G/VAL/N/1/ECU/3  
19 February  2013 
(13-0903) Page: 1/295 
Committee on Customs Valuation  Original:  Spanish  
 
  NOTIFICATION UNDER ARTICLE 22.2 OF THE AGREEMENT ON  
IMPLEMENTATION OF ARTICLE VII OF THE GENERAL  
AGREEMENT ON TARIFFS AND TRADE 1994  
ECUADOR  
 The following communication, dated 2 7 September 2012, is being circulated at the request 
of the delegation of Ecua dor. 
_______________  
 
 
 Pursuant to Article 22 of the Agreement on Implementation of Article VII of the GATT 1994 
(Customs Valuation Agreement) and in compliance with the Decision on Notification and Circulation 
adopted by the Committee on Customs Valuatio n on 1 2 May 1 995 (G/VAL/5), Ecuador hereby 
notifies to the Committee on Customs Valuation the following legislation and documents:  
 
Legislation  Annex  Page  
1. Decision No. 571 of the Andean Community Commission, published in Ecuador in 
Official  Journal No. 317 of 2 0 April 2 004 1 3 
2. Community Regulation s implementing Decision No. 571 on Customs Valuation 
of Imported Goods , annexed to Resolution No. 846, published in Lima in Official Gazette 
of the Cartagena Agreement No. 1103 of 9 August 2 004 and the Supplement  
to Official  Journal No. 17 of 1 3 May 2 005 2 33 
3. Resolution No. 1239 updating Resolution No. 1112 - Adoption of the Andean Customs 
Value Declaration, published in  Official Gazette of the Cartagena Agreement No. 1720 of  
1 June 2 009 3 160 
4. Andean Community G eneral Secretariat Resolution No. 1456 on Special Cases 
of Customs Valuation, published in Official Gazette of the Cartagena Agreement 
No. 2024 of  2 March 2 012 4 186 
5. Andean Community General Secretariat Resolution No. 1486 on the incorporation into 
Resolu tion No. 846 of the implementing instruments of the WCO Technical Valuation 
Committee, published in Official Gazette of the Cartagena Agreement No. 2073 of  
20 July 2 012 5 192 
6. Organic Code of Production, Trade and Investment, published in Official Journal No. 351 
of 29 December 2 010 6 209 
7. Regulation s on the Title "Customs Facilitation for T rade" of Book V of the Organic Code 
of Production, Trade and Investment, issued pursuant to Decree No.  758 and published 
in Official Journal Supplement No. 452 of 1 9 May  2011 7 284 
8. Resolution No. S ENAE -DGN-2012-0231-RE of 29  June 2 012, "Regulations concerning 
the reasonable doubt procedure"  8 286 
9. Resolution No. 04-2010-R1 of 1 5 March 2 010, "Procedure for control of the customs 
valuation of imported goods"  9 288 
10. Resolut ion No. S ENAE -DGN-2012-0353-RE of 2 1 October 2 012, "Guidelines concerning 
persons that may sign the Andean Customs Value Declaration (DAV) form"  10 291 
 G/VAL/N/1/ECU/3  
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  Ecuadorian customs bulletins : Bulletins providing foreign trade operators with information, 
clarifica tion, replies or instructions on specific topics that are of general interest or the subject 
of widespread consultation.  Replies are based on current legislation.  Available online in Spanish 
at http://www.aduana.gob.ec/contenido/boletines.asp  
 G/VAL/N/1/ECU/3  
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  ANNEX 1  
ANDEAN COMMUNITY  
EIGHTY -SEVENTH PERIOD OF REGULAR 
SESSIONS OF THE COMMISSION  
11 and 12 December 2 003 
Lima - Peru 
DECISIO N NO. 571 
Customs valu ation 
of imported goods  
THE COMMISSION OF THE ANDEAN COMMUNITY , 
CONSIDERING : Article 58 of the Cartagena Agreement ; Decisions Nos. 378 on Customs 
Valuation, 379 on the Andean Customs Value Declaration and 521 on amendment of Decision 
No. 378; and 
WHEREAS : The Andean regulations on customs valuation were adopte d by Decisions 
Nos. 378 and 379, taking into account the "Agreement on Implementation of Article  VII of the 
General Agreement on Tariffs and Trade  1994" of the World Trade Organization (WTO Customs 
Valuation Agreement) , and the Andean Customs Value Declaration (DAV) form was created ; 
The member countries of the Andea n Community are also Members of the World Trade 
Organization and are therefore bound to apply the WTO Customs Valuation Agreement;  
The member countries of the Andean Community are also members of the World Customs 
Organization (WCO);  
It is necessary to imp lement harmonized legislation setting out the provisions on 
determining  the customs value of goods imported into the customs territory o f the 
Andean  Community;  
For proper implementation of the WTO Customs Valuation Agreement, sufficient information 
