Trece Martires City College Subject: TARM103_Customs Valuation System

10/04/2022 5:54:05 pm

VALUATION METHOD
METHOD ONE: TRANSACTION VALUE: CONCEPTUAL APPROACH
CUSTOMS VALUATION SYSTEM

• A set of rules to determine the customs value

• “customs value of imported goods” means the value of goods for the purpose of levying ad
valorem duties of customs on imported goods. (WVA, Art 15.1(a)]
• Should not be confused with Box 22 of SAD where customs value is defined as FOB Value
STANDARDS IN CUSTOMS VALUE
Sequential order

• The primary method of valuation is Method One: Transaction Value.

• However, if the dutiable value cannot be determined with the use of Method One, the following
valuation methods shall be applied in sequential order
• Method Two: The Transaction Value of Identical Goods
• Method Three: The Transaction Value of Similar Goods
• Method Four: Deductive Value
• Method Five: Computed Value
• Method Six: Fallback Value
EXCEPTION TO THE SEQUENTIAL ORDER
The importer may request that the order of application Methods Four and Five be reversed. But if the
Commissioner of Customs determines that the reversal will give rise to difficulties in determining dutiable
value using Method Five then the request shall be denied and Method Four shall be used.
If the importer does not request that the order of Method Four and Method Five be reversed, the normal
order of the sequence shall be followed.
RULE ON VALUATION

• The primary method in determining the dutiable value of imported goods shall be Method One: The
Transaction Value
• Whenever the conditions prescribed for its use are fulfilled
METHOD ONE: TRANSACTION VALUE
The dutiable value of imported goods shall be the transaction value that is, the price actually paid or
payable when sold for export to the Philippines adjusted and subject to conditions:

• Sale for export

• Conditions that must be fulfilled
• PAPP
• Adjustments
MNEMONIC: -SACO-PAPA
ELEMENTS OF “SALE FOR EXPORT”
 Trece Martires City College Subject: TARM103_Customs Valuation System
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1. A commercial operation which involves a buyer and a seller;

2. Delivery of goods from a foreign territory to Philippine Territory;
3. The buyer agrees to obtain certain goods for a price while seller agrees to supply certain goods;
4. Mode of payment and when payment is made
5. Change of ownership;
6. Delivery date; and
7. Method of Delivery
Only transactions involving an actual international transfer of goods may be used in valuing merchandise
under the transaction value method (Advisory Opinion 14.1).
IMPORTATIONS WHERE THERE ARE “NO SALE FOR EXPORT TO THE PHILS”

• Free consignments, like gifts, samples, and promotional items;

• Donations or relief consignments;
• Goods imported under a hire or leasing contract;
CONDITIONS THAT MUST BE FULFILLED BEFORE METHOD ONE: TV MAY BE USED TO VALUE GOODS AND
ALL FOUR MUST BE CONCURRENTLY FULFILLED:
1. Restrictions
2. Conditions
3. Subsequent Proceeds
4. Relationship
RECON-SUBRE
CONDITION 1: RESTRICTIONS AS TO DISPOSITION
There must be no restrictions by the seller to the buyer as to the disposition or use of the goods.
Acceptable restrictions:
1. Imposed or required by law;
2. Limit the geographical area in which the goods may be resold; or
3. Seller may require a specific channel of distribution in the sale of goods
CONDITION 2: THE SALE OF PRICE MUST NOT BE SUBJECT TO SOME CONDITIONS OR CONSIDERATIONS
FOR WHICH A VALUE CANNOT BE DETERMINED WITH RESPECT TO THE GOODS BEING VALUED:
a. The seller establishes the price of the imported goods on condition that the buyer will also buy
other goods in specified quantities;
b. The price of the imported goods is dependent upon the price or prices at which the buyer of the
imported goods sells other goods to the seller of the imported goods;
c. The price is established on the basis of a form of payment extraneous to the imported goods, such
as where the imported goods are semi-finished goods which have been provided by the seller on
condition that the seller will receive a specified quantity of the finished goods.
CONDITION 3: PROCEEDS OF SUBSEQUENT SALE
No part of the proceeds of any subsequent resale, disposal, or use of the goods by the buyer will accrue
directly or indirectly to the seller.
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10/04/2022 5:54:05 pm

CONDITION 4; THE BUYER AND THE SELLER ARE NOT RELATED, OR WHERE THEY ARE RELATED, SUCH
RELATION DID NOT INFLUECE THE PRICE OF THE GOODS
Situations where there is relationship between buyer and seller:
1. They are officers or directors of one another’s businesses;
2. They are legally recognized partners in business;
3. They are employer and employee;
4. Any person directly or indirectly owns, controls, or holds five (5) percent or more of the outstanding
voting stock or shares of both of them;
5. One of them directly or indirectly controls the others;
6. Both of them are directly or indirectly controlled by a third person;
7. Together they directly or indirectly control a third person; and
8. They are related by affinity or consanguinity up to the fourth civil degree.

