• They are officers or directors of one another’s businesses;
• They are legally recognized partners in business;
• They are employer and employee;
• Any person directly or indirectly owns controls or holds five percent or more of the outstanding voting stock or shares of both of them;
• One of them directly or indirectly controls the other;
• Both of them are directly or indirectly controlled by a third person;
• Together they directly or indirectly control a third person; or
• They are the members of the same family

Sole agent or sole distributor or sole concessionaire associated with any person shall be deemed to be related for the purpose of these rules, if they fall within the criteria of this sub-rule.

The term “person” also includes legal persons.

1.

Transaction Value of imported goods

Rule 3

2.

Transaction Value of Identical Goods

Rule 4

3.

Transaction Value of similar goods

Rule 5

4.

Determination of value when cannot be determined under Rule 3, 4 & 5

Rule 6

5.

Deductive value based on identical/ similar imported goods

Rule 7

6.

Computed Value

Rule 8

7.

Best Judged Value/ Residual Method

Rule 9

8.

Cost and services liable to be included in TV

Rule 10

9.

Valuation declaration

Rule 11

10.

Rejection of declared TV

Rule 12

11.

Interpretative notes to be used for interpretation of these Rules (Schedule providing interpretative notes for interpretation of above Rules above is provided with these Rules)

Rule 13

Rule 4

Transaction Value of Identical Goods-

• imported at or about the same time;
• at the same commercial level and same quantity;
• Otherwise appropriate adjustments of value of goods in terms of commercial level and quantity;

The term ‘identical goods’ have been defined in Rule 2(d) of the Import Valuation Rules, 2007.

Rule 5

Transaction Value of Similar Goods-

• imported at or about the same time;
• at the same commercial level and same quantity; or
• Otherwise appropriate adjustments of value of goods in terms of commercial level and quantity;

The term ‘similar goods’ have been defined in Rule 2(f) of the Import Valuation Rules, 2007

Provided value of similar goods should not have been provisionally assessed

Rule 6

Determination of value when cannot be determined under Rule 3,4 & 5, it has to be determined as per Rule 7 and 8 sequentially

However, at the request of the importer and with the approval of proper officer, order of application of Rules 7 and 8 can be reversed

Rule 7

Deductive value based on identical/ similar imported goods –

If goods being valued or identical or similar goods are sold in India, in same condition as imported at or about the same time, the assessable value shall be Unit Price at which imported/identical/similar imported goods are sold in greatest aggregate quantity to unrelated persons in India but subject to following deductions-

• commission usually paid or agreed to be paid or the additions usually made for profits and general expenses;
• usual costs of transport and insurance and associated costs incurred within India;
• the customs duties and other taxes payable in India by reason of importation or sale of the goods

Rule 8

Computed Value-

Value of imported goods shall be based on a computed value, which is sum of =

• Cost of materials and fabrication or other processing employed in producing the imported goods;
• Amount of profit and general expenses equal to that reflected in sale of same class or kind of goods made by producers in the country of exportation for export to India;
• The cost or value of expenses under Rule 10(2)

Rule 9

Best Judged Value/ Residual Method-

If the value cannot be determined based on the above rules, it shall be determined by applying reasonable means consistent with the principles and general provisions of these rules and on the basis of data available in India

Value so determined shall be less than or equal to the Normal price of such goods in the course of international trade

Rule 10 (1)

Cost and services to be included in Transaction Value-

The adjustments shall be made for the following cost and services and cost to be added if not included-

1. Expenses incurred by the buyer, but not included in the value of imported goods, namely:
   • Commissioners and brokerage, except buying commissions;
   • Cost of containers;
   • Cost of packing (whether for labour or material).
2. Goods and services supplied by the buyer free of charge or at reduced price for use in connection with production and sale for export of imported goods namely-
   • Materials, components, parts and other similar items incorporated in the imported goods;
   • Tools, dies, moulds and similar items used in the production of the imported goods;
   • Materials consumed in the production of the imported goods;
   • Engineering, development, art work, design work and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods
3. Royalties and License fee related to the imported goods- payable by Buyer if such royalties are paid as a condition of the sale
4. Proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly to the Seller
5. All other payments actually made or to be made as a condition of sale of the Imported Goods, by the Buyer to Seller/ Third Party, agreed as a ‘condition of sale’ or to satisfy an obligation of the Seller is to be included in the value

Rule 10 (2)

Transaction Value shall include-

1. Transportation Cost, upto the place of Importation (Transaction Cost also includes ship demurrage charges on chartered vessels, lighterage/ barge charges)
2. Cost of Insurance to the place of Importation

If Transportation cost is not ascertainable, 20% of the FOB value of the goods shall be added to such cost.

Provided where FOB value is not ascertainable but sum of FOB value and Insurance Cost is ascertainable, Transport Cost shall be 20% of such sum.

If Insurance Cost is not ascertainable, cost shall be 1.125% of FOB value of the goods.

Provided where FOB value is not ascertainable but sum of FOB value of the goods and transportation cost is ascertainable, cost of insurance shall be 1.125% of such sum.

In case where import is by air and Transaction Cost is ascertainable, Transaction Cost should not exceed 20% of FOB

In case goods are 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.

Note: Said rule emerged after changes vide Notification No.-91/2017-Customs (NT) dated 26.09.2017. Further, Ad Hoc addition of 1% of FOB value came to struck down by Hon’ble Supreme Court in the case of Wipro Ltd. vs. Assistant Collector of Customs 2015 (319) ELT 177 (SC).

Rule 11

Valuation declaration for determination of value of Imported Goods-

Importer or his agent shall furnish declaration disclosing full and accurate details relating to the value of imported goods; 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

Rule 12

Rejection of declared Transaction Value-

If Customs authorities have reason to doubt the truth or accuracy of the declared value in terms of these Rules, the valuation shall be carried out by other methods

Rule 13

Interpretative notes to be used for interpretation of these Rules (Schedule providing interpretative notes for interpretation of above Rules above is provided with these Rules)

Rule 3

Conditions for acceptance of transaction value (TV)-

Unless rejected by the proper officer under Rule 8, the value of export of goods shall be the transaction value. The Transaction Value shall be accepted even where the buyer and seller are related provided the relationship has not influenced the price.

Further, Rules 4 to 6 of said Rules needs to be sequentially followed if buyer and seller are related and the price is influenced by the relationship or where price is not the sole consideration for sale.

Rule 4

Determination of export value by comparison-

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 import or in its absence another destination country of import with adjustment

The Proper officer shall make reasonable adjustments, taking into consideration the relevant factors, including adjustment for difference in dates, commercial levels, quantity levels, composition, quality, design, freight and insurance

Rule 5

Computed Value-

shall include cost of production, charges for design or brand and amount towards profit

Rule 6

Best Judged Value/Residual method-

In case of failure to determine value as per above Rules, residual method shall be applied 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

Rule 7

Valuation declaration-

Exporter shall furnish a declaration relating to the value of export of goods in the manner as prescribed in this behalf

Rule 8

Rejection of declared Transaction Value-

If proper officer has reason to doubt the truth and accuracy of the value declared, best judgment assessment shall be done as laid down in this Rule