COURSE ON WTO LAW AND JURISPRUDENCE PART I: BASIC WTO LEGAL PRINCIPLES

Transcription

1 COURSE ON WTO LAW AND JURISPRUDENCE PART I: BASIC WTO LEGAL PRINCIPLES Customs Valuation, Fees and Formalities Session 3 18 October 2018

2 AGENDA In this session, we will discuss: 1. Customs Valuation 2. Fees and Formalities

3 CUSTOMS VALUATION Three factors have an influence on the amount of ad valorem duties: Tariff rate Classification of goods Value of goods

4 CUSTOMS VALUATION Three factors have an influence on the amount of ad valorem duties: Tariff rate Classification of goods Value of goods

5 Example of questions that can arise in connection with customs classification EC Chicken Cuts dispute

6 Tariff Item Number Description of Products EC Schedule Final Bound Rate of Duty Special Safeguard (... ) 0207 (... ) Meat and edible offal, of the poultry of heading No. 0105, fresh, chilled or frozen: Poultry cuts and offal other than livers, frozen: Of fowls of the species Gallus domesticus: Cuts: Boneless 1024 ECU/T SSG (... ) 0210 Meat and edible meat offal, salted, in brine, dried, smoked; edible flours and meals of meat or meat offal (... ) Other, including edible flours and meals of meat or meat offal: Meat: (... ) Other 15.4% (... ) 6

7 7 Salted = salted for long-term preservation?

8 1.2% 3 % Salt content 8

9 CUSTOMS VALUATION Three factors have an influence on the amount of ad valorem duties: Tariff rate Classification of goods Value of goods

10 CUSTOMS VALUATION (CONT.) The value of tariff concessions may be affected by the manner in which the customs value is determined. Ad valorem tariff 10% 1, ,000 12,000 Value

11 WHAT IS THE APPROPRIATE CUSTOMS VALUE? Original rule provided in Article VII:2 of the GATT 1947: (a) The value for customs purposes of imported merchandise should be based on the actual value of the imported merchandise on which duty is assessed, or of like merchandise, and should not be based on the value of merchandise of national origin or on arbitrary or fictitious values. (b) "Actual value" should be the price at which, at a time and place determined by the legislation of the country of importation, such or like merchandise is sold or offered for sale in the ordinary course of trade under fully competitive conditions. (c) When the actual value is not ascertainable in accordance with subparagraph (b) of this paragraph, the value for customs purposes should be based on the nearest ascertainable equivalent of such value.

12 VARIOUS INTERPRETATIONS AS OF 1955 A B f.o.b. c.i.f. Current Domestic Value Transaction Value Import Market Value

13 CUSTOMS VALUATION IN THE GATT/WTO SYSTEM WTO 153 Members Agreement on Implementation of Article VII of the GATT 1994 ("CVA") GATT contracting parties Article VII Non-uniform system Various practices, incl. BDV Tokyo Round CV Agreement WTO CVA Uniform system Specific rules and procedures for valuation Year

14 THE CUSTOMS VALUATION AGREEMENT OBJECTIVES (PREAMBLE) Rules on Article VII of GATT (elab.) Transaction value (strengthening use) Fair, uniform and neutral customs valuation Avoid use of customs valuation against dumping Simple and equitable criteria for CV

15 THE CUSTOMS VALUATION AGREEMENT STRUCTURE Rules on Customs Valuation (Part I) Special and Differential Treatment (Part III) Administration, consultations and dispute settlement (Part II) Final Provisions (Part IV)

16 THE MEANING OF "CUSTOMS VALUE" Part I establishes rules and procedures for the determination of the "customs value". "Customs value" is defined as the value of goods "for purposes of levying ad valorem duties of customs on imported goods" (Article 15.1(a) of the CVA). Therefore, the CVA does not apply for the determination of the value of goods for purposes of levying internal taxes.

17 METHODS FOR DETERMINATION OF CUSTOMS VALUE T.V. Transaction value of identical goods Transaction value of similar goods Deductive method Computed method Reasonable means

18 METHODS FOR DETERMINATION OF CUSTOMS VALUE (CONT.)

19 THE TRANSACTION VALUE (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

20 THE TRANSACTION VALUE (NOTE TO ARTICLE 1) The price actually paid or payable : the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods, need not necessarily take the form of a transfer of money may be in the form of letters of credit or negotiable instruments, may be paid directly or indirectly.