RULES ON RELATIONSHIP

• Relationship will not automatically result in rejection of the use of Method One.
• Use of Method One may only be rejected if relationship influenced the price.
• Persons who are associated in business with one another, in that, one is the sole agent, sole
distributor, or sole concessionaire are not related unless they fall within the category oof the 8
types of relationship.
 Trece Martires City College Subject: TARM103_Customs Valuation System
10/04/2022 5:54:05 pm

PRICE ACTUALLY PAID OR PAYABLE

Price actually paid

• Supplier paid at the time of importation

• Prepaid, at sight L/C, D/P
Price Payable

• Supplier not yet paid at the time of importation

• Deferred payment (D/A; O/A, USANCE L/C) to be settled after entry filling.

➢ The total payment made or to be made by the buyer to or for the benefit of the seller of the
imported goods.
➢ Value of the goods expressed in money
➢ The payment need not necessarily take the form of a transfer of money.
➢ Payment may be made by way of letters of credit or other modes of payment like D/P, D/A, O/A
➢ Refers to the price of the imported goods.
➢ Dividends or other payments from the buyer to the seller that do not relate to the imported goods
are not part of the dutiable value.
ADJUSTMENTS: (MANDATORY ADDITIONS)
Conditions before adjustments can be made:

• To the extent that they are incurred by the buyer;

• Provided there is objective and quantifiable data to form the basis of the adjustment, and
• If such value has not been included in the PAPP.
ADJUSTMENTS: CARP-PIT-LUH

• C – Commissions and brokerage fees

• A – Assists
• R – Royalties and fees
• P – Packing and Container Costs
• P - Proceeds
• I - Insurance
• T – Transport Cost
• LUH – Loading, unloading, and handling charges associated with the transport of goods
a. Commissions and brokerage (except buying commissions) – AGENT

b. Cost of containers which are treated as being one for customs purposes with the goods in question;
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c. Cost of packing for labor or materials;

d. Assists
The value, apportioned as appropriate, of certain goods and services supplied directly or indirectly by
the buyer free of charge or at a reduced cost for use in connection with the production and sale for
export of the imported goods, to the extent that such value has not been incorporated in the price
actually paid or payable.

• Materials, components, parts, and similar items incorporated in the imported goods;
• Tools dies, moulds, and similar items used in the production of the imported goods;
• Materials consumed in the production of the imported goods; and
• Engineering, development, artwork, design work, and plans and sketches undertaken elsewhere
than in the Philippines and necessary for the production of the imported goods.
e. Royalties and license fees related to the goods being valued that the buyer must pay either directly
or indirectly, as a condition of sale of the goods being valued to the extent that such royalties and
fees are not included in the price actually paid or payable;
• The royalties and license fees may include, among other things, payments in respect to patents,
trademarks, and copyrights. However, the charges for the right to reproduce or resell imported
goods in the Philippines shall not be added to the price actually paid or payable for the
imported goods in determining the dutiable value.
• If such payment are not a condition of the sale for export to the Philippines.
f. Parts of the proceeds of any subsequent resale, disposal, or use of the imported goods by the buyer
that accrues directly or indirectly to the seller where an appropriate adjustment can be made at the
time of importation
g. The cost of transport of the imported goods from the port of exportation to the port of entry in the
Philippines;
• The cost of transportation would include those costs for physically moving the goods to the port
of entry in the Philippines.
• How shall freight be computed in case imported goods are transported by the importer’s own
vessel or aircraft?
h. The cost of insurance
• From the port of loading to the port of entry
i. Loading, unloading, and handling charges associated with the transport of the imported goods from
the country of the exportation to the port of entry in the Philippines;
• These would include, in part, the movement of goods onto or from any conveyance. Handling
would include any number of activities surrounding the physical movement of the goods such
as preparation of manifest, B/L or AWB, obtaining any export license, and any other shipping
arrangement.
• All these charges must be associated with the transportation of the goods before the vessel
reaches the port of importation.
The customs value shall not include the following charges or costs,
If they are distinguished from the price actually paid or payable for the imported goods:
1. Charges for construction, erection, assembly, maintenance, or technical assistance, undertaken
after importation on imported goods such as industrial plant, machinery, or equipment;
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2. Cost of transport after importation; and

3. Duties and taxes of the country of importation. (WVA, Note to Art. 1.3)