What are the Key Points and Methods of Value Verification? - Professional Articles (2024)

Main Basis:

Regulations on Tariff of the People’s Republic of China

Measures for the Customs to Examine and Determine the Duty-paid Value of Imported and Exported Goods

Measures for theCustoms toExamineand Determinethe Duty-paidValue of Bonded Goods Sold in the Domestic Market

Measures for the Customs Taxationon Imported and Exported Goods

In addition, there arealsoother officialannouncements issued by the Customs for examininganddeterminingthe customsvalue. For example, to regulate thecustomsvalueof imported goods or trade methods such as processing trade, cross-border e-commerce, aircraft leasing, etc.

As the name implies, the customs valuation,is a process in which the Customsexaminesthedeclared valueof importsand exportsto determine the customsvalue. Therefore, determination of duty-paid value of the import and export goods isthe coreissuefor the Customs valuation.

The basic methods for determining the customs valueare as follows:

(I) Determination of the Customs Value of Imported Goods

1.Valuation Method Based on Transaction Price

The customs value of imported goods shall be determined by the Customs on the basis of the transaction priceof the imported goods, including the cost of transport and associated charges and insurance of the goods before the unloading at the port of entry in the territory of the People’s Republic of China.Where the transaction price of imported goods cannot be determined or is deemed to not comply with the provisions by the Customs, the Customs shall determine the customs value of the goods by the following items 2-6 methods in a sequential order after gathering relevant information and consulting with taxpayers regarding value.

Note: taxpayers may, after providing relevant information to the Customs, request that the applicable order of items 4and 5in the followingparagraph be reversed.

2.Valuation Method Based on Transaction Priceof Identical Goods

The valuation method based on the transaction priceof identical goods is a valuation method whereby the Customs determines the customs value of imported goods on the basis of the transaction priceof identical goods sold for export to the territory of the People’s Republic of China at or about the same time as the imported goods.“Identical goods”means goods which are produced in the same country or region as the imported goods and are identical to the imported goods in all aspects including physical characteristics, quality, and reputation; but minor differences in appearance are permitted. “About the same time”means less than 45 days before or after the day on which the Customs accepts the declaration of goods.

3.Valuation Method Based on Transaction PriceofSimilarGoods

The valuation method based on the transaction priceof similar goods is a valuation method whereby the Customs determines the customs value of imported goods on the basis of the transaction priceof similar goods sold for export to the territory of the People’s Republic of China at or about the same time as the imported goods.“Similar goods”means goods which are produced in the same country or region as the imported goods and, although not identical in all aspects, have similar characteristics and component materials enabling them to perform the same functions, and they can be commercially interchangeable with the imported goods.

4.Deductive Price ValuationMethod

The deductive price valuation method is a valuation method whereby the Customs determines the customs value of imported goods on the basis of the sales price of the imported goods or identical or similar goods after deduction of relevant expenses incurred within China. The sales price shall meet all of the following conditions:(1) the price is the sales price of the imported goods or identical or similar goods sold within China at or about the time of the importation; (2) the price is the sales price of the goods in the same condition as imported; (3) the price is the sales price of the goods initially sold within China; (4) the price is the sales price of the goods sold to unrelated parties within China; and (5) the goods sold at the price are in the largest aggregate quantity.

5.Computed Price ValuationMethod

The computed price valuationmethod is a method whereby the Customs determines the customs value of imported goods on the basis of the sum of the following:(1) the cost of materials, parts and other processing employed in producing the goods; (2) usual profit and general expenses (including direct and indirect expenses) in sales of goods of the same class or kind for export to China; and (3) the cost of transport and associated charges and insurance incurred before the unloading of goods at the port of entry within China.

6.Reasonable Price ValuationMethod

The reasonable price valuationmethod is a method whereby the Customs determines the customs value of imported goods on the basis of objective and quantifiable data under the principles of neutrality, fairness, and uniformity,only if the customs value cannot be determined by the above methods.In determining the customs value applying this method, the Customs is not allowed touse the following:

1）sales price of goods produced within China;

2） the higher price of two alternatives;

3） sales price of the goods in the exporting country or region;

4）price of identical or similar goods computed based on the values or costs other than computed price valuationmethod.

5）sales price of goods exported to a third country or region; or

6）floor price, or arbitrary or fictitious prices.

(II) Customs Value of Exported Goods

The customs value of exported goods shall be determined by the Customs on the basis of the transaction priceof the goods, including the cost of transport and associated charges and insurance incurred before loading of the goods at the port of departure within the People’s Republic of China.

Where the transaction priceof exported goods cannot be determined, the Customs shall, after gathering relevant information and consulting with taxpayers, determine the customs value of the goods on the basis of the following prices in a sequential order:

(1) the transaction priceof identical goods exported to the same country or region at or about the same time;

(2) the transaction priceof similar goods exported to the same country or region at or about the same time;

(3) the value computed on the basis of the cost, profit, and general expenses (including direct and indirect expenses) for producing identical or similar goods within China and the cost of transport and associated charges and insurance incurred within China; and

(4) the value determined by reasonableprice valuation method.

