Method 6 (the fall back method) all have their pitfalls, particularly when SARS has made a predetermined decision to enforce a value it thinks is correct in respect of any shipment.
Over and above the real risk of SARS miscalculating a value, there is the further risk to the importer that SARS attempts to levy forfeiture, which is in effect a penalty for contravening the Customs and Excise Act, when there is no real contravention of the Act, i.e. values are properly declared but disputed by SARS.
It is best as an importer, taking into account the risk that SARS may dispute the values as declared by the importer, contacts us to ensure that its documents are in proper order prior to importing goods, so as to ensure that method 1 (which is always preferred) is used to determine the value of the imported goods.
If, however, a dispute has already arisen in respect of the values declared by an importer it is best to consult with us so that the appropriate representation is made to SARS so as to avoid the unnecessary levying of forfeiture and inflated values on goods imported into the country, and if these internal representations fail, to take steps to review these decisions in the High Court of South Africa.