21 SITUATIONS IN WHICH THE TRANSACTION VALUE CANNOT BE USED (ARTICLE 1.1) Price actually paid or payable 1. Restrictions on the buyer that diminish the value of good. 2. Conditions on sale/price preventing determination of value. 3. Proceeds of subsequent sale/disposal/use accrue to seller. 4. Buyer and seller are related parties.

22 RELATED PARTY TRANSACTIONS Article 1.2 of the CVA: the mere existence of a relationship between buyer and seller shall not itself be grounds for disregarding the transaction value. Customs must examine "the circumstances surrounding the sale" to determine whether the "relationship... Influenced[d] the price". The relationship between customs valuation determination and transfer pricing for income tax reasons can be complicated.

23 SUBSEQUENT METHODS OF CUSTOMS VALUATION Method Transaction value of identical goods (Article 2) Description Calculated on the basis of value of identical goods if: - they are the same in all respects; - they have been produced in the same country as the goods being valued; - and they have been produced by the producer of the goods being valued. Goods must be sold for export to the same country of importation as the goods being valued. They must also be exported at or about the same time as the goods being valued. Transaction value of similar goods (Article 3) Calculated on the basis of value of similar goods if: - goods closely resembling the goods being valued in terms of component materials and characteristics - goods which are capable of performing the same functions and are commercially interchangeable with the goods being valued - goods which are produced in the same country as, and by, the producer of the goods being valued. Goods must be sold to the same country of importation as the goods being valued. The goods must be exported at or about the same time as the goods being valued.

24 SUBSEQUENT METHODS OF CUSTOMS VALUATION (CONT.) Method Deductive value (Article 5) Computed value (Article 6) Reasonable means (Article 7) Description Calculated on the basis of the unit price at which the imported goods or identical or similar goods are sold to an unrelated buyer in the greatest aggregate quantity in the country of importation. The buyer and the seller in the importing country must not be related and the sale must take place at or about the time of importation of the goods being valued. If no sale took place at or about the time of importation, it is permitted to use sales up to 90 days after importation of the goods being valued. Calculated on the basis of the cost of production of the goods being valued, plus an amount for profit and general expenses usually reflected in sales from the country of exportation to the country of importation of goods of the same class or kind, and other expenses if necessary Methods laid down in Articles 1 through 6 of CVA with "reasonable flexibility" in their application.

25 PROHIBITED METHODS OF VALUATION Price of domestic good Arbitrary or fictitious values System providing for the higher of 2 values Minimum customs values Prohibited means (Article 7.2) Price of goods in export market Export price to a third country Production cost not computed value

26 WHAT TO DO WHEN THE INFORMATION SUBMITTED BY THE IMPORTER IS NOT RELIABLE? There are two relevant provisions: Article 17 of the CVA: Nothing in this Agreement shall be construed as restricting or calling into question the rights of customs administrations to satisfy themselves as to the truth or accuracy of any statement, document or declaration presented for customs valuation purposes. Decision Regarding Cases where Customs Administrations have Reasons to Doubt the Truth or Accuracy of the Declared Value

27 DELAYS IN DETERMINATION OF CUSTOMS VALUE (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.

28 DETERMINATION OF CUSTOMS VALUE Need to delay final determination of customs value Importer required to provide guarantee if it wishes withdrawal of goods Importer provides sufficient guarantee The goods can be withdrawn from customs

29 DETERMINATION OF CUSTOMS VALUE (CONT.) Need to delay final determination of customs value Importer not required to provide guarantee for the withdrawal of goods The goods can be withdrawn from customs

30 COLOMBIA INDICATIVE PRICES AND RESTRICTIONS ON PORTS OF ENTRY 2004: Colombia established framework legislation on indicative prices. Subsequently, Colombia issued various resolutions providing for indicative prices for specific products. Features of the indicative price system: "Referential prices", initially intended control". to be used for "customs Based on average production costs, or otherwise, lowest price actually negotiated or offered for importation of the good into Colombia. Established a priori prior to the specific import transactions.

31 COLOMBIA INDICATIVE PRICES AND RESTRICTIONS ON PORTS OF ENTRY Panel found that for customs purposes, indicative prices reflect "the value of the good", whenever indicative prices are higher than the declared value. Payment on the basis of indicative prices at the time of entry was an assessment of duties, not a deposit. Indicative price system was inconsistent with the obligation to conduct customs valuation on a case-by-case basis. Was also inconsistent with the requirement to use the sequential methods of valuation. Called for the use of the higher of two values and minimum customs values contrary to Articles 7.2(b) and (f).

