Managing Economies, Trade and International Business by Aidan O’Connor

Author:Aidan O’Connor
Format: epub
Publisher: Palgrave Macmillan

Determination of the applicable duties

MFN and preferential customs duties, antidumping and countervailing duties, and safeguard measures are levied by the authorities of each importing country according to three elements which the customs declaration contains: customs value, tariff classification code and origin of imported goods. The incidence of ad valorem duties depends to a large extent on the methods used to determine the dutiable value. The benefits to the trade arising from tariff bindings could be considerably diminished according to the rules and practice applied to determine the customs value of imported goods. According to the main principle of the 1995 WTO Agreement on Customs Valuation (ACV), the value for customs purposes should be based on the price actually paid or payable when sold for export to the country of importation.25 Such value, also called transaction value, is the invoice price, and may be adjusted, where appropriate, to include certain payments made by the buyers.26 The ACV requires all members to harmonize their national legislation on the basis of its rules, with the purpose of ensuring uniformity in the application of the customs valuation procedures, so that importers may assess in advance of imports the amounts of duties to be paid. When customs authorities have reasons to doubt that the value declared in the invoice is lower than the actual transaction price, the burden of the proof falls upon the importer. In order to ensure that the transaction value declared is rejected by customs authorities on an objective basis, the ACV stipulates that national legislation should provide certain rights to importers.27 However, in practical terms, there are several reasons why the benefits potentially arising from the ACV are diminished. The elements that should be included in the invoice price are not clear to all exporting firms and not all importers are acquainted with the elements that may be excluded from the determination of such price for customs valuation purposes. In addition, the lack of harmonization requires the knowledge of the national rules and customs practice, thus complicating a correct preliminary assessment of the value of imported goods. Such an assessment is quite important especially for firms exporting towards emerging markets like China, India and Brazil, where the concern for under-invoiced imported goods is so high as to lead to thorough controls of the declared customs value.

Each importing country determines the applicable duty according to its national customs tariff. All customs tariffs are based on the Harmonized Commodity Description and Coding System (HS Convention), the multilateral convention establishing a code and a description for all traded goods.28 The HS Convention is administered by the World Customs Organization (WCO) which is based in Brussels. The HS Convention is structured in twenty-one sections subdivided into ninety-nine chapters, categorized by productive sector, with goods grouped either according to the material of which are made or to the use, or function, they are destined to. The first two digits identify the HS chapter, the first four digits the HS heading, and the first six digits the HS subheading.

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