The WTO Agreement on Customs Valuation provides a procedure to determine the customs value of imported goods. Basic principle adopted in the Agreement stipulates that customs valuation shall, except in specified circumstances, be based on the actual price of the goods to be valued, which is generally shown on the invoice. This price, plus adjustments for certain elements listed in Article 8, equals the transaction value, which constitutes the first and most important method of valuation referred to in the Agreement and transposed in the domestic law in Section 25(1) of the Customs Act, 1969. For cases in which the transaction value is not acceptable as the customs value because the price has been distorted as a result of certain conditions, or where no transaction value is available, the WTO Agreement and the Customs Act, 1969 lay down other methods of customs valuation, to be applied in the prescribed hierarchical order. For uniform applicability across the country, the legislature has mandated the Directorate General of Customs Valuation to determine customs value of goods or class of goods imported in Pakistan so that the misuse of the facility of self-assessment under transaction value method is checked on the one hand and widespread undervaluation, in certain type of commodities, or commodities with reference to certain type of origins, is arrested on the other hand.
The combined reading of Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade, Pakistan’s ratification of the this agreement, and aligning of its Customs Act with it in 2000, sections 18, 25 and 25-A, 79 and 80 of Customs Act, 1969 as are currently in force and chapter IX of Customs Rules 2001 entail that determination of customs values by using the powers conferred under section 25-A is not a simple matter and Valuation Rulings cannot be issued in automatic or mechanical manner. Now it is well settled and understood by the regulators that widespread coverage of commodities and issuance of rulings is neither permissible nor it can be allowed. Pre-determination of values under section 25-A is a mechanism for exceptions’ handling; it cannot override section 25 and majority of assessments for all practical purposes shall remain under section 25. Powers granted under Section 25-A are used to enhance the mandate of section 25 and not to override or circumvent it.
As a specialized department, the main function of the Directorate General of Customs Valuation is to determine customs value of certain commodities under Section 25A of the Customs Act, 1969, where there are reasons, to be placed on record, that assessments under section 25 of the Customs Act, 1969 are problematic and cannot be handled in normal course of clearance by the clearance formations in the country. The customs values are determined after following a ‘due process’. The department makes an effort to keep the process fair and transparent so that it does not become a non-tariff barrier to international trade.
The Directorate General of Customs Valuation issues Valuation Rulings as envisaged under section 25A and Valuation Advices in case of transactions processed under Section 81 of the Customs Act, 1969 by the Clearance Collectorates. These rulings and advices are issued in the light of existing laws, rules, SROs and standing orders etc. issued from time to time. Due process of law is followed in the exercise of determination of Customs values. The methodologies prescribed under Section 25 of the Customs Act, 1969 are followed in letter and spirit. The whole exercise is carried out in a fair and transparent manner. In case of grievances against the notified values under Section 25A of the Customs Act, 1969, the aggrieved person can avail the statutory remedy by filing of a revision petition under Section 25D of the Customs Act, 1969 before the Director General of Customs Valuation.
It is not a mandatory condition under the law to hold stakeholder meetings before issuance of a Valuation Ruling. However, it has been noted that there is hardly any ruling issued without stakeholders’ meeting. For this purpose, formal notices are issued to the stakeholders including importers, local manufacturers, trade bodies / associations, industrial experts, representatives of Chambers of Commerce and Industry and Federation of Chambers of Commerce and Industry, Clearance Collectorates, especially at Karachi, are invariably invited to participate in the proceedings. Directorate of Valuation expects the participants to bring all documents, record, evidences, samples or other material in support of their contentions so that open discussion is held during the stakeholder meeting.
This Directorate General believes that most of the business information and intelligence is available with the businesses / traders. Based on this principle, input and feedback of stakeholders is considered as one of the essential ingredients for fine calibration of customs values so that they are true reflective of the transaction values. Director may continue the current practice and it is advised to hold at least one stakeholder meeting before finalizing any Valuation Ruling.
Re-determinations under section 25-A depend on the following factors:
The Directorate General continuously up-dates its rulings but due to resource constraints, as identified above, is usually lagging behind. The Directorate General shall also make a priority list for the Valuation Rulings to be revised. The factors which affect the process of prioritizing have been identified in section Drivers of Valuation Rulings. The same factors can be considered for prioritizing redeterminations.
