WORLD TRADE  
ORGANIZATION  G/VAL/W/133 
11 March 2004 
 (04-1070) 
Committee on Customs Valuation Original:   English 
   
NOTIFICATION UNDER ARTICLE 22 OF THE CUSTOMS  
VALUATION AGREEMENT 
 
India’s response to questions from the European Communities
  
and the United States on the notification in G/VAL/N/1/IND/3  
 
 The following communication, dated 9 March 2004 is  being circulated at the request of the 
delegation of India.  
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 Questions from the European Communities
 
 
Q.1 Can India indicate the reasons for the amendment of the Customs Valuation 
(Determination for Price of Imported Goods) Rules 1988.  Q.2 What is the purpose and objectives of the amending provisions. 
 
Answer: The amendment was with a view to preventing customs valuation fraud based on India’s long experience in the application of th e WTO Agreement on Customs Valuation (ACV). The 
Uruguay Round Ministerial Decision Regarding C ases Where Customs Administrations Have 
Reasons to Doubt the Truth or Accuracy of th e Declared Value (adopted by the Committee on 
Customs Valuation as Decision 6.1 and hereinafte r referred to as the Committee’s Decision 6.1) 
enables Customs Administrations to  reject the declared value in cases of reasonable doubt regarding 
the truth or accuracy of the declaration.  The ame ndment made in Rule 4(2) of the Indian Customs 
Valuation Rules seeks to specify in clearer terms th e situations in which a customs officer may reject 
the declared value.   Q.3 Can India specify the provisions of th e WTO Customs Valuation Agreement to which 
the amending provisions indicated in G/VAL/N/1/IND/3 correspond.  
 
Answer: ACV is an Agreement on implementation of Article VII of the GATT. The exact wordings used in Sub-Rules 4(2) (a) to (c) can be found in Article VII 2 (b) and Note to Article VII, 
paragraphs 2.1 and 2.3 respectiv ely. India believes that these are certain basic principles in 
international trade transaction and should conti nue to hold ground on a harm onious interpretation of 
Article VII and ACV.    Sub-Rule 4(2) (d) is based on Article 8.3 of ACV. 
 
Q.4 Article 1 (1) of the WTO Customs Valuat ion Agreement sets out detailed conditions and 
restrictions which are applicable, Rule 4 of the Customs Valuation (Determination of Price of 
Imported Goods) Rules 1988 incorporates these provisions of the WTO Agreement into the 
legislation of India. 
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In what way does the inclusion of the provisions c ontained in the additional cl auses (a), (b) and (c) as 
now added to the above mentioned Rule 4 lead to implementation of Article (1) of the WTO 
Agreement.  
 
Answer:  As explained in response to Questions 1 and 2 above, Sub-Rules 4(2) (a) to (c) aims 
to particularize the situations of potential valuati on fraud for carrying out necessary checks for truth or 
accuracy of the declared value in acco rdance with Committee’s Decision 6.1. 
  Questions from the United States (from document G/VAL/W/128)
 
 Q.1 What was the objective for the amendments  issued in the Gazette Notification of 
7 September 2001? 
 
Answer: The amendment was with a view to combating customs valuation fraud based on 
India’s long experience in the application of th e WTO Agreement on Customs Valuation (ACV). The 
Committee’s Decision 6.1 enables Customs Administrati ons to reject the declared value in cases of 
reasonable doubt regarding the truth or accuracy of the declaration.  The amendment made in Rule 
4(2) of the Indian Customs Valuation Rules seeks to specify in clearer terms the situation in which a 
customs officer may reject the declared value.   
Q.2 Do the amendments change the Government of India’s application of transaction value? 
 
Answer:   No  
Q.3 The General Introductory Commentary  to the WTO Customs Valuation Agreement states 
‘the basis for the valuation of goods for customs purposes should, to the greatest extent possible, 
be the transaction value of the goods being value d.”  How do the amendments to India’s law 
promote the principle, and do they do so, to a greater degree, than the previous legislation? 
 
