Introduction on The Valuation System

According to the new customs law, the primary basis for customs value in Ethiopian Customs Authority is "transaction value" as defined in Article 1 below. Unless otherwise relationship and other factors as indicated in 5 a-i influence the price, the transaction value shall be accepted.

Where the transaction value cannot be determined there should normally be a process of consultation between the customs administration and importer with a view to arriving at a basis of value and in order to apply either the Identical or similar goods transaction value.

Where it cannot be determined on the basis of the transaction value of the imported goods or of identical or similar imported goods, the deductive value or computed value methods respectively shall be applied.

When applying these valuation methods adjustments to the price actually paid or payable in cases where certain specific elements which are considered to form a part of the value for customs purposes are incurred by the buyer but are not included in the price actually paid or payable for the imported goods should be considered in order to determine the correct duty paying value

Hence, according to the Proclamation for the re-establishment and Modernization of Customs Authority No. 60/1997 Article 48/6 and 11 The Federal Government Revenues Board has issued this Directive.

PART I

APPLICATION OF THE RULES ON CUSTOMS VALUATION

1. TRANSACTION VALUE

1.1.  The transaction value method is the first method to be applied in customs valuation.

1.2.   Transaction value means the price actually paid or payable by the buyer for the goods when sold for export to the country of importation.

1.3.   Customs Duty Paying value shall be based on the price actually paid or payable by the buyer to the benefit of the seller.

1.4.   The buyer has to produce the seller's invoice and other relevant supporting documents for the price and costs he has paid or payable for the seller and other clients related to his transaction.

1.5.   The conditions whereby the transaction value shall not be applied are:

a.       If buying and selling is not concluded between the buyer and the seller;

b.      If customs has grounds that there is a relationship between the buyer and the seller which is either legal or natural;

c.       If the seller imposes restrictions as to the disposition or use of the goods by the buyer;

d.      If the agents of the seller import goods on consignment basis from the supplier for sales locally;

e.       If the same goods are imported by organizations who don't have different legal personality from the supplier or the seller;

f.        If the same goods are imported by legally represented individuals or organizations in the name of the supplier or the seller;

g.       If the value of the goods shows significant difference from the value of identical or similar goods;

h.       If the documents stated under Article 20 of the Proclamation N0. 60/1997 are not fully produced;

i.         If the value declared by the importer is found to be fraudulent;

2. TRANSACTION VALUE OF IDENTICAL GOODS

2.1.   If the customs value of the imported goods cannot be determined under the provisions of No. 1 above, the customs value shall be the transaction value of identical goods sold for export to the same country of importation and exported at or about the same time as the goods being valued.

2.2.   "Identical goods" means goods, which are the same in all respects, including physical characteristics, quality and reputation.

2.3.   When there are no identical goods produced and supplied by the same supplier, identical goods of other suppliers in the same country of origin can be considered;

2.4.   In applying this method, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the customs value.

2.5.   Where no such sale is found, the transaction value of identical goods sold at a different commercial level and/or in different quantities, adjusted to take account of differences attributable to commercial level and/or to quantity, shall be used, provided that such adjustments can be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustment, whether the adjustment leads to an increase or a decrease in the value.

2.6.   Where the costs and charges referred to as adjustment below are included in the transaction value, an adjustment shall be made to take account of significant differences in such costs and charges between the imported goods and the identical goods in question arising from differences in distances and modes of transport.

3. TRANSACTION VALUE OF SIMILAR GOODS

3.1.   If the customs value of the imported goods cannot be determined under the methods in 1 and 2 above, the customs value shall be the transaction value of similar goods sold for export to the same country of importation and exported at or about the same time as the goods being valued.

3.2.   "Similar goods" means goods which, although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable. The quality of the goods, their reputation and the existence of a trademark are among the factors to be considered in determining whether goods are similar;

3.3    In applying this method, the transaction value of similar goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the customs value. Where no such sale is found, the transaction value of similar goods sold at a different commercial level and/or in different quantities, adjusted to take account of differences attributable to commercial level and/or to quantity, shall be used, provided that such adjustments can be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustment, whether the adjustment leads to an increase or a decrease in the value.

3.4.   Where the costs and charges referred to as adjustment below are included in the transaction value, an adjustment shall be made to take account of significant differences in such costs and charges between the imported goods and the similar goods in question arising from differences in distances and modes of transport.

 If the customs value of the imported goods cannot be determined under the above methods, the customs value shall be determined under the method below.

PART II

OTHER VALUATION METHODS

4.      The Deductive Method

4.1.   If the imported goods or identical or similar imported goods are sold in the country of importation in the condition as imported, the customs value of the imported goods under the provisions of this method shall be based on the wholesale unit price at which the imported goods or identical or similar imported goods are so sold in the greatest aggregate quantity, at or about the time of the importation of the goods being valued less all local costs incurred and taxes paid by the buyer.

