Customs Valuation (Determination of Price of imported Goods) Rules, 2007

1. Short title, commencement and application.-(1)These rules may be called the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007.

(2)    They shall come into force on the 10th day of October, 2007.

(3)    They shall apply to imported goods.

2.  Definitions. - (1) In these rules, unless the context otherwise requires, -

(a)  "computed value" means the value of imported goods determined in accordance with rule
8.

(b)  "deductive value" means the value determined in accordance with rule 7.

(c)  "goods of the same class or kind", means imported goods that are within    a group or
range of imported goods produced by a particular industry or industrial sector and includes
identical goods or similar goods;

(d)  "identical goods" means imported goods -                  

(i)    which are same in all respects, including physical characteristics, quality and
reputation as the goods being valued except for minor differences in appearance that do
not affect the value of the goods;       

(ii)   produced in the country in which the goods being valued were produced;
and                          

(iii)    produced by the same person who produced the goods, or where no such goods
are available, goods produced by a different person,

but shall not include imported goods where engineering, development work, art work,
design work, plan or sketch undertaken in India were completed directly or indirectly by
 the buyer on these imported goods free of charge or at a reduced cost for use in
connection with the production and sale for export of these imported
goods;                        

1
[(da) “place of importation” means the customs station, where the goods are brought for
being cleared for home consumption or for being removed for deposit in a warehouse;]

(e)  "produced" includes grown, manufactured and mined                        

(f)  "similar goods" means imported goods -                             

(i) which although not alike in all respects, have like characteristics and like component
materials which enable them to perform the same functions and to be commercially
interchangeable with the goods being valued having regard to the quality, reputation and the
existence of trade mark;                               

(ii) produced in the country in which the goods being valued were produced;
and                               

(iii) produced by the same person who produced the goods being valued, or where no such
goods are available, goods produced by a different person,                              

but shall not include imported goods where engineering, development work, art work,
design work, plan or sketch undertaken in India were completed directly or indirectly by
the buyer on these imported goods free of charge or at a reduced cost for use in
connection with the production and sale for export of these imported goods;               

(g)   "transaction value" means the value referred to in sub-section (1) of section 14 of the
Customs Act, 1962;       

(2)   For the purpose of these rules, persons shall be deemed to be "related" only if -               

(i)    they are officers or directors of one another's businesses;               

(ii)   they are legally recognised partners in business;               

 (iii)  they are employer and employee;               

(iv)  any person directly or indirectly owns, controls or holds five per cent or more of the
outstanding voting stock or shares of both of them;               

(v)   one of them directly or indirectly controls the other;                        

(vi)  both of them are directly or indirectly controlled by a third person;                        

(vii)together they directly or indirectly control a third person; or                        

(viii) they are members of the same family.                               

ExplanationI.  - The term "person" also includes legal persons.

Explanation II. - Persons who are associated in the business of one another in that one is
the sole agent or sole distributor or sole concessionaire, howsoever described, of the
other shall be deemed to be related for the purpose of these rules, if they fall within the
criteria of this sub-rule.

3.    Determination of the method of valuation.- (1) Subject to rule 12, the value of imported
goods shall be the transaction value adjusted in accordance with provisions of rule 10;
      
(2)   Value of imported goods under sub-rule (1) shall be accepted:
               
Provided that -
              
(a) there are no restrictions as to the disposition or use of the goods by the buyer other than
restrictions which –
                            
(i)    are imposed or required by law or by the public authorities in India; or
                            
(ii)   limit the geographical area in which the goods may be resold; or
                            
(iii)  do not substantially affect the value of the goods;
                       
(b)   the sale or price is not subject to  some condition or consideration for which a value cannot
be determined in respect of the goods being valued;
                       
(c)   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, unless an appropriate adjustment can be made in
accordance with the provisions of rule 10 of these rules; and
                       
(d)   the buyer and seller are not related, or where the buyer and seller are related, that
transaction value is acceptable for customs purposes under the provisions of sub-rule (3)
below.
 
      
(3)   (a) Where the buyer and seller are related, the transaction value shall be accepted
provided that the examination of the circumstances of the sale of the imported goods indicate
that the relationship did not influence the price.
              