1. In declaration to the Customs, taxpayers shall truthfully provide invoices, contracts, bills of lading, packing lists, and other documents to the Customs, and declare the related transactions. The Customs shall examine the price of the declared goods, and confirm whether the related relationship affects the transaction price.

2.To verify the truth and accuracy of the declared values, when examining and verifying the value, the Customs may require the taxpayers and the customs declaration enterprises to make supplementary declaration. For example, they shall also truthfully provide payment vouchers relating to the transaction, as well as other commercial documents, written materials, and electronic data proving the truth and accuracy of the declared values.

3. Whenthe Customs has any doubt about the truth or accuracy of the declared value or deems that the relationship between the buyer and the seller has affected the transaction price,it will initiate the price doubt negotiation procedure, notifying in writing the taxpayer of the reasons for the doubt. The taxpayer shall, provide the relevant information or other evidence in writing to prove that the declared value is true and accurate or the relationship between both parties has not affected the transaction price.

4. After initiating the price doubt negotiation procedure and the taxpayer’sprovision ofthe relevant information or evidence, the Customs still has reasons to doubt the truth or accuracy of the declared value, or to believe that the relationship between the buyer and the seller has affected the transaction price after examining such information or evidence. Under this condition, the Customs can decline the declared value, and use the above-mentioned valuation methods in a sequential order to examine and determine the customs value in accordance with relevant provisions. Otherwise, the Customs accepts the declared price of the enterprise as the transaction price to examine and determine the customs value.

(I) Main Points of Customs Value Verification

“Value verification” isan examinationprocedureforthe authenticity andaccuracy of the declared transaction priceof imported or exported goods, as well asany relationship between the buyer and the seller affectingthe transaction price, conducted by the Customs for the purpose of determining the customs value of imported or exported goods,by exercising powerslegallythrough the methods such as examining documents, verifying data, and checking physical goods and relevant accounts.

In the valueverification, the Customs actually conducts a comprehensive and systematic review and verification of the actual transaction of the importsand exports.The keycontentsof the value verificationare as follows:

1. Whether the relevant documents are true, valid and complete, and whether the documents and the goods can be mutually verified.

2. Whether all relevant expenses are included in the customs value. “Relevant expenses” here, such as royalties, the “assistance” expenses provided by the buyer free of charge or at a reduced price, freight and insurance premiums incurred abroad, commissions and brokerage, except buying commissions, cost of containers as essential part ofthe imported goods, cost of packing bothfor labor andmaterials, income from resale, disposal or use of imported goods by the seller, etc.

3. Whether the transaction priceis affectedby a special relationship.

4. Whether there is any special arrangement affecting the transaction price, such as tie-in or mutual sales.

5. Whether there is payment by installments or payment through multiple channels.

(II) Main Methods of Customs Value Verification

The Customs value verification is mainly though the methods of examining documents, verifying data, and checking physical goods and relevant accounts. The keymethodsof the value verificationare as follows:

1.consulting and duplicating the contracts, invoices, account books, payment vouchers, bills, business correspondence, and audio-video recordings relating to the imported or exported goods, as well as other commercial documents, written materials, and electronic data reflecting the relationship and trading activities between the buyer and the seller;

2.investigating the taxpayers of imported or exported goods and citizens, corporations, or other organizations who financially or otherwise associated with the taxpayers, withregardto theissues on the prices of imported or exported goods;

3.examining the imported or exported goods or taking samples of the goods for inspection or lab testing;

4.entering the factories, operation addresses and warehouses of the taxpayers to inspect goods and business operations relating to their import or export activities;

5.with the approval of the director of the customs office directly under the General Administration of Customs or the director of the subordinate customs office authorized by it, requesting the provision of information on capital flows in an institutional account of a taxpayer with a bank or any other financial institution, and notifying the banking regulatory authority of relevant information; and

6.requesting the tax authorities to provide information on the payment of domestic taxes relating to the imported or exported goods.

In addition, according to the valueverification, the Customs can also determinewhether to initiatethe inspection, investigation and even criminal detection to verify the import and export goods and activities of enterprises, so as to verify whether the import and export activities of enterprises conform to the customs laws and regulations.

1. If a taxpayer fails to declare the valuetruthfully, and falsely conceals thevalue, evades taxes,etc.which, upon examination and determination by the Customs, constitutesviolation of the customs supervision regulations or a smuggling act, it shall be punishedin accordance with theImplementation Regulations of the Customs of the People’sRepublic of China on Administrative Penalties; if the illegal act reached the extent of committing a crime, the enterprises shallbe prosecuted for criminal liabilityaccordingly.

2. If the taxpayer has any objection to the customs value, he may apply to the higher-levelCustoms authority in charge of examining determining the price for reconsideration. If the taxpayerrefuses to accept the reconsideration decision, it may file an administrative lawsuit beforethe court.