4.2.   The deductive value shall be based on the goods themselves, identical or similar goods sold to persons who are not related to the persons from whom they buy such goods.

4.3.   If neither the imported goods nor identical nor similar imported goods are sold in the country of importation in the condition as imported, then, then the calculation shall be on the same goods imported within three months time.

4.4.   Also the customs value shall be based on the unit price at which the imported goods, after further processing, are sold in the greatest aggregate quantity to persons in the country of importation.

4.5.   Deductions from the unit price are the following:

(i)  Either the commissions usually paid or agreed to be paid or the additions usually made for profit and general expenses in connection with sales in such country of imported goods of the same class or kind;

(ii) The usual costs of transport and insurance and associated costs incurred within the country of importation;

(iii) The customs duties and other national tax payable in the country of importation by reason of the importation or sale the goods.

(iii) If processed the cost of processing shall be deducted.

4.6.   For the calculation of the above; the importer shall submit

a)  The sellers invoices;

b)  Price list for the same goods at time of importation;

c)  Other documents required by customs;

d)  And to withdraw the goods from customs the importer shall present the estimated local selling price as tangible evidence.

5. THE COMPUTED VALUE METHOD

5.1.  The customs value of imported goods at this stage shall be based on a computed value.

5.2.  Computed value shall consist of the sum of:

(a) The cost or value of materials and fabrication or other processing employed in producing the imported goods;

(b) An amount for profit and general expenses equal to that usually reflected in sales of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to the country of importation;

(c) The cost or value of all other expenses.

5.3   If the customs value of the imported goods cannot be determined under the methods above, the customs value shall be determined using reasonable means consistent with the principles and general provisions of this procedure and on the basis of data available from free sources.

5.4.  With regard to Used Goods the procedure issued by the Federal Government Revenues Board shall be applicable.

PART III

6.   For the purposes of this valuation system, persons shall be deemed to be related only if:

(a)  They are officers or directors of one another's businesses;

(b)  They are legally recognized partners in business;

(c)  They are employer and employee;

(d)  any person directly or indirectly owns, controls or holds 5 per cent or more of the outstanding voting stock or shares of both of them;

(e)  One of them directly or indirectly controls the other;

(f)   Both of them are directly or indirectly controlled by a third person;

(g)  Together they directly or indirectly control a third person; or

(h) They are members of the same family.

7.     In determining the customs value under the methods above adjustments shall be added to the price actually paid or payable for the imported goods:

(a)  The following, to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the goods:

(i)  Commissions and brokerage, except buying commissions;

(ii)  The cost of containers which are treated as being one for customs purposes with the goods in question;

(iii)  The cost of packing whether for labour or materials;

(b)  The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable:

(i) Materials, components, parts and similar items incorporated in the imported goods;

(ii) Tools, dies, moulds and similar items used in the production of the imported goods;

(iii) Materials consumed in the production of the imported goods;

(iv) engineering, development, artwork, design work, and plans and sketches undertaken elsewhere than in the country of importation and necessary for the production of the imported goods;

(c)  royalties and license fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable;

(d)  The value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller.

(e)  The cost of transport of the imported goods to the port or place of importation;

(f)  Loading, unloading and handling charges associated with the transport of the imported goods to the port or place of importation; and

(g) The cost of insurance.

8. CONVERSION OF CURRENCY

The conversion of currency is necessary for the determination of the customs value. The rate of exchange to be used shall be that duly published by the National Bank of Ethiopia every Monday and Shall be applicable from Tuesday up to the next Monday.

9. When required by the clearing agent or the owner should complete either customs declaration of facts.

10 Confidentiality

All information which is by nature confidential or which is provided on a confidential basis for the purposes of customs valuation shall be treated as strictly confidential by the authorities concerned who shall not disclose it without the specific permission of the person or government providing such information, except to the extent that it may be required to be disclosed in the context of judicial proceedings.

11. Request Notice in Writing

Notice of the decision on appeal shall be given to the appellant and the reasons for such decision shall be provided in writing. The appellant shall also be informed of any rights of further appeal.

12. Right to Appeal

As stipulated in Article 83 of the Proclamation No. 60/1997; importers have also the right to appeal to The Federal Government Revenues Board (see appeals procedure).

13. According to Article 44 to 46 of the Proclamation No. 60/1997 conditions, amount and types of guarantee are explicitly stipulated. If, in the course of determining the customs value of imported goods, it becomes necessary to delay the final determination of such customs value, the importer of the goods shall clear them from customs by providing sufficient guarantee in the form of a surety, a deposit or some other appropriate instrument, covering the ultimate payment of customs duties for which the goods may be liable.

14. This rule shall be improved, or changed by the Federal Government Revenues Board.