(b)   In a sale between related persons, the transaction value shall be accepted, whenever the
importer demonstrates that the declared value of the goods being valued, closely
approximates to one of the following values ascertained at or about the same time.
                       
(i)    the transaction value of identical goods, or of similar goods, in sales to unrelated buyers
in India;
                    
(ii)   the deductive value for identical goods or similar goods;
                    
(iii)  the computed value for identical goods or similar goods:
      
Provided that in applying the values used for comparison, due account shall be taken of
demonstrated difference in commercial levels, quantity levels, adjustments in accordance with
the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are
not related;
              
(c) substitute values shall not be established under the provisions of clause (b) of this sub-rule.
 
(4)   if the value cannot be determined under the provisions of sub-rule (1), the value shall be
determined by proceeding sequentially through rule 4 to 9.

4.    Transaction value of identical goods. — (1)(a)Subject to the provisions of rule 3, the value
of imported goods shall be the transaction value of identical goods sold for export to India and
imported at or about the same time as the goods being valued;  
    
 Provided that such transaction value shall not be the value of the goods provisionally assessed
under section 18 of the Customs Act, 1962.
              
(b)   In applying this rule, the transaction value of identical goods in a sale at the same
commercial level and in substantially the same quantity as the goods being valued shall be
used to determine the value of imported goods.
              
(c)   Where no sale referred to in clause (b) of sub-rule (1), is found, the transaction value of
identical goods sold at a different commercial level or in different quantities or both, adjusted
to take account of the difference attributable to commercial level or to the quantity or both,
shall be used, provided that such adjustments shall be made on the basis of demonstrated
evidence which clearly establishes the reasonableness and accuracy of the adjustments,
whether such adjustment leads to an increase or decrease in the value.
 
 (2)  Where the costs and charges referred to in sub-rule (2) of rule 10 of these rules are
included in the transaction value of identical goods, an adjustment shall be made, if there are
significant differences in such costs and charges between the goods being valued and the
identical goods in question arising from differences in distances and means of transport.
 
(3) In applying this rule, if more than one transaction value of identical goods is found, the
lowest such value shall be used to determine the value of imported goods.

5.    Transaction value of similar goods. — (1)Subject to the provisions of rule 3, the value of
imported goods shall be the transaction value of similar goods sold for export to India and
imported at or about the same time as the goods being valued:   
 
 Provided that such transaction value shall not be the value of the goods provisionally assessed
under section 18 of the Customs Act, 1962.
 
(2)    (2)  The provisions of clauses (b) and (c) of sub-rule (1), sub-rule (2) and sub-rule (3), of rule 4
shall, mutatis mutandis, also apply in respect of similar goods.

6.    Determination of value where value can not be determined under rules 3, 4 and 5. - If
the value of imported goods cannot be determined under the provisions of rules 3, 4 and 5, the
value shall be determined under the provisions of rule 7 or, when the value cannot be
determined under that rule, under rule 8.
    
Provided that at the request of the importer, and with the approval of the proper officer, the
order of application of rules 7 and 8 shall be reversed.

7.   Deductive value. — (1)  Subject to the provisions of rule 3, if the goods being valued or
identical or similar imported goods are sold in India, in the condition as imported at or about
the time at which the declaration for determination of value is presented, the value of
imported goods shall be based on the unit price at which the imported goods or identical or
similar imported goods are sold in the greatest aggregate quantity to persons who are not
related to the sellers in India, subject to the following deductions : —
              
(i)    either the commission usually paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of imported goods of the same
class or kind;
                    
(ii)   the usual costs of transport and insurance and associated costs incurred within India;
              
(iii)  the customs duties and other taxes payable in India by reason of importation or sale of the
goods.
 
(2)  If neither the imported goods nor identical nor similar imported goods are sold at or about
the same time of importation of the goods being valued, the value of imported goods shall,
subject otherwise to the provisions of sub-rule (1), be based on the unit price at which the
imported goods or identical or similar imported goods are sold in India, at the earliest date
after importation but before the expiry of ninety days after such importation.
      
(3)   (a)    If neither the imported goods nor identical nor similar imported goods are sold
in India in the condition as imported, then, the value shall be based on the unit price at which
the imported goods, after further processing, are sold in the greatest aggregate quantity to
persons who are not related to the seller in India.
 
