RESTRICTEDWORLD TRADE
ORGANIZATIONG/VAL/W/98/Add.3
25 April 2002
(02-2392)
Committee on Customs Valuation Original:  English
PARAGRAPH 12 OF THE DOHA MINISTERIAL DECLARATION:
IMPLEMENTATION-RELATED ISSUES
Questions on Tirets 57-61 by Canada
Addendum
The following communication, dated 23 April 2002, has been received from the Permanent
Mission of Canada.
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General Questions on Each Proposal:
As indicated in Canada’s opening statement on the implementation proposals related to the
Customs Valuation Agreement (CVA) at the 27 March 2002 meeting of the Customs Valuation
Committee, Canada has the following questions for India on each of the proposals  under tirets 57-61:
1.  Does the proposal require a change to the CVA?
2.  How does the proposal affect the transaction value as the basis of customs valuation?3.  How does the proposal affect the fairness, uniformity or neutrality of the determination of
customs values under the CVA?
4.  How does the proposal ensure and increase transparency in the determination of customs
value?
5.  How does the proposal ensure that customs values will not be determined by or based on
arbitrary or fictitious values?
6.  How will the proposal affect the principle in the CVA that customs value should not be
determined by or based on prices in the exporting-country’s market or in the importing country’s
market?
Further to India’s presentations at the 26 February and 27 March meetings of the Customs
Valuation Committee meeting:
7.  How would each proposal “deter fraud”, part icularly since fraud is not caused by the CVA
but is the deliberate misrepresentation of the facts, is not unique to customs valuation, and is bestaddressed by transparent administration, fair verification activities and effective enforcement
programs?
8.  How would each proposal facilitate “genuine trade”, as opposed, for example, to increasing
the uncertainty for importers by increasing the discretion and choice of customs authorities?G/VAL/W/98/Add.3
Page 2
9.  How would each proposal “protect revenue”, as opposed to increase revenue by increasing
the value for duty to be determined under the CVA?
During the Customs Valuation Committee the mee ting of 26 February, India stated that the
focus of its implementation issues is on the “set  of problems emanat[ing] from multilateralism in the
context of customs valuation.”  In this regard:
10.  Could India elaborate on what it meant by  “multilateralism in the context of customs
valuation”, and on how  this  “multilateralism” relates to each proposal, both in terms of the problem
each proposal is trying to address and the proposed solution?
In addition to India providing further clarification of the problems giving rise to its proposals
under tirets 57 to 61 and in order to better understand India’s concerns and proposals, Canada would
also request India to provide the following information:
11.  In applying the CVA and determining the customs value of an imported good, does India
verify and confirm the value of goods at the border, before the good is cleared from customs control,or is this done after importation (e.g., by post-entry audits)?
12.  What approaches and methods, including those developed by the World Customs
Organization, has India tried to use to address the problems underlying India’s proposals, and why
have they not worked in India’s case, particularly when other countries are addressing successfully thesame and similar problems using existing approaches, techniques and methods that do not require
changing the CVA?
Specific Questions:
In addition we are requesting that India provide responses to the above questions for each
proposal, Canada would further ask India the following specific questions regarding each individual
proposal:
Tiret 57  -  “The addition of cost of services such as engineering, development, and design work,
which are supplied directly or indirectly by the buyer free of charge or at reduced cost for the
production of goods under import, shall be included in Article 8:1(b)(iv).”
1. Canada requests India to provide a copy of its regulations, policies and procedures for
applying CVA Article 8:1(b)(iv), including those pertaining to the circumstances under which the
costs of engineering, development, and design work are included or excluded from the customs value?
2.  In administering the CVA, does Indian Customs audit or verify the amount paid, and any
additions (Article 8) to the price paid or to be paid?  How are audits conducted and why do such
audits not redress situations where the value of engineering, development, and design work claimed
by an importer as being supplied domestically is unsubstantiated or overstated and the value found
incorrect?
3.  What percentage of imports during a year involve domestically-supplied engineering,
development and design work?
