TRANSACTION VALUE
SYSTEM
SEQUENTIAL APPLICATION OF VALUATION METHODS
TOPIC
RULES ON CUSTOMS VALUATION
METHOD 1: THE TRANSACTION VALUE
METHOD 2: THE TRANSACTION VALUE OF IDENTICAL GOODS
TOPIC
METHOD 3: THE TRANSACTION VALUE OF SIMILAR GOODS
METHOD 4: DEDUCTIVE VALUE
METHOD 5: COMPUTED VALUE
METHOD 6: FALLBACK VALUE
SEQUENTIAL APPLICATION OF VALUATION
METHODS
The methods of valuation are set out in a sequential order of application
The primary method for customs valuation is the Transaction Value
Where the dutiable value cannot be determined under the Transaction Value
method, it is to be determined by proceeding sequentially through the succeeding
methods to the first such method under which the dutiable value can be determined
RULES ON CUSTOMS VALUATION
General Provision
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.
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
However, at the request of the importer, the order of application of Methods Four
and Five may be reversed; provided, that the Commissioner of Customs agrees to
such request taking into consideration that the reversal of the sequential order will
not give rise to real difficulties for the BOC in determining the dutiable value under
Method Five.
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. If the
importer does so request but it then proves impossible to determine the dutiable
value under the provisions of Method Five, the dutiable value shall be determined
under the provisions of Method Four, if it can be so determined.
Where the DV cannot be determined under the provisions of Method One to Five, it
shall be determined under the provisions of Method Six
PRICE ACTUALLY PAID OR PAYABLE (PAPP)
The DV 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 Philippine -PAPP is the total payment made or to
be made by the buyer to or for the benefit of the seller for the
imported goods.
PRICE ACTUALLY PAID OR PAYABLE (PAPP)
The WVA itself provides no definition of a sale. It merely states that there
must be a specific commercial operation that meets certain requirements
and conditions. WCO Advisory Opinion 1.1 provides guidance in this
matter by elaborating on the concept of “sale” as it appears in the WVA. It
states that a sale may be described as follows:
1. A commercial operation which involves a buyer and a seller
2. The buyer agrees to obtain certain goods
3. An agreement to exchange the ownership of the goods at a time and for a
price or other consideration
4. A compensation occurs as the transfer for that ownership and acquisition
of those goods
5. Both parties acknowledge that the transaction constitutes a commercial
operation
NO SALE
GOODS THAT MIGHT BE CONSIDERED NOT TO BE SUBJECT TO A SALE
WOULD INCLUDE, AMONG OTHERS, THE FF:
1. Free consignments like gifts, samples, and promotional items
2. Goods imported on consignments
3. Goods imported by intermediaries, who do not purchase the goods
and who sell them after importation
4. Goods imported by branch offices which are not separate legal
entities.
5. Goods imported under a hire or leasing contract
6. Goods supplied on loan, which remain the property of the sender
ADJUSTMENT
In determining the dutiable value under the provisions of Method One, the
following adjustments shall be added to the price actually paid oy payable for the
imported goods being valued to the extent that they are incurred by the buyer,
provided there is objective and quantifiable data to form the basis of the
adjustments, and if such value has not been included in the price actually paid or
payable:
1. COMMISSIONS AND BROKERAGE FEES (Except Buying Commissions)
Includes selling commissions which are paid by the seller to his agent in the promotion and sale of
his products. Selling commission may take the form of an indentor’s commission, selling agent’s
commission, or manufacturer’s representative commission. -the term Brokerage fees refer to a
commission paid to a broker who arranges the transaction between a seller and a buyer.
BUYING COMMISSIONS-are fees paid by an importer to the importer’s agent for the service of
representing the importer abroad in the purchase of the goods being valued.
2. COST OF CONTAINERS
3. COST OF PACKING (whether for labor or materials)
4. ASSISTS
“Assists” is defined as 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. The goods services are:
4.1 Materials, components, parts, and similar items incorporated in the imported goods
4.2 Tools, dies, moulds, and similar items used in the production of the imported goods
4.3 Materials consumed in the production of the imported goods
4.4 Engineering, development, artwork, design work, and plans, and sketches undertaken
elsewhere than in the Philippines and necessary for the production of the imported
goods
5. ROYALTIES AND LICENSE FEES
6. PROCEEDS
7. COST OF TRANSPORT
8. COST OF INSURANCE
9. POST IMPORTATION CHARGES/COSTS
The dutiable value must not include the following charges or costs, if they are
distinguished from the price actually paid or payable for the goods:
Charges for construction, erection, assembly, maintenance, or technical
assistance, undertaken after importation on imported goods such as
industrial plant, machinery or equipment
Cost of transport after importation
Duties, taxes, and other charges paid for the imported goods
All additions to the price actually paid or payable shall be made only
on the basis of objective and quantifiable data
THE TRANSACTION VALUE OF IDENTICAL GOODS
If the dutiable value of imported goods cannot be determined with the
use of Method One, the dutiable value shall be determined under
Method Two or The Transaction Value of Identical Goods sold for export
to the Philippines and exported at or about the same time as the goods
being valued.
