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Introduction to Cross-border Trade Valuation

Valuation is one of the key components of import-export activities. The word ‘Valuation’ is exclusively defined in the Customs Act, of 1962. According to the act, valuation means the transaction value of the imported goods and exported goods; the price actually paid or payable for the goods when sold for export to India for delivery at the time and place for importation. In terms of export, this can be exported from India for delivery at the time and place of exportation. To define the valuation at arm’s length basis, the buyer and the seller are not related and the price is the sole consideration for the sale subject to such other conditions. If we jot down the term ‘Valuation’, then it can be any amount paid or payable for costs and services, including commissions and brokerage, engineering and design work, royalties and license fees, costs of transportation to the place of importation or exportation, insurance, loading-unloading, and handling charges, etc. The Basic Customs Duty (BCD), an inseparable part of global trade is derived from the valuation itself. A percentage charged on transaction value on an ad-valorem basis leads us to the BCD of any imported goods. This BCD is paid by the importer at the time of clearance of goods for home consumption or for further exportation.

Like I said before valuation is an inseparable part of imported goods and exported goods, this is explained broadly in the following acts and rules:

Customs Act, 1962

Customs Tariff Act, 1975 (No. 51 of 1975)

Customs Valuation (Determination of Value of Exported Goods) Rules, 2007

Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

I will try to boil down the valuation concept in my upcoming articles. We shall also see why valuation is important as per these acts and rules.

I hope this concise article will add value to your knowledge. In my next column, we shall dig down a bit into valuation terminology. Until then goodbye.

If you have any suggestions, advice, or if you wish to refer to any other cross-border trade-related topic, you can always reach out to me here.

Thank you!

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