WORLD TRADE
ORGANIZATIONG/VAL/W/112
31 October 2002
(02-6002)
Committee on Customs Valuation Original:  English
IMPLEMENTATION RELATED ISSUES WITH RESPECT TO PARAGRAPH 8.3 OF
THE DOHA MINISTERIAL DECLARATION: CONCERNS RELATING TO THE
ACCURACY OF DECLARED CUSTOMS VALUES
AND THE PRACTICAL MEANS TO ADDRESS SUCH CONCERNS
 (Identification and Assessment)
Communication from the European Communities
The following communication, dated 30 October 2002,has been received from the Permanent
Mission of the European Communities.
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A. Introduction
1. The WTO Agreement on Customs Valuation sets out the legal framework and a specific body
of rules on customs valuation.
2. WTO Members usually acting through their customs administrations apply the provisions of
the CVA in order to determine the customs value of imported goods for the purposes of the levying of
import duties where ad valorem duties are concerned.
3. The determination of customs value results from the interaction of:
the valuation rules, valuation methods and Interpretative Notes to the CVA;actual commercial transactions and the data arising therefrom;
customs processes and  procedures.
4. The legal rules are applied in the context of, and in conjunction with, both general and
specific customs procedures to specific  commercial transactions.
B. Concerns in relation to the trut h or accuracy of declared values
5. Concerns can arise as to the truth or accuracy of declared values due to a number of reasons.
The general environment in which customs and trade carry out their respective roles, and interact with
each other, is frequently characterised by elements which give rise to such concerns. These elementsmay include:
a) Lack of mutual confidence between trade and customs, error, mistrust.b) Lack of experience with regular commercial flows.G/VAL/W/112
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c) Importers are motivated to take risks by mis-declarations to customs. Cases of fraud
or attempted fraud leading to generalization of conclusions in relation to loss of
revenue.
d) Under-trained customs and inadequate management; conflict in relations between
customs and trade.
e) Uncooperative trade sectors and/or non-structured trade: traders do not keep accounts
(or proper accounts), traders are not accessible or cannot be relied upon to cooperate
in case of post import controls or audit.
f)  Lack of a comprehensive understanding of the Valuation Agreement and its
applicability to the diversity of trade flows.
g) National laws relating to the powers of customs are incomplete or inadequate.  Court
rulings do not uphold the rights of customs and revenue authorities in the
performance of their duties.
Example 1 : it is useful to look at just one of the above-mentioned elements i.e., error.
A. Errors of Information*Importers do not understand the rules which they are obliged to respect.*Importers receive inadequate or incorrect advice from customs and/or import specialists.
B. Errors of procedure
Inadequate or inappropriate customs procedures can lead to situations whereby importers find
it difficult to prepare, document and declare the relevant information to customs. Inadequate
procedures can also frustrate the proper application of the CVA, for example by not providing
a means for the declaration, assessment  and collection of payments relating for example to
royalties and licence fees, split payments, proceeds.
Other indicative evidence in this area includes errors in customs declarations.Example 2 : Problem of establishing a case before the courts. In the absence of objective or 3
rd
party evidence, the court is likely to decide in favour of the importer in cases of fraud or even
in cases  where there is lack of proof appropriate to the determination  the customs value and
the customs  decides to reject transaction value (Decision 6.1).
Example 3 : Informal sector: this term denotes a sector of trade found in all economies but
more prevalent in developing countries, which have particular characteristics such as: multipleand changing pattern of suppliers, frequent small imports, frequent changes in business model
( or no business model), lack of accounts and records, regular change of business (or place of
business). Such importers rarely build up a relations with the customs services and are not
partners in programmes of compliance or authorised traders.
6. The elements indicated above, which can lead to a malaise or a generalized concern in
relation to the accuracy of declared values, are self explanatory and both the problem and the effects
of the problem will be recognisable and readily acknowledged by both customs and trade interests. ItG/VAL/W/112
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is therefore not necessary for the purposes of the note to give a detailed account of each problem area,
or a description of how each element arises, but several are usually present and act together to ensure
below optimal results for both customs and traders alike.
C. Practical  means to address such concerns and assessment thereof
For the trade benefits of their own country, and  the successful application of the Valuation
Agreement, national  customs administrations  need to deliver a good standard of service.  This
requires ongoing efforts and commitments to ensure ongoing training and capacity building, use of
effective and efficient procedures, and use of appropriate tools. Customs administrations are
increasingly aware of what needs to be done, and bodies such as the World Customs Organisation
can provide extensive advice and know-how to cu stoms administrations who wish to work in this
direction. A brief and indicative list of actions, programmes and methodologies which are appropriate
in this regard include:
(i)  establish appropriate work programmes to target areas where administrative
development and capacity needs re-enforcement.
(ii) apply, adapt or support, as necessary, use of modern customs tools such as audit, risk
management, import specialisation).
(iii) establish  appropriate strategies to manage cases such as 'informal sector' trade.
(iv) introduce programmes for compliant and non-compliant traders.
(v) train and develop specialised services such as enquiry, investigative and anti-fraud
units.
Information strategies : there is scope for administrations to enhance their capacity to compile, analyse
and use a range of information sources which are relevant to those services which are responsible for
dealing with import operations. Administrations should ensure import specialists have access toinformation about business practices, structures and general commercial procedures.
Cooperation and assistance : the sourcing of information from other administations, undertaken in  the
context of an appropriate legal and administrative framework, can be of assistance to services.
Reliance on export values would be of lesser use due to a number of factors such as the absence of a
common definition and  the absence of checks and controls in respect of data generated in this area.Nevertheless, cooperation in cases of commercial fraud may lend itself to more focussed cooperation
between administrations;  the use of well designed channels within an appropriate legal framework
(agreements between countries) can be useful in this respect. The identification of important trading
partners in this context would provide a useful basis for the development of the necessary instruments.
Future developments:  work continues on the development of new working tools for customs
administrations. Developments - usually in the domain of information technology and electronic
media - are worthy of attention as sources of new tools which can add reliability and security to
transactions which form the basis of duties and taxes for many administrations.
Developments in this area are likely to be of assistance to customs administrations in identifyingsecure data and documents in business to business transactions, thus removing the risk of inaccurate
declarations by  importers.
D. Overall Assessment
There is general recognition that a strong customs administration which develops and retains
the necessary skills and uses the full range of tools now available and found to be effective by many
administrations will overcome the difficulties which are deemed to arise in relation to the accuracy ofG/VAL/W/112
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declared values. There is now an increasing emphasis on, and availability of, high quality tools and
training which should be within the reach of all customs administrations.
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