enablin g the elements of commercial transactions in imported goods to be known is needed 
in order to determine the customs value;  
In order to ensure proper and uniform implementation of this Decision, provision has to be 
made for the adopt ion of its implementing regulations;  
At its XIth Meeting, the Andean Presidential Council instructed the Commission of the 
Andean  Community, in coordination with the Council on Customs Matters, to approv e rules 
to enable flexible and streamlin ed customs procedures to be determine d consistent with the level 
of progress in the expanded subregional market;  
With a view to complying with this mandate from the Andean Presidential Council, and with 
the objective of establishing the Andean Common Market by 2005 at the latest, it is necess ary to 
replace Andean Decisions Nos. 378, 379 and 521 of the Commission;  
The General Secreta riat has submitted its Proposal  92/Rev.  2 on the customs valu ation 
of imported goods;  G/VAL/N/1/ECU/3  
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  HEREBY DECIDE S: 
Chapter I Scope  
Article 1.- Legal basis  
For the purposes of cu stoms valuation, the member countries of the Andean Community 
shall be governed by the provisions in the "Agreement on Implementation of Article VII 
of the General Agreement on Tariffs and Trade 1994 ", hereinafter the "WTO Customs Valuation 
Agreement " attached to this Decision, by this  Decision and by its Community implementing 
regulations to be adopted for this purpose in a Resolution by the General Secretariat.  
Chapter  II Determina tion of the customs value  
Article 2.- Customs value  
The customs value of im ported goods shall be determined according to the methods laid 
down in Articles 1 to 7 of the WTO Customs Valuation Agreement and its respective Interpretative 
Notes, taking into account the general guidelines in the Agreement it self, in this Decision and its 
implementing r egulations.  
Article 3.- Methods for determining customs value  
Pursuant to the provisions in the WTO Customs Valuation Agreement, the following are the 
methods to be used to determine  the customs value or the taxable base for the payment o f import 
duties and taxes:  
1. First m ethod :  Transaction value of imported goods  
2. Second method :  Transaction value of identical goods  
3. Third method :  Transaction value of similar goods  
4. Fourth method :  Deductive value  
5. Fifth method :  Computed valu e 
6. Sixth method :  "Fall-back" 
Article 4.- Orde r of application of the methods  
In accordance with the General Note in Annex I to the WTO Customs Valuatio n Agreement, 
the methods indicated in the preceding Article shall be applied in the order indicated th erein.  
The transaction value of imported goods shall be  the first basis used to determine their 
customs value and shall always be followed provided that the relevant requirements are met . 
The order of application of the methods indicated in numbers 4 and 5  of the preceding 
Article may be reversed, if requested by the importer and with the consent of the Customs 
Administ ration.  
Article 5.- Application of Article 5.2 of the WTO Customs Valuation Agreement  
If the imported goods or identical or similar imported  goods are not sold in the country 
of importation in the condition as imported, the method indicated in number 4 of Article 3 of this 
Decision shall be followed in accordance with Article 5.2 of the WTO Customs Valuation 
Agreement, whether or not requested  by the importer, taking into account the Interpretative Note 
to Article 5 of the aforementioned Agreement.  
Chapter  III Delivery costs  
Article 6.- Element s to be included in the customs value  
All the elements indicated in Artic le 8.2 of the WTO Customs Val uation Agreemen t 
concerning the cost of transport of the imported goods and the related cost of transport ing the G/VAL/N/1/ECU/3  
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  said goods to the port o r place of importation, loading, unloading and handling charges associated 
with the transport of the imported goods to the port or place of importation, and the cost 
of insurance, shall form part of the customs value.  
The cost of unloading and handling at the place of importation into Andean Community 
Customs Territory shall not form part of the customs value provided that  it is distinguished from 
the overall transport costs.  