(b) In such determination, due allowance shall be made for the value added by processing and
the deductions provided for in items (i) to (iii) of sub-rule (1).

8.    Computed value. — Subject to the provisions of rule 3, the value of imported goods shall
be based on a computed value, which shall consist of the sum of:-
                       
(a)   the cost or value of materials and fabrication or other processing employed in producing
the imported goods;
                       
(b)   an amount for profit and general expenses equal to that usually reflected in sales of goods
of the same class or kind as the goods being valued which are made by producers in the
country of exportation for export to India;
 
(c)  the cost or value of all other expenses under sub-rule (2) of rule 10.

9.    Residual method. - (1)  Subject to the provisions of rule 3, where the value of imported
goods cannot be determined under the provisions of any of the preceding rules, the value shall
be determined using reasonable means consistent with the principles and general provisions
of these rules and on the basis of data available in India;
      
Provided that the value so determined shall not exceed the price at which such or like goods
are ordinarily sold or offered for sale for delivery at the time and place of importation in the
course of international trade, when the seller or buyer has no interest in the business of other
and price is the sole consideration for the sale or offer for sale.
 
(2)   No value shall be determined under the provisions of' this rule on the basis of -
      
(i)    the selling price in India of the goods produced in India;
      
(ii)   a system which provides for the acceptance for customs purposes of the highest of the two
alternative values;
        
(iii)  the price of the goods on the domestic market of the country of exportation;
        
(iv)  the cost of production other than computed values which have been determined for
identical or similar goods in accordance with the provisions of rule 8;
        
(v)   the price of the goods for the export to a country other than India;
        
(vi)  minimum customs values; or
        
(vii) arbitrary or fictitious values.

10.Cost and services. -

 
(1) In determining the transaction value, there shall be added to the price actually paid or
payable for the imported goods, -
           
(a)   the following to the extent they are incurred by the buyer but are not included in the
price actually paid or payable for the imported goods, namely:-
                      
(i)    commissions and brokerage, except buying commissions;
                      
(ii)   the cost of containers which are treated as being one for customs purposes
with the goods in question;
                    
(iii)  the cost of packing whether for labour or materials;
           
 (b)   The value, apportioned as appropriate, of the following goods and services where
supplied directly or indirectly by the buyer free of charge or at reduced cost for use in
connection with the production and sale for export of imported goods, to the extent that
such value has not been included in the price actually paid or payable, namely:-
                    
(i)    materials, components, parts and similar items incorporated in the imported
goods;
                    
(ii)   tools, dies, moulds and similar items used in the production of the Imported
goods;
                    
(iii)  materials consumed in the production of the imported goods;
                    
(iv)  engineering, development, art work, design work, and plans and sketches
undertaken elsewhere than in India and necessary for the production of the
imported goods;
           
(c)   royalties and licence fees related to the imported goods that the buyer is required to
pay, directly or indirectly, as a condition of the sale of the goods being valued, to the
extent that such royalties and fees are not included in the price actually paid or payable;
           
(d)   The value of any part of the proceeds of any subsequent resale, disposal or use of the
imported goods that accrues, directly or indirectly, to the seller;
           
(e)   all other payments actually made or to be made as a condition of sale of the
imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an
obligation of the seller to the extent that such payments are not included in the price
actually paid or payable.
 
Explanation.- Where the royalty, licence fee or any other payment for a process, whether
patented or otherwise, is includible referred to in clauses (c) and (e), such charges shall
be added to the price actually paid or payable for the imported goods, notwithstanding
the fact that such goods may be subjected to the said process after importation of such
goods.
 

