RESTRICTEDWORLD TRADE
ORGANIZATIONG/VAL/W/98/Add.2
22 April 2002
(02-2247)
Committee on Customs Valuation Original:  English
PARAGRAPH 12 OF THE DOHA MINISTERIAL DECLARATION:
IMPLEMENTATION-RELATED ISSUES
Questions and comments by Japan
Addendum
The following communication, dated 18 April 2002, has been received from the Permanent
Mission of Japan.
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A. General
1. As one of the common elements in the proposal of each of the five tirets mentioned below,
Japan points out that the customs administration of an importing Member is entitled to request (andthus should naturally do so) the importer to provide further information if it has reasons to doubt the
truth or accuracy of the value being declared.  The 1994 “Decision Regarding Cases where Customs
Administration have Reasons to Doubt the Truth or Accuracy of the Declared Value” (hereinafter “the
1994 Decision”) allows the customs administration to do exactly that.  Could the proponent of each
tiret provide its views on this point?
2. After receiving such a request from the customs administration, the importer must provide
further information in order to prove that the declared value for the imported goods is appropriate.  If,
after which, the customs administration still has doubts about the truth or accuracy of the declared
value, Japan is of the view that the customs ad ministration could reject it in accordance with certain
procedures. The 1994 Decision also confirms such treatment.  Could the proponent of each tiret
provide its views on this point?
3. For each tiret, the proponents have failed to provide specific examples or case studies in a
detailed manner to allow other Members to better understand their proposal.  Could the proponents,
therefore, provide such information by illustrating problems that they are faced with and by giving the
reasons for promoting their proposal?
B. 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).
4. We are under impression that India may have mi staken the understanding of Article 8:1(b)(iv)
of the Agreement on Customs Agreement (hereinafter “the Agreement”).  At the March Committee
meeting, India explained that the “value of engineering, drawings etc., procured from the country of
importation, but a person other than the buyer, was not excluded from being added to the customs
value” (paragraph 11 of G/VAL/M/25).  The provision of Article 8:1(b)(iv) states that the elements
for inclusion in the customs value is, among others , the value of “engineering, development, artwork,
design work, and plans and sketches undertaken elsewhere than in the country of importation andG/VAL/W/98/Add.2
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necessary for the production of the imported goods”.  This means that the value of engineering,
development, artwork, design work, and plans and sk etches (hereinafter “engineering etc.”) would not
need to be added if they have been developed in the country of importation, regardless of who
provides them to the buyer.  We understand that the Agreement does not provide any provisions on
who provides engineering, etc. to the buyer, but ra ther that it ensures that the value of engineering,
etc. developed in the country of importation should not be added to the customs value.  We ask India
to please check its view on Article 8:1(b)(iv) in accordance with our explanation.
5. If the value of engineering etc. is counted towards the customs value, does this not create a
double taxation problem?
6. (a) Could the proponents of this tiret explain who they think should bear the burden of
proving whether or not engineering etc. has been developed in the country of importation?  We are of
the view that the importer should, in principle, bear  the burden of proving the declared value to the
customs administration.
(b) For this tiret, if the importer claims that engineering etc. was developed in the country of
importation, the customs administration can request the importer to prove its claim.  We also believethat the current Agreement enables the customs administration to know the accurate customs value.
Could the proponents of this tiret provide its views on this point?
7. If the Agreement were to be amended along the lines of this tiret, this would result in an
increased customs value by expanding elements for inclusion in the customs value, and thus woulderode the effects of tariff negotiations by offsetting the advantages of tariff reductions or elimination
through the price increase of imported goods.  Could the proponents of this tiret provide its views on
this point?
8. What would be the impact on fiscal revenues, as well as the economic implications if the
Agreement were to be amended along the lines of this tiret?
C. Tiret 58:                The residual method of determining customs value under Article 7 shall be
inclusive of all eventualities, thus allowing valuation based on domestic market price or export price
in a third country with appropriate adjustments.
9. Recognizing that the valuation method based on the domestic market price or the export price
in a third country tends to become arbitrary or fictitious, and one of the main objectives of the current
Agreement is to prevent such a arbitrary or fictitious valuation.  We think that the proposal of the tiret
would require some fundamental changes in the c oncept of the Agreement.  Does the proponents of
the tiret wish to pursue an overall revision of th e current Agreement?  (We should note here that one
of major trading countries, upon introducing the Agreement under the GATT, abolished its valuationmethod based on the domestic sale price.)
10. Although the application of anti-dumping measures is, in principle, based on the domestic
sale price, the objectives of customs valuation are different from those of imposing anti-dumping
measures.  In order to achieve the objectives of the Agreement, which includes, among others,preventing arbitrary or fictitious customs value, the method to determine customs valuation must be
transparent.  Japan cannot accept the valuation method based on the domestic sale price as, in our
view, it is strongly against the basic principles of the Agreement and would very likely be used to
combat dumping, which the preamble of the Agreement tries to prevent.  Could the proponents of this
tiret provide their views on this point?
11. (a) Who is responsible for collecting information on the domestic market price or the
export price in a third country?  We believe it to be very difficult for the importer to do so.G/VAL/W/98/Add.2
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(b) Even if this tiret were accepted, how could the proponents ensure the truth or accuracy of the
price?
12. (a) Supposing that the customs value were to be determined by applying this tiret, how
could the proponents prove that the domestic market price or the export price in a third country isappropriate?  We believe that it would be a tough question, even for the customs administration of the
importing Member.