If any of the aforesaid elements results  free of charge for the buyer or importer, is provided 
using  their own means or services, is not eligible or has not been duly substantiated 
by documents, the co st of delivery to the place of importation shall be included in the customs 
value, calculated according to the procedures, rates or payments customarily applicable to 
the same type of costs.  If no information on such rates or payments is available, the tra nsaction 
value shall not be used and the goods shall be valued using the subsequent methods indicated in 
Article  3 of this Decision.  
Article 7. - Place of importation  
For the purpose of applying the adjustments for delivery costs mentioned in the preceding 
Article, irrespective of the customs regime applicable to the goods, the place of importation 
is the place of entry into Andean Community Customs Territory, namely, the place at which 
the goods are for the first time subject to customs formalities, meaning  the receipt and inspection 
of the transport documents at the time of arrival.  
Chapter  IV Declara tion of the customs value  
Article 8.- Andean Customs Value Declaration and its content  
The Andean Customs Value Declaration is a supporting document for the cu stoms 
declaration of imported goods.  It shall contain information relating to the elements of fact and 
circumstances concerning the commercial transaction in imported goods that have determined 
the customs value declared.  
Article 9.- Imposition of the Ande an Customs Value Declaration  
The Customs Administrations of Andean Community member countries shall require 
the importer to produce the "Andean Customs Value Declaration (DAV) " in order to determine 
the customs value of the imported goods.  The utilization and the format of the DAV shall 
be governed by a Resolution by the General Secretariat.  
Article 10. - Simplified declaration  
The Customs Administration s of Andean Community member countries may authori ze use 
of a simplified form for the declaration of value  if the circumstance s of the import transaction 
so warrant or if so provided for the customs declaration of the imported goods.  The criter ia 
and the procedure shall be set out in the Resolution of the General Secretariat of the 
Andean  Community, which adop ts the "Andean Customs Value Declaration ", and in the provisions 
adopted for the customs declaration of imported goods.  
Article 11.- Completion, signature and submission  
The Andean Customs Value Declaration shall be completed and signed by the importer 
or buyer of the goods ; and if the domestic legislation of the member country so provides, by their 
legal representative or the person authorized to d o so on their behalf.  
The Andean  Customs Value  Declaration shall be submitted to the customs authority, 
togeth er with the customs declaration of the imported goods, by the importer o r by the person 
authorized to act on his/her behalf, as provided in domestic customs legislation.  G/VAL/N/1/ECU/3  
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  Article 12. - Electronic declaration  
The Andean Customs Value Declaration may be submit ted to the competent customs 
authority using an electronic data transmission system, in accordance with the provisions 
in domestic legislati on. In such c ases, all the information indicated in Article 8 of this Decision 
shall be forwarded.  
Electronic transm ission of the Andean Customs Value Declaration shall take place 
simultaneously with the customs declaration of the imported goods, by the importer or by 
the person authorized to act on his /her behalf, as provided in domestic customs legislation.  
The digita l signature on the electroni c declaratio n shall also be certified, as provided 
in domestic customs legislation.  
Article 13.- Respons ibilities  
Pursuant to Article 11 of this Decision, any person completing and signing the 
Andean  Customs Value Declaration sh all be responsible for:  
(a) The truth, accuracy and completeness of the particulars given in the declaration of  value;  
(b) the authenticity of the documents submitted in support of these particulars ; and 
(c) the supply and submission of any additional info rmation or document  necessary to  establish 
the customs value of the goods.  
Violation of the provisions in this Article shall be considered an administrative offence  
without prejudice to the relevant Community and domestic provisions on customs control 
and fraud.  
Chapter  V 
Customs Controls  
Article 14.- Powers of the Customs Administrations 
of Andean  Community  member  countries  
Pursuant to Article 17 of the WTO Customs Valuation Agreement, in conjunction with 
the provisions in paragraph 6 of Annex III thereto,  Customs Administration s of Andean Community 
member countries have the right to carry out the necessary controls and enquiries in order 
to ensure  that the customs value declar ed as the taxable base is correct and has been determined 
in accordance with the criteria and requirements in the WTO Customs Valuation Agreement.  