(2) For the purposes of sub-section (1) of section 14 of the Customs Act, 1962 (52 of 1962) and
these rules, the value of the imported goods shall be the value of such goods, and shall include
-

(a) the cost of transport, loading, unloading and handling charges associated with the
delivery of the imported goods to the place of importation;

(b) the cost of insurance to the place of importation:

Provided that where the cost referred to in clause (a) is not ascertainable, such cost shall
be twenty per cent of the free on board value of the goods:

Provided further that where the free on board value of the goods is not ascertainable but
the sum of free on board value of the goods and the cost referred to in clause (b) is
ascertainable, the cost referred to in clause (a) shall be twenty per cent of such sum:

Provided also that where the cost referred to in clause (b) is not ascertainable, such cost
shall be 1.125% of free on board value of the goods:

Provided also that where the free on board value of the goods is not ascertainable but the
sum of free on board value of the goods and the cost referred to in clause (a) is
ascertainable, the cost referred to in clause (b) shall be 1.125% of such sum:

Provided also that in the case of goods imported by air, where the cost referred to in
clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board
value of the goods:

Provided also that in the case of goods imported by sea or air and transshipped to
another customs station in India, the cost of insurance, transport, loading, unloading,
handling charges associated with such transshipment shall be excluded.

Explanation-

The cost of transport of the imported goods referred to in clause (a) includes the ship
demurrage charges on charted vessels, lighterage or barge charges.
11. Declaration by the importer. — (1)The importer or his agent shall furnish -
              
(a)  a declaration disclosing full and accurate details relating to the value of imported goods;
and
              
(b)   any other statement, information or document including an invoice of the manufacturer or
producer of the imported goods where the goods are imported from or through a person other
than the manufacturer or producer, as considered necessary by the proper officer for
determination of the value of imported goods under these rules.
      
(2)   Nothing contained in these rules shall be construed as restricting or calling into question
the right of the proper officer of customs to satisfy himself as to the truth or accuracy of any
statement, information, document or declaration presented for valuation purposes.
      
(3)   The provisions of the Customs Act, 1962 (52 of 1962) relating to confiscation, penalty and
prosecution shall apply to cases where wrong declaration, information, statement or
documents are furnished under these rules.

12. Rejection of declared value. —  (1) When the proper officer has reason to doubt the truth
or accuracy of the value declared in relation to any imported goods, he may ask the importer
of such goods to furnish further information including documents or other evidence and if,
after receiving such further information, or in the absence of a response of such importer, the
proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it
shall be deemed that the transaction value of such imported goods cannot be determined
under the provisions of sub-rule (1) of rule 3. 

(2) At the request of an importer, the proper officer, shall intimate the importer in writing the
grounds for doubting the truth or accuracy of the value declared in relation to goods imported
by such importer and provide a reasonable opportunity of being heard, before taking a final
decision under sub-rule (1).

Explanation.-(1) For the removal of doubts, it is hereby declared that:-

(i) This rule by itself does not provide a method for determination of value, it provides a
mechanism and procedure for rejection of declared value in cases where there is reasonable
doubt that the declared value does not represent the transaction value; where the declared
value is rejected, the value shall be determined by proceeding sequentially in accordance with
rules 4 to 9.

(ii) The declared value shall be accepted where the proper officer is satisfied about the truth
and accuracy of the declared value after the said enquiry in consultation with the importers.

(iii) The proper officer shall have the powers to raise doubts on the truth or accuracy of the
declared value based on certain reasons which may include -

(a) the significantly higher value at which identical or similar goods imported at or about the
same time in comparable quantities in a comparable commercial transaction were assessed;

(b) the sale involves an abnormal discount or abnormal reduction from the ordinary
competitive price;

(c) the sale involves special discounts limited to exclusive agents;

(d) the misdeclaration of goods in parameters such as description, quality, quantity, country of

origin, year of manufacture or production;

(e) the non declaration of parameters such as brand, grade, specifications that have relevance
to value;

(f)  the fraudulent or manipulated documents.

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

1. Short title, commencement and application.- (1) These rules may be called the Customs
Valuation (Determination of Value of Export Goods) Rules, 2007.

(2)   They shall come into force on the 10th day of October, 2007.

(3)   They shall apply to the export goods.

2. Definitions. - (1) In these rules, unless the context otherwise requires, -

(a) "goods of like kind and quality" means export goods which are identical or similar in
physical characteristics, quality and reputation as the goods being valued, and perform the
same functions or are commercially interchangeable with the goods being valued, produced
by the same person or a different person; and

(b) "transaction value" means the value of export goods within the meaning of sub-section (1)
of section 14 of the Customs Act, 1962 (52 of 1962).

