. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/VAL/W/33
14 April 1999
(99-1485)
Committee on Customs Valuation Original:  English
COMMUNICATION FROM THE REPUBLIC OF KOREA REGARDING
THE AGREEMENT ON CUSTOMS VALUATION
Customs Valuation Issue and Trade Facilitation
The following communication, dated 6 April 1999, has been received from the Republic of
Korea with the request that it be circulated to Members.  The delegation of Korea intends to introduce
this paper at the 26 April meeting of the Committee, and invites an exchange of views on the issuespresented.
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The GATT Customs Valuation Agreement (hereafter referred to as the Agreement) was
erected as a new structure establishing a fair, uniform and neutral system for the valuation of goods
for customs purposes, replacing the use of arbitrary or fictitious customs value.  The most important
question is whether uniformity in terms of interpretation and application of the Agreement throughout
the WTO Member Countries is ensured, since a harmonized and uniform understanding of the
Agreement in all countries concerned is the key to an effective, successful implementation andoperation of the Agreement.
However, the Agreement has not been uniformly implemented and applied.  Indeed, there exist
controversial cases that have been subject to different interpretations between and/or among major
trading countries, resulting in disharmony and un certainty in the interpretation and implementation of
the Agreement.
Korea would like to address two legal issues in this paper that have been subject to different
interpretations, creating conflicts of interpretation and application of the Agreement by some
Members:
1. Whether quota charges paid by the seller (exporter) on behalf of the buyer (importer) are part of
the “price actually paid or payable” for the imported goods [See Ospig 
Textilgesellschaft  KG
W. Ahlers v. Hauptzollamt Bremen-Ost-Germany, case 7/83, European Court Reports 1984,;
and Generra Sportswear Co. v. U.S, 905 F. 2d 377, 380 (Fed. Cir. 1990)]. The former case
refers to a ruling by the Court of Justice of the European Communities which answered by the
negative to this issue while the latter is a ruling of the U.S. Federal Circuit Court that was
affirmative.
2. What should be the basis used for customs appraisal under the actual transaction value when
there is more than one sale for export to the country of importation [See Nissho Iwai American
Corp. v. United States, 982 F. 2d 505 (1992); See also  Harbour Sales Co. v. The Deputy
Minister of National Revenue, Appeal No. AP-93-322, Canadian International Trade Tribunal
(1994); Compare  Commission Regulation (EEC) No. 1762/95 of 1 July 1995 on the
Application of Article 147 of the Community  Customs Code Implementing Provisions].G/VAL/W/33
Page 2
In cases where there are a manufacturer, a middleman, an importer and a purchaser, and the sale
between the manufacturer and the middleman involved goods that were for exportation to a
country of importation, which of the two or three possible sales prices [i.e., the price paid by the
importer to the middleman or the price paid by the middleman to the manufacturer or possibly
the price paid by the importer (another middleman) to the purchaser] should be used as thebasis for appraising the transaction value?
The U.S. Federal Circuit Court in Nissho Iwai American Corp. v. U.S., 982 F. 2d 505 (1992)
ruled that the manufacturer’s price constitutes a viable transaction value when the goods are
clearly destined for export to the United Stat es and when the middleman deals with each other
at arm’s length, in the absence of any non-market influences that affect the legitimacy of the
sale price. ( emphasis added )"
However, the European Union expressed a different stance by adopting an amendment of
Article 147 of the Communities Customs Act in the manner of enacting the European
Commission Regulation (EEC) No. 1762/95 of  1 July 1995. The Article 147, as amended,
stipulates that a declarant can ask the customs to accept an export price of an earlier sale if he
demonstrates that there are relevant circumstances which led to export of the goods to the
customs territory of the European Union.
Japan, for its part, believes that an importing transaction provided in Article 4 of the Tariff Act
of Japan occurs principally when a bona fide  sale is consummated between an exporter and an
importer which was destined for export to Japan from abroad. This view is in line with Article4-1 of the Administrative Instruction of the Minist er of Finance concerning Tariff Act of Japan.
Japan, therefore, rules that the transaction price at the time of arrival of the imported goods at
the customs territory in Japan should principally be used as the basis for determining the
customs value.
In sum, major trading countries have been at variance with each other in the interpretation and
implementation of the Agreement.  Because of this discord, Korea believes that responsibility for
solving the above-mentioned issues is in the hands of the Committee on Customs Valuation of the
WTO and the Technical Committee on Customs Valuation of the WCO (World Customs
Organization).  Hence, taking into consideration the issues underlined in this paper, we must concludethat both bodies are facing a number of tasks before uniformity and certainty in the implementation
and operation of the Agreement are achieved.
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