Article 15.- Control of the customs value  
Taking into account the preceding Article, Customs Administration s shall bear general 
responsibility for valuation, which incudes, in addition to pr ior controls and those in the course 
of clearance, post-importation checks, controls, studies and enquiries in order to ensure 
the correct valuation of the goods imported.  
Article  16.- Obliga tion to provide information  
Any person directly or indirectly concerned by import transactions for the goods in question 
or subsequent transactions  concerning the same goods, as well as any person who has carried out 
any act at the Customs in relation to the customs declaration of the goods and the declaration 
of value,  who is requested by the customs authority to provide information or proof for 
the purposes of customs valuation , shall provide these in a timely manner in the form and 
according to the terms laid down in domestic legislation.  G/VAL/N/1/ECU/3  
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  Article 17.- Doubts concernin g the truth or accuracy of the value declared  
When a declaration has been submitted and the Customs Administration has reason to d oubt 
the truth or accuracy of the value declared or the data or documents submitted in support o f the 
declaration, the Customs  Administr ation shall request the importers to provide written 
explanation s, additional documents or proof to show that the value declared represents the total 
amount actually paid or payable for the imported goods, adjusted in accordance with the 
provisio ns in Article  8 of the WTO Customs Valuation Agreement.  
The customs value of the imported goods shall not be determined by applying the 
transaction value method if the importer fails to respond to these requests or if the proof provided 
is inadequate or in sufficient to prove the truth or accuracy of the value in the aforementioned way.  
Article 18. - Burden of proof  
In determining the customs value, as well as in checks and enquiries by the 
Customs  Admin istrations of Andean Community m ember countries concerni ng valuation, 
the burden of  proof shall, in principle, lie with the importer or buyer of the goods.  
If the importer and buyer are not the same person, the burden of proof shall lie with both 
the importer and the buyer of the imported goods ; if the importer  or buyer is a legal person, 
with its legal representative and the person authorized to act on its behalf.  
Article 19.- Violations  and penalties  
Customs violations with regard to customs valuation and the penalties applicable shall be 
defined and applied i n accordance with the provisions in the domestic customs legislation of the 
Andean Community member country in which the offence is committed.  
Article 20.- Administrative structures  
The national valuation services of the Customs of Andean Community member countries  
shall be given appropriate administrative structures with the powers and functions  to enable them 
to fulfil their investigation responsibilities.  
Chapter  VI 
General Provisions  
Article  21.- Currency  
The customs value of imported goods shall be det ermined in the currency established by 
the member country.  Where necessary, foreign currency shall be converted at the exchange rate 
prevailing on the date of acceptance of the customs declaration of the imported goods 
duly published by the competent autho rities.  
When the exchange of information among member c ountries and between them and 
the General Secretariat of the Andean Community has to be in United States dollars, conversion 
shall be governed by the provisions in this Article.  
Article 22 .- Implementi ng instruments  
When interpreting and implementing the value rules in the WTO Customs Valuation 
Agreement, as set ou t in this Decision and its i mplementing regulations, the Decisions 
of the Committee on Customs Valuation of the World Trade O rganization, tog ether with the 
Advisory Opinions, Commentaries, E xplanatory Notes, Case Studies and S tudies by the Technical 
Committee on Customs Valuation of the World Customs Organization, shall be taken into account.  G/VAL/N/1/ECU/3  
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  Article 23.- Dumping and subsidies  
The provisions in  the WTO Customs Valuation Agreement 's rules , and those cont ained in this 
Decision and its implementing regulations, shall not apply to  combating dumping or re medying  
subsidization.  The prevention or correction of distortions caused by their existence shal l be 
resolved in accordance with the relevant Andean Community regulations and the 
WTO Agreements.  
Article 24.- Preship ment inspection companies  
Preshipmen t inspection companies shall comply with the provisions in the 
World  Trade  Organization 's Agreement o n Preshipment Inspection.  Accordingly, when 
Andean  Community member countries utilize the services of such companies for goods to 
be valued , it shall be understood that their activities shall be limited to verifying the origin al price 
of the goods imported  and not to determin ing their customs value.  
In accordance with the foregoing, the certification s issued by such companies shall not be 
binding for determination of the customs value and the price verified may be considered a risk  
indicator.  
Article 25.- Data banks  
Andean Community member countries shall create data banks for the purpose of customs 
valuation to facilitate the proper application of the provisions of the WTO Customs Valuation 
Agreement.  