4. Since Customs would still need to audit th e importer to determine the monetary cost of
domestically-supplied engineering, development and design work and how much should be allocated
to the imported goods, how would this proposal address fraud related to such assists supplied
domestically?G/VAL/W/98/Add.3
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5.  Since the proposal would now require importers to add to the price paid or payable the costs
of domestically-supplied the cost of engineering, development and design work, why would this
proposal not increase uncertainty for traders or create additional compliance burdens on importers.
6.  Why would this proposal not increase the discretion of customs authorities in the
determination or acceptance of the transaction value as the value of duty?
Tiret 58  - “The residual method of determining customs value under Article 7 shall be inclusive of all
residual eventualities, thus allowing valuation based on domestic market price or export price in a
third country with appropriate adjustments.”
1.  For each of the last five years, what percentage of customs value determinations were made
by India on the basis of Article 7 of the CVA?  What percentage of imports in each year was the
customs value determined under Article 7 of the CVA?
2.  During the last five years, what were the main reasons for Indian Customs to determine that
the customs value could not be determined under Article 1 of the CVA?
3. In its proposal under tiret 58, what is meant by India by the phrase “all residual eventualities”
and how would this be defined fo r purposes of applying the CVA?
4. During the 27 March meeting of the Customs Valuation Committee, India indicated that the
application of this proposal would not require exporting countries to provide information on export
prices or domestic prices.  In this regard:
a) where would  the information on these export and domestic prices be obtained;
b) what would be the appropriate adjustments,  how would these adjustments be made, and how
and where would the information on such adjustments be obtained;
c) how would such information on the abov e prices and adjustments be verified?
5. How would the use of domestic prices or export prices in a third country be consistent with
the principles set out in the preamble of the CVA, including the principles that the determination of
the customs value of an imported good should be consistent with commercial practice and that
customs values should not be based on arbitrary values?
6.  How would this proposal ensure that custom s values would be determined on a fair, uniform
and neutral basis as called for in the CVA?
7.  Does this proposal increase the discretion of customs of officials in determining the customs
value, and hence increase uncertainty and unpredictability for traders?
Tiret 59  - “The Agreement should be amended to provide for the highest value when more than one
transaction value of identical or similar goods is found.”
During the 26 February meeting of the Customs Valuation Committee, India stated that this
change to the CVA was required because small pilot consignments were being cleared through
customs at low prices by a cartel of traders and CVA “Articles 2:3 and 3:3 make it difficult for
Customs Administration to discard such artifi cially low values even though contemporaneous
evidence of higher values for identical/similar goods  exists for sales between independent buyers and
sellers of repute under fully competitive conditions.”  India also indicated during that meeting that
“such values often do not even cover the cost of the basic raw material used.”G/VAL/W/98/Add.3
Page 4
1. Could India please provide a copy of its regulations, practices and procedures provided to
importers that explain India’s policies for applying  the provisions of CVA Articles 2 and 3 on the use
of identical or similar goods to value imports?
2. Could India identify how it obtains informatio n on identical and similar goods when it applies
CVA Articles 2 and 3.
3. Since CVA Articles 2:1(a) and 3:1(b) stipulate that the identical or similar goods should be
“exported at or about the same time as the goods being valued”, why would a Customs Administration
be required to used  the “artificially low values” of an earl ier smaller pilot consignment to determine
the customs value?
4. Since CVA Articles 2:1(b)and 3:1(b) stipulate that the identical or similar goods should be “in
substantially the same quantity as the goods being valued”,  why would a Customs Administration be
required to used the “artificially low values” of an earlier smaller pilot consignment to determine the
customs value?
5.  If a Customs Administration suspected customs-value fixing by a cartel of traders to establish
“artificially low values (e.g., such as in cases where there is “contemporaneous evidence of higher
values for identical/similar goods exists for sales between independent buyers and sellers of repute
under fully competitive conditions”), why would it no t conduct an audit or verification of the records
of the importers to investigate the matter?  If importers were attempting deliberately to undervalue aseries of imports following a small consignment import, would this not be revealed in such an audit or
verification?  Would this then not be a case of fraud to be addressed by proper enforcement and not by
CVA Articles 2 and 3?