(b) What kind of prices are used for customs valuation purposes among the wide variety of prices
used for the transactions of goods, either domestic or international?
D. 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.
13. One of the main objectives of the current Agreement is to eliminate the adverse effects
(instability of customs value, lack of predictabi lity towards the customs valuation system from the
perspective of importers, etc) of utilizing the highest value for customs valuation, whenever there is
more than one transaction value for identical or  similar goods.  (For example, under the former
customs valuation system in one of the major trading Members, the customs value was based on either
the value of the goods for the domestic market in the exporting country, or the value of the goods for
export to that country, whichever was the highest.  However, this system was abolished upon
introduction of the Agreement under the GATT.)  Since the proposal of this tiret would mean
changing the basic principles of the Agreement, we would like to know whether the proponents of thetiret are of the view that a fundamental revision of the Agreement is necessary or not.
14. Bearing in mind that the transaction value differs among countries, is it not inappropriate to
use the highest value as the customs value?  Ac cording to the Agreement, the customs value of
imported goods shall be the transaction value (Article 1) and if the customs value cannot bedetermined under Article 1, the customs value will be determined based on the provisions of Articles
2 to 7.  Under Articles 2 and 3, whenever there is more than one transaction value of identical or
similar goods, the lowest of such values shall be used to determine the customs value of the imported
goods.  By changing this to the highest value, would this not significantly exceed the appropriate
estimate of the actual transaction value?
15. Under the proposal of this tiret, how will the pilot transaction, where the customs value is set
at low level, be treated?  An explanation with specific examples or detailed case studies would be
appreciated.
16. In real commercial transaction, the price of the goods varies depending on the amount of
goods that the buyer purchases (for example, a high price for a small amount and a discounted pricefor a large quantity).  In such a case, if the transaction value of the imported goods cannot be
determined under Article 1 of the Agreement and thus the value will have to be determined under
Article 2 of the Agreement, is it not inappropriate to determine the transaction value based on the
highest value?  (In the case of a customs value for discounted goods, the discounted price is accepted
as the price actually paid or payable.  See paragraphs 5 of both Note to Article 2 and Note to Articles3 of the Agreement.)
E. Tiret 60:                Buying commissions should be taken into account in the determination of
customs value of imported goods as it forms a legitimate component of the landed cost of imported
goods.
17. In the Agreement, there is a clear definition fo r "buying commissions".  The Note to Article 8
stipulates that “the term "buying commissions" means fees paid by an importer to the importer’s agent
for the service of representing the importer abroad in the purchase of the goods being valued.”  WeG/VAL/W/98/Add.2
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would like to request the proponents of this tiret to provide an explanation, based on specific
examples or detailed case studies, on what kind of problems they are faced with through the current
practice: i.e. by not adding buying commissions to the price actually paid or payable for the imported
goods.
18. The issue of buying commissions is also taken up in the WCO (World Customs
Organization).  According to one of its explanatory notes on this issue, the customs administration can
verify whether or not the commission payment by the importer is a buying commission by requesting
the importer to present the authorities with the buyin g agent’s contract.  If this is not possible, the
customs administration can still ask the importer to provide the agent's activities with a view of
clarifying whether or not the agent really is a buy ing agent.  If the importer fails to provide the
customs administration with these elements, it may reject the importer’s claim that the commissionpayment is a buying commission (see paragraph 8 of the WCO’s Commentary 17.1).  What is the
view of the proponents of the tiret on this point?
19. Under the proposal of this tiret, if buying commissions were added to the price
actually paid or payable for imported goods, would not fair competition be inhibited, since therewould be a difference in the customs value between those importers who need not rely on a buying
agent for the purchase of goods abroad and those who do?
20. Bearing in mind that South Asian countries are major exporters of textile products in the
world, by adding buying commissions, this would lead to an increase in import prices, which will thenhave negative implications on exporting countries, for example India.
F. Tiret 61:                Persons associated with each other as sole agents, sole distributors, and sole
concessionaires, howsoever described, should automatically be deemed "related".
21. According to Paragraph 5 of Article 15 of the Agreement, “persons who are
associated in business with one another 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”.  Can the proponents of this tiret explain
what kind of problems they are faced with in cases where the criteria of paragraph 4 are not met?
22. (a) Are the proponents of this tiret of the view that whenever there are relations, such as a
sole agent, a sole distributor or a sole concessionaire, between an importer and an exporter, both
parties are "related"?
(b) There is perhaps need to verify their rela tionship based on their contracts in accordance with
the criteria of paragraph 4 (see paragraphs 3 and 4 of WCO's Explanatory Note 4.1 and Case Study
9.1).
(c) Even if we were to accept the proposal of the tiret, this fact shall not, in itself, be grounds for
regarding the transaction value as unacceptable; the circumstances surrounding the sale shall,
therefore, be examined (Paragraph 2(a) of Article  1).  Hence, even if both the importer and exporter
are related, this does not automatically mean that the declared value by the importer may be treated as
unacceptable.  We think that the fundamental concern of the proponents of this tiret (under-valuation)
might not be solved through this proposal alone.
23. We suggest that the proponents of this tiret look more closely to the work carried out by the
WCO on this issue.G/VAL/W/98/Add.2
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G. Paragraph 8.3 of the 2001 Decision on Impl mentation-Related Issues and Concerns
(WT/MIN(01)/17)
24. Japan wishes to reserve its right to pose questions after the proponents of the original proposal
provide their explanations at the next May meeting.
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