32 THAILAND CIGARETTES Involved claims under both CVA and GATT Thailand had rejected the declared transaction value for certain entries during between related parties. The Philippines' main claims under the CVA: Thailand had a general rule of rejecting the transaction value. Thailand had failed to comply with provisions of Article 1.2 regarding the determination of the "circumstances of the sale" for specified entries. Thailand had failed to comply with procedural requirements, including Article 16.

33 THAILAND CIGARETTES Generally, not much dispute over the interpretation of the CVA mostly how it applied to the facts. Panel found "support" for some of its rulings in a comment by WTO Technical Committee (in which WCO participated). The Panel's main findings under the CVA: Thailand had no general rule rejecting the transaction value. Thailand had failed to comply with provisions of Article 1.2 in determining whether the relationship between buyer and seller affected the price. Thailand had failed to comply with procedural requirements, including Article 16.

34 AGENDA 1. Customs Valuation 2. Fees and Formalities

35 FEES AND FORMALITIES (ARTICLE VIII OF THE GATT 1994) General obligation: ordinary customs duties and other duties or charges must not be imposed in excess of the bound rates (Article II:1(b)). However Article II:2(c) exempts fees from the prohibition on "other duties and charges" under Article II:1(b) second sentence, provided they are commensurate with the cost of the services rendered.

36 Examples of fees Quarantine inspection fee Fumigation fee Consular tax/invoice Quota license fee

37 Examples of fees Customs user fee Port (improvement) taxes Warehousing taxes

38 FEES (ARTICLE VIII OF THE GATT 1994) (CONT.) Article VIII:1(a) provides that all fees and charges (other than import/export duties and internal taxes), i. shall be limited in amount to the approximate cost of services rendered, ii. shall not represent an indirect protection to domestic products or taxation of imports or exports for fiscal purposes. The first subparagraph requires: The fee or charge must involve a "service" rendered "service" is meant in "a more artful political sense, i.e., government activities closely enough connected to the processes of customs entry that they might, with no more than the customary artistic licence accorded to taxing authorities, be called a service to the importer in question." (GATT Panel Report, US - Customs User Fee) The fee or charge must not exceed the approximate cost of the service rendered.

39 FEES (ARTICLE VIII OF THE GATT 1994) (CONT.) Example: sanitary inspection fee = 2% of value of consignment (shipment). Consistent with Article VIII:1(a)? Why or why not? Advantages and disadvantages of a percentagebased fee?

40 FEES (ARTICLE VIII OF THE GATT 1994) (CONT.) GATT Panel Report in US - Customs User Fee: a service must refer to a service rendered to the individual importer. In that case, the cost was deemed to be the cost of customs processing of the individual entry. WTO Panel Report, Argentina - Textiles: An ad valorem tax, by its very nature, is not "limited in amount to the approximate cost of services rendered."

41 FEES (ARTICLE VIII OF THE GATT 1994) (CONT.) Regarding the requirement: "shall not represent an indirect protection to domestic products or taxation of imports or exports for fiscal purposes." Little guidance from case law. US Customs User Fee suggests that for "fiscal purposes" means (inter alia?) that the total income generated exceeds the total cost of operating the "service" at issue.

42 FEES (ARTICLE VIII OF THE GATT 1994) (CONT.) Panel Report in China Raw Materials: Bidding price for a quota share is not a fee covered by Article VIII Why? the bidding process and collection of a bid-winning price is much different in nature from a customs-related service supplied in exchange for a particular fee or charge. The bid winning price reflects the value that a potential exporter attributes to the right to export the product at some point in the future. (para )

43 FORMALITIES (ARTICLE VIII OF THE GATT 1994) Appellate Body Report, Argentina Import Measures: typically involve the use of documentary and procedural tools to collect, process, and verify information in connection with the importation of products... Compliance with such formalities and requirements enables trade to occur within a Member s specific regulatory framework. (para )

44 FORMALITIES (ARTICLE VIII OF THE GATT 1994) (CONT.) There are two obligations imposed on formalities under Article VIII:3: No substantial penalties shall be imposed for minor breaches of customs regulations or procedural requirements. No penalty regarding omissions or mistakes in customs documentation shall be greater than necessary to serve merely as a warning.

45 FEES AND FORMALITIES (ARTICLE VIII OF THE GATT 1994) (CONT.) What is the relationship between Article XI and Article VIII? In Argentina Import Measures, the Appellate Body said: requirements under Article VIII are not excluded per se from the scope of Article XI:1 Can be assessed under either provision. However, a fee or formality can be inconsistent with Article VIII without necessarily being inconsistent with Article XI.