6.  Canada would also request that India reply to the above three questions for the following
specific scenario described by India during the 27 March meeting of the Customs Valuation
Committee.  During that meeting, India described a scenario where an importer would first import a
small pilot consignment to establish the “artificially  low value” and then, in order to avoid detection
through the application of the provisions under Articles 2 and 3 of the CVA in future shipments (e.g.,
the stipulation of “in substantially the same quantity”), continue to import in similar small volumes in
subsequent shipments.
Tiret 60  - “Buying commissions should be taken into acc ount in the determination of customs value
of imported goods as it forms a legitimate co mponent of the landed cost of imported goods.”
1. Would India please provide its existing domestic legislation or policy that defines “a buying
agent” and sets out India’s practices and procedures for applying this provision of the CVA?  HasIndia incorporated the work of the World Customs Organization in refining its policies and practices
for applying this provision of the CVA?
2. Since Buying Agents bring purchasers and buyers together and hence facilitate trade, would
the proposal not be, in effect, the same as imposing a new tax on facilitating trade?
3.  Since the services of a buying agent brings no value to the goods being imported, how does
this proposal promote a fair, uniform and neutral customs valuation system?
4.  Would not this proposal discriminate between importers who do not use buying agents (e.g.,
large companies) and importers who use buying agents (e.g., small companies)?G/VAL/W/98/Add.3
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Tiret 61  - “Persons associated with each other as sole agents, sole distributors, and sole
concessionaires, howsoever described, should automatically be deemed ‘related’”.
As background, CVA Article 15.5 now reads:
“Persons who are associated in business with one anothe r in that one is the sole agent, sole distributor
or sole concessionaire, however described, of the other shall be deemed to be related for the purposes
of this Agreement if they fall within the criteria of paragraph 4.”
The above proposal, as drafted, appears to require that all “sole agents”, “sole distributors” or
“sole concessionaires” be deemed automatically as related to the importer for purposes of applying
the CVA, regardless of whether or not the relationship with the importer falls under the criteria ofCVA Article 15:4.  During the 27 March meetin g of the Customs Valuation Committee, India
indicated that the intent of its proposal was not to delete the last phrase of CVA Article 15.5, which
reads: “if they fall within the criteria of paragraph 4."  India also appeared to indicate that its intention
behind its proposal was not to deem automatically  “sole agents”, “sole distributors” or “sole
concessionaires” in all cases.  Rather India referred to the possibility of other forms of relationshipsthan those set out in CVA Article 15:4 and suggested that the importer and his/her “sole agent”, “sole
distributor” or “sole concessionaire” could be given the opportunity to prove they were not ‘related’.
In order to seek clarification of India’s proposal, including its reasons, objectives and how it
would function, we would ask India to please explain:
1.  Why is the current definition of “related” under Article 15:4 inadequate or inappropriate for
applying the CVA where importations involve sole agents/distributors/concessionaires?
2.  Why is different treatment is
 required in the case of importations involving “sole
agents/distributors/concessionaires”?
3. What would be the other forms of relationshi ps that India would wish to include in the
definition of “related” as it applies to sole agents/distributors/concessionaires?
4.  Why does India believe it is necessary to include these forms of relationship for purposes of
applying the CVA where sole agents/distributors/concessionaires are involved in the importtransaction?
5. Would India’s proposal require the importer or the sole agent/distributor/concessionaire to
prove there was not a relationship; and if so, why does India believe that the importer and sole
agent/distributor/concessionaire should be deemed as being related unless they prove otherwise?
6.  What are the definitions of “sole agents”, “sole distributors” and “sole concessionaires” for
purposes of this proposal?
7.  Who would make the determination that there was a “related” relationship, what would be the
criteria for determining if a relationship was “related”  or not, and what information would the
importer or the sole agent/distributor/concessionaire be required to provide to prove there is no
“related” relationship?
8.  Would such determinations be subject to the CVA review and appeal provisions?
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