Valuation

What is Customs Valuation?

Customs Valuation is the process of determining a Customs Value for imported goods for the purpose of levying ad valorem duties (duties calculated as a percentage of the value of the goods).

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The Legal Framework

PNG Valuation Legislation

Customs value of imported goods must be determined in accordance with the national laws of Papua New Guinea.

Customs (Ad Valorem Duties) Regulations 1987 is PNG's primary legislation for customs valuation.

International Basis

PNG's valuation legislation is based on international agreements under the World Trade Organization (WTO):

Article VII of GATT 1994	General Agreement on Tariffs and Trade – lays down the fundamental principles of valuation.
Agreement on Implementation of Article VII	The detailed "Valuation Agreement" that sets out the methods for determining customs value.
Uruguay Round Ministerial Decision	Addresses cases where Customs has reason to doubt the truth or accuracy of declared values.

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The Principles of Customs Valuation

Core Principles (from Article VII of GATT)

The Customs Value must:

Not be arbitrary or fictitious	Must be based on real facts, not made up.
Not be based on value of indigenous goods	Cannot use the value of similar goods made in PNG as a basis.
Be real	Based on the actual import or like goods.
Be derived from an actual sale or offer of sale	Must come from a genuine commercial transaction.
Reflect normal competitive business conditions	Assumes buyers and sellers are acting independently and commercially.

The Basis of Customs Value

The Customs Value is based on the price paid or payable for the goods when sold for export to PNG.

In simple terms: It is the transaction value of the goods on the market when sold to the importer in PNG.

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Determination of Customs Value

The Primary Method: Transaction Value

The Transaction Value is the price paid or payable for the goods when sold for export to PNG, adjusted according to certain factors in the national legislation.

Price Paid or Payable	The total payment made or to be made by the buyer to the seller for the imported goods.
Adjustments	Certain costs must be added to or excluded from the price (see Part 5).

The 5 Alternative Methods (Sequential)

If the Customs Value cannot be determined under the Transaction Value Method, the Valuation Agreement provides five (5) other methods to determine a value. These must be applied in sequential order until a value is reached:

Method Name	Description
Transaction Value of Identical Goods	Value based on the transaction value of identical goods sold for export to PNG.
Transaction Value of Similar Goods	Value based on the transaction value of similar goods sold for export to PNG.
Deductive Value Method	Value based on the unit price at which the imported goods (or identical/similar goods) are sold in PNG, with deductions for certain costs.
Computed Value Method	Value based on the cost of production, profit, and general expenses.
Fallback Method	A reasonable means consistent with the principles of the Valuation Agreement, using available data.

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Important Valuation Issues – Conditions to Satisfy

Customs must be satisfied with the truth and accuracy of declared values, compliance with valuation conditions, and the availability of objective and quantifiable evidence of the sale transaction.

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Dutiable and Non-Dutiable Factors

When determining Customs Value, certain costs must be added (dutiable factors) and others may be excluded (non-dutiable factors).

Dutiable Factors (Inclusions)

These costs must be added to the price paid or payable if not already included:

Commissions and Brokerage	Except buying commissions (see non-dutiable factors).
Royalties and License Fees	Payments related to the goods being valued that the buyer must pay.
Proceeds of Subsequent Sale	Any part of the proceeds from any subsequent resale, disposal, or use of the goods that accrues to the seller.
Advance Payments / Deposits	Payments made in advance that are not reflected on the invoice.

Non-Dutiable Factors (Exclusions)

These costs may be excluded provided they are clearly shown and separately stated on the invoice:

Discounts	Legitimate discounts on the price.
Buying Commission	Fees paid by the importer to an agent for representing them in the purchase.
Interest Charges	Finance charges under a deferred payment arrangement (if separately shown)
Post-Importation Charges	Costs for construction, erection, assembly, maintenance, or technical assistance undertaken after importation.
Duties and Taxes Payable in PNG	Customs duty, GST, and other taxes payable in the importing country.

Key Requirements for Exclusions

For non-dutiable factors to be excluded:

•   The charges must be clearly described and separately stated on the invoice.
•   The arrangements for these charges must be made before or at the time of importation.
•   The charges must be directly related to the goods being valued.

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