“Exported at or about the same time” is generally interpreted as
exportation of the identical goods forty five (45) days before or after the
date of BL/AWB of the goods being valued.
IDENTICAL IMPORTED GOODS ARE DEFINED AS GOODS WHICH ARE:
the same in all respects including physical characteristics,
quality and reputation
produced by the producer of the goods being valued
produced in the same country as the goods being valued
Identical goods EXCLUDES:
imported goods for which engineering, development,
artwork, design work, and plans and sketches is
undertaken in the Philippines and is provided by the buyer
to the producer of the goods free of charge or at a reduced
cost.
Minor differences in appearance would not
preclude goods which otherwise conform to the
definition from being regarded as identical
In applying Method Two, the Collector of Customs shall,
wherever possible, use a sale of identical goods at the same
commercial level and in substantially the same quantities as
the goods being valued. Where no such sale is found, a
sale of identical goods that takes place under any one of the
following three conditions may be used:
1. A sale at the same commercial level but in different quantities
2. A sale at a different commercial level but in substantially the
same quantities
3. A sale at a different commercial level and in different quantities
If in applying Method Two, more than one
transaction value of identical goods is found, the
lowest of such value shall be used to determine the
dutiable value of the imported goods.
THE TRANSACTION VALUE OF SIMILAR GOODS
Similar goods are defined as goods which, although not alike in all
respects
Have like characteristics and like component materials
Are capable of performing the same functions as the goods being
valued
Are commercially interchangeable with the goods being valued
Are produced in the same country of the goods being valued
Are produced by the producer of the goods being valued
Similar goods ALSO EXCLUDES:
imported goods for which engineering, development, artwork, design
work, and plans and sketches is undertaken in the Philippines and is
provided by the buyer to the producer of the goods free of charge or at a
reduced cost.
If in applying Method Three, more than one
transaction value of similar goods is found, the
lowest of such value shall be used to determine the
dutiable value of the imported goods.
THE DEDUCTIVE VALUE
By this Method, the dutiable value is determined on the basis of sales in
the Philippines of the goods being valued or of identical or similar
imported goods, less certain specified expenses resulting from the
importation and sale of the goods.
THE SALE IN THE PHILIPPINES MUST MEET THE FF. CONDITIONS:
1. The imported goods or identical or similar imported goods have been sold in the Philippines
in the same condition as imported
2. Sales of the imported goods being valued or of identical or similar imported goods have
taken place at or about the same time of importation of the goods being valued (extending
45 days prior to and 45 days following the importation of the goods being valued)
3. The purchaser must not be related to the importer from whom he buys such goods
4. The purchaser in the Philippines must not have supplied assists, either directly or indirectly
A deductive value is determined by making a deduction
from the established price per unit for the aggregate of
the ff. elements:
Commissions generally earned on a unit basis in connection
with sales in the Philippines
Additions usually made for connection with sales profit
Usual transport, insurance, and associated costs incurred
within the Philippines
Customs duties and other national taxes payable in the
Philippines
The term “unit price” means the price at which the greatest number of units is
sold in sales to persons who are not related to the persons from whom they buy
such goods at the first commercial level after importation at which such sales
take place.
As an example of this, goods are sold from a price list which grants
favorable unit prices for purchases made in larger quantities
The greatest number of units sold at a price is 80; therefore, the
unit price in the greatest aggregate quantity is 90
THE COMPUTED VALUE
Under this Method, the dutiable value is determined 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 Philippines of goods of the same
class or kind.
The dutiable value may be calculated as follows: Determine the aggregate of the
relevant costs, charges, and expenses or the value of:
1. Materials employed in producing the imported goods
2. Fabrication, production or other processing costs for the imported goods (direct and indirect
labor, factory overheads)
The ff. are to be added if not included above:
1. Cost of containers
2. Cost of packing
3. Assists
4. Engineering, development, artwork, design, work, and plans and sketches undertaken
in the Philippines and charged to the producer
THE FALLBACK VALUE
When the dutiable value cannot be determined under any of the previous methods
of valuation, it shall be determined by using other reasonable means consistent with
the principles and general provisions of GATT 1994, the WVA, and on basis of data
available in the Philippines.
If the importer requests, he shall be informed in writing of the dutiable value
determined under Method Six and the method used to determine such value
No dutiable value shall be determined under Method Six on the basis of:
1. The selling price in the Philippines of goods produced in the Philippines
2. A system that provides for the acceptance for customs purposes of the
higher of two alternative values.
3. The price of goods in the domestic market of the country of exportation.
4. The cost of production, other than computed values, that have been
determined for identical or similar goods in accordance with Method Five
hereof.
5. The price of goods for export to a country other than the Philippines.
6. Minimum dutiable values.
7. Arbitrary or fictitious values.
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