Answer: The Indian Valuation legislation conti nues to respect the primacy of transaction value 
and it is stated in clear terms under Rules 3 and 4.  The amendment was intended to specify the potential situations of valuation fraud so as to facilitate identification of the genuine cases of 
transaction value. 
 
Q.4 Article 1 to the WTO Valuation Agreemen t contains criteria for acceptance of a 
transaction value.  Are the amendments to India’ s legislation contained in Article 1 as criteria 
for acceptance of a transaction value? 
 
Answer: As explained in response to questions 1 and 3 above, the amendment was to facilitate 
identification of genuine cases of transaction valu e.  The amended provisions may become the 
grounds for rejection of declared value by  application of Committee’s Decision 6.1. 
 
Q.5 Please confirm that prior to the 2001 amendment Rule 3 stated: “for the purpose of 
these rules, the value of imported goods shall be the transaction value;” and that subsequent to 
the amendment Rule 3 now states “Subject to Ru les 9 and 10A, the value of imported goods 
shall be the transaction value.” 
 
Answer: This is correct. 
 
Q.6 Please explain the operational effect of the change to Rule 3. 
 
Answer: The change is by way of clarification.  It is intended to emphasize that transaction 
value is subject to adjustment under Rule 9 (Article 8 of ACV) and that  its acceptance is subject to the  G/VAL/W/133 
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truth or accuracy of the declaration which may be  determined under the provisions of Rule 10 A 
(Committee’s Decision 6.1).  
Q.7 Please confirm that the effect of the insertio n of Rule 4 is to add the following criteria 
for acceptance of a transaction value: 
 
- the sale is in the ordinary course of trade under fully competitive conditions  - the sale does not involve any abnormal discount  or reduction from the ordinary competitive 
price;  
- the sale does not involve special discounts limited to exclusive agents  
- objective and quantifiable data exist with rega rd to the adjustments required to be made, 
under the provisions of rule 9, to the transaction value 
 
 What is the basis for these criteria, and what is their objective in the application of 
Article 1 of the Agreement on Customs Valuation? 
 
Answer:  ACV is an Agreement on implementati on of Article VII of the GATT.  The exact 
wordings used in Sub-Rules 4(2) (a) to (c) can be found in Article VII 2 (b) and Note to Article VII, 
paragraphs 2.1 and 2.3 respectively.  India believes that these are certain basic principles in 
international trade transaction and should conti nue to hold ground on a harm onious interpretation of 
Article VII and ACV. Sub-Rule 4 (2) (d) is based on Article 8.3 of ACV. 
 
  The above situations may become criteria  for rejection of declared value in cases 
where the Customs has reasonable doubt regarding the truth or accuracy of the declaration submitted.  
The objective of the amendment is to specify in clear  terms the situations in which a Customs officer 
may reject the declared value.  
 
Q.8 Who determines “fully competitive conditions.”  And how is this accomplished?  What 
are the criteria? 
 
Q.9 Who determines “abnormal discount or reduction” from the ordinary competitive 
price? What are the criteria?  What types of pr ices are used for comparison as an “ordinary 
competitive price”?  Is there a difference from “normal discount or reduction”?  
Answer: These are expressions used in Article VII of the GATT and well understood in trade 
parlance. The assessing officers take decisions rega rding the acceptability of declared prices taking 
into account, inter alia,  the relevant international price in formation and cont emporaneous import 
prices.  The decision in cases where the truth or accur acy of the declaration is reasonably suspected is 
taken after due enquiry and in consultation with the importer, in accordance with Rule 10 A 
(Committee’s Decision 6.1).   
Q.10 Please explain the difference in the overall operation of India’s customs valuation 
regime before the amendment versus how the opera tion of India’s customs valuation regime 
after the 2001 amendment.  
Answer: India is seriously concerned about  the valuation frauds taking place through 
under-valuation by certain unscrupulous importers resulting in heavy leakage of revenue.  The 
amendments introduced in Rule 4 (2 ) were to check these tendencies.  However, care is always taken 
to ensure that cases of genuine transactions are unaffected by the change.  These cases of genuine 
transactions are in fact facilitate d by intelligent application of valuation control tools and risk 
assessment.  
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