(2) For the purposes of these rules, persons shall be deemed to be "related" only if -

(i) they are officers or directors of one another's businesses;

(ii) they are legally recognised partners in business;

(iii)  they are employer and employee;

(iv) any person directly or indirectly owns, controls or holds five per cent or more of the
outstanding voting stock or shares of both of them;

(v) one of them directly or indirectly controls the other;

(vi) both of them are directly or indirectly controlled by a third person;

(vii) together they directly or indirectly control a third person; or

(viii) they are members of the same family.

ExplanationI. - The term "person" also includes legal persons.

Explanation II. - Persons who are associated in the business of one another in that one is the
sole agent or sole distributor or sole concessionaire, howsoever described, of the other shall be
deemed to be related for the purpose of these rules, if they fall within the criteria of this sub-
rule.

3. Determination of the method of valuation. - (1)Subject to rule 8, the value of export goods
shall be the transaction value.

(2) The transaction value shall be accepted even where the buyer and seller are related,
provided that the relationship has not influenced the price.

(3) If the value cannot be determined under the provisions of sub-rule (1) and sub-rule (2), the
value shall be determined by proceeding sequentially through rules 4 to 6.

4. Determination of export value by comparison. - (1)   The value of the export goods shall be
based on the transaction value of goods of like kind and quality exported at or about the same
time to other buyers in the same destination country of importation or in its absence another
destination country of importation adjusted in accordance with the provisions of sub-rule (2).

(2) In determining the value of export goods under sub-rule (1),  the proper officer shall make
such adjustments as appear to him reasonable, taking into consideration the relevant factors,
including-

(i)  difference in the dates of exportation,

(ii)  difference in commercial levels and quantity levels,

(iii) difference in composition, quality and design between the goods to be assessed and the
goods with which they are being compared,
(iv) difference in domestic freight and insurance charges depending on the place of
exportation.

5. Computed value method. - If the value cannot be determined under rule 4, it shall be based
on a computed value, which shall include the following:-

(a) cost of production , manufacture or processing of export goods;

(b) charges, if any, for the design or brand;

(c) an amount towards profit.

6. Residual method. - (1) Subject to the provisions of rule 3, where the value of the export
goods cannot be determined under the provisions of rules 4 and 5, the value shall be
determined using reasonable means consistent with the principles and general provisions of
these rules provided that local market price of the export goods may not be the only basis for
determining the value of export goods.

7. Declaration by the exporter.-The exporter shall furnish a declaration relating to the value of
export goods in the manner specified in this behalf.

8. Rejection of declared value.-(1)   When the proper officer has reason to doubt the truth or
accuracy of the value declared in relation to any export goods, he may ask the exporter of such
goods to furnish further information including documents or other evidence and if, after
receiving  such further information, or in the absence of a response of such exporter, the
proper officer still has reasonable doubt about the truth or accuracy of the value so declared,
the transaction value shall be deemed to have not been determined in accordance with sub-
rule (1) of rule 3.

(2)  At the request of an exporter, the proper officer shall intimate the exporter in writing the
ground for doubting the truth or accuracy of the value declared in relation to the export goods
by such exporter and provide a reasonable opportunity of being heard, before taking a final
decision under sub-rule (1).

Explanation. - (1) For the removal of doubts, it is hereby declared that-

(i) This rule by itself does not provide a method for determination of value, it provides a
mechanism and procedure for rejection of declared value in cases where there is reasonable
doubt that the declared value does not represent the transaction value; where the declared
value is rejected, the value shall be determined by proceeding sequentially in accordance with
rules 4 to 6.   

(ii) The declared value shall be accepted where the proper officer is satisfied about the truth or
accuracy of the declared value after the said enquiry in consultation with the exporter.

(iii) The proper officer shall have the powers to raise doubts on the declared value based on
certain reasons which may include -

(a) the significant variation in value at which goods of like kind and quality exported at or
about the same time in comparable quantities in a comparable commercial transaction were
assessed.

(b) the significantly higher value compared to the market value of goods of like kind and
quality at the time of export.

(c) the misdeclaration of goods in parameters such as description, quality, quantity, year of

manufacture or production.