To be enforced in Pakistan
from Jan 1, 2000
By AMANULLAH BASHAR
Sep 06, 1999
Under the World Trade Organization (WTO), the General Agreement on
Tariff and Trade (GATT) system for customs valuation is being enforced in Pakistan from
January 1, 2000.
Since the ultimate target of introducing GATT valuation system at
customs stage is aimed at minimizing duty on imports to a level of zero-rated regime, the
customs revenues are likely to fall in the initial stage. Although it may not be possible
to assess the exact fall in revenue at this stage, however, experts feel that a 10 per
cent fall in revenue collection through customs is estimated.
India has already introduced the GATT system of valuation in 1998 and
has to bear a considerable loss of revenue. In the long run, the customs revenue will be
replaced by GST and the revenue collecting authorities in Pakistan are also making headway
in that direction.
The new system is claimed to be stable, uniform, reasonable and
impartial which is derived in the ordinary course of trade and under full competitive
conditions, keeping in view the comparable quantities, qualities, place, time etc.
This system of valuation has to be based on equitable and simple
principles, which should ensure quick clearance of imported consignments. Dutiable value
should be based on equitable and simple principles. The concept of dutiable value shall be
readily comprehensible to the importer as well as the customs. The system of valuation
should not prevent the quick clearance of goods, it should enable traders to estimate in
advance with a reasonable degree of certainty the value of customs purposes. When the
customs considers that the declared value may be incorrect, the essential facts for the
determination and enforcement of dutiable value should be speedily and accurately verified
and the system should reduce formalities to a minimum level.
New system should provide the protection to the honest importers and in
case of any valuation dispute, the dutiable value should be speedily and correctly
verified. The procedure should be simple and the documentation should be minimum.
The findings of the conference, held at Geneva in 1947, were embodied
in the General Agreement on Tariffs and Trade (GATT) signed at Geneva on behalf of 23
nations on October 30, 1947.
Pakistan acceded as a Contracting Party to the GATT in 1951. The main
objectives and principles of the GATT are: The most favoured nation treatment, the
non-discrimination and the reduction of trade barriers especially the customs duties.
The valuation provision in Article VII of the GATT, calls for
standardization, as far as practicable of definitions for value and of procedures for
determining value and lays downs certain principles in this connection.
After the adoption of Article VII of the GATT, the next step in the
development of international cooperation in valuation procedure was taken by the European
Customs Union Study Group. The group was set up in 1947 in Brussels.
Brussels Valuation Convention
The definition of value, produced by the study group in 1949 adapted
for use by any country and was incorporated in the convention on the valuation of goods
for customs purposes which was signed in Brussels on Dec.15, 1950. At present this code of
valuation is applied by 17 European countries and by six other than European countries
namely Haiti, Kenya, Korea, Pakistan, Rwanda and Tunisia as member countries.
The increased importance of customs valuation is a feature of the
development of modern customs tariff system. In the past, the usual purpose of imposing
import duties was to raise revenue. For ease of incidence i.e. revised at a fixed rate per
unit of quantity, or if exceptionally "ad valorem" they were applied to
merchandise market value which was easy to ascertain. In more recent time the purpose of
imposing import duties has begun to turn towards protection and encouragement of home
industry and as the "ad valorem" system has been found to be more suitable for
this purpose (for various reasons e.g fluctuating prices, the need to take into account
gradations of quality, etc.,) its use has become widespread. This development has greatly
extended the field of customs valuation and has included in it many classes of merchandise
entailing special valuation problems such as novel, specialized and proprietary goods and
merchandise for which small price margins are in important element in competition. More
adequate and precise valuation procedures have thus become necessary.
Customs valuation is distinguished from commercial valuation. The
customs is concerned not only with the transaction between the buyer and the seller but
with all similar transactions between other buyers and sellers. The customs must ensure
impartial application of "ad valorem duties so as to avoid any discrimination between
one importer and another. A new factor in valuation is thus the need for a standard. This
standard, which constitutes the customs definition of value, must be applicable to all
transactions, whoever the parties to them may be and whatever their conditions.
PROVISIONS OF CUSTOMS VALUES :
* Should be real and that they should be neither arbitrary or
fictitious nor based upon the value of merchandise of national origin.
* The basis for determining such values should be stable, given
* The administration of customs valuation shall be Uniform, Impartial,
Reasonable and Subject to arbitration.
The Brussels Convention provides for necessary currency conversions to
be made at the official rates of exchange of importing countries.
* The value of any imported goods shall be taken, to be at the normal
price. The normal price of any imported goods shall be determined on the following
- that the goods brought by sea or land are treated as having been
delivered to the buyer at the port or place of importation, as the case may be, and that
goods brought by air are treated as having been delivered to the buyer at the airport or
place where they are unloaded in Pakistan or if the aircraft first lands in Pakistan at
some other airport or place without unloading the goods at such other airport or place.
- that the seller will bear freight, insurance, commission and all
other costs, charges and expenses incidental to the sale and the delivery of the goods at
that port, airport or place which will be included in the normal price.
- that the buyer will bear any duties or taxes applicable in Pakistan
which will not be included in the normal price.
The normal price shall be determined on the assumption that it includes
the value of the right to use the patent , design or trade mark in respect of the goods.
The value of any exported goods shall be taken to be the normal price,
that is to say, the price which they would fetch, at the prescribed time, on sale in open
market for exportation to the country to which goods are consigned between a seller and a
buyer independent of each other.
The normal price of any exported goods shall be determined on the
* that the goods are treated as having been delivered to the buyer on
board the conveyance in which they are to be exported:
* that the seller will bear all packing, commission, transport, loading
and all other costs, charges and expenses including any export duty which may be
chargeable incidental to the sale and to the delivery of the goods on board the conveyance
in which they are to be exported and which will be included in the normal price.
The normal price shall be determined on the assumption that it includes
the value of the right to use the patent, design or trade mark in respect of the goods.
Discounts and price reductions, freely available to any buyer in the
open market, including those relating to quantity and level, do not ordinarily call for
adjustment of contract prices. In the case of discounts and price reductions of only
limited availability, however, it is usually necessary to adjust the reduced contract
Reduction or concession in price (discounts, rebates) there are
admissible if they are:
- customary in trade and freely available to any buyer of the same
commercial level and fixed at the time of assessment of the duties (not retrospective).
Admissible reductions of concessions in price.
* Quantity rebates are reductions in price granted for the buying of a
certain quantity of goods. There may also be a standard price for minimum quantities with
progressive rebates for quantities falling within stated brackets (no rebate up to 300
tonnes, 4 per cent rebate from 300 tonnes to 800 tonnes, 7 per cent over 800 tonnes). Such
rebates are admissible in determining the dutiable value, even the goods are imported in
successive consignments, but only if reasonable time reflecting the normal commercial
practice in the quantity to which the discounts are related, in fact to be delivered to
the country of import. In such cases the quantity rebate for the total quantity of the
goods shall be accepted by the customs at the time of clearance of the last partial
consignment, provided that the rebate was fixed by the seller already at the time of the
customs clearance for home use or for temporary admission in respect of the first partial