Utilization of data banks shall not lead to automatic re jection of the transaction value of the 
goods imported.  It shall enable the values declared to be verified and risk indicators to be created 
in order to generate and substantiate the doubts referred to in Article 17 of this Decision for the 
control and development  of programmes on studies and investigations on value.  
Likewise, the information in data banks may be used for application of the valuation 
methods indicated in Articles 2, 3 and 7 of the Agreement, provided that the requirements for e ach 
method ar e met . 
Article 26.- Mutual assistance and cooperation  
Member countries ' customs authorities shall provide mutual assistance and cooperation 
in accordance with the relevant Community regulations.  
The assistance and cooperation envisaged shall lead to broade r exchange of information, 
including that contained in the data banks created pursuant to the preceding Article, on a regular 
and updated basis, as well as the exchange of any type of data or documen ts required in o rder 
to conduct studies or investigations  on value.  
In accordance with the Ministerial Declaration and with paragraph 8.3 of the 
Ministerial  Decision on implementation -related issues and concerns, both adopted during the 
IVth Ministerial Conference of the WTO , held  in Doha in November 2 001, whe n the customs 
administration  of an importing member country has reason able grounds  to doubt the truth 
or accuracy of the declared value, it may seek assistance from the customs administration 
of an exporting member country on the value of the goods concerne d In such cases, the exporting 
member country shall offer cooperation and assistance consistent with this Decision and with its 
domestic laws and procedure s, including furnishing information on the export value of the goods 
concerned, bear ing in mind the pr ovisions in  Article 10 of the WTO Customs Valuation Agreement.  G/VAL/N/1/ECU/3  
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  Article 27.- Risk management and combating fraud  
Customs administrations shall inform each other of cases detected concerning suppliers, 
importers or any person directly or indirectly related t o international trade transactions or 
subsequent trans actions concerning goods that have been the subject of proven fraudulent 
practices.  For this purpose, the provisions adopted in decisions on combating fraud and on 
customs controls shall apply.  
Chapter  VII 
Final Provisions  
First.- An Ad hoc group of government experts on customs valuation is hereby created 
within the Andean Comm ittee on Customs Matters.  It shall be composed of one regular member 
and one or more alternates from each member country and sha ll study technical issues raised by 
member countries, propose solutions to questions, problems or disputes arising with regard to the 
application of the valuation  rules, recommend procedures for any special customs valuation cases 
and propose the updating of this Decision and o f the Resolutions adopting its implementing 
regulations and the Andean Customs Value Declaration.  
Second .- This Decision , together with the Reso lutions adopting the Community r egulations 
and the Andean Customs Value Declaration, shall  be updated in the light of changes and priorities 
required for application of the r ules contained in these provisions.  
Third.- Decisions Nos. 378 and 521 are hereby repealed.  Decision No. 379 will be repealed 
as soon as the General Secretariat 's Resolutio n on the Andean Customs Value Declaration comes 
into effect.  
Fourth .- This Decision shall come into force for member countries on the first day 
of January in the year 2004.  
Chapter  VIII 
Transitional Provisions  
First.- Within a period not exceeding six cale ndar months from the date of entry into force 
of this Decision and subject to the opinion of the Committee on Customs Matters, 
the General  Secretariat of the Andean Communi ty shall adopt the Community 's implementing 
regulations for this Decision and the An dean Customs Value Declaration by means of Resolutions.  
Second .- Member co untries which have al ready implemented national formats for the 
Declaration of Value and informatics applications for the said formats, both in the customs system 
and for foreign tra de operators, may defer full application of the provisions of Chapter IV of this 
Decision until 31  December 2 005. 
Third.- Inasmuch as the A ndean Community is constituted as a Community customs 
territory, references in this Decision and in the Resolu tions a dopting the Community 's 
implementing r egulations on customs valu ation of goods and the Andean Customs Value 
Declaration to the "Andean Community Customs Territory " shall be considered to mean 
the "Customs Territory of the importing member country ". 
Done in  the city of Lima, Peru, on the twelfth day of December in the year two  thousand  
and three.  G/VAL/N/1/ECU/3  
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  ANNEX 
AGREEMENT ON IMPLEMENTATION OF ARTICLE VII  OF THE 
GENERAL  AGREEMENT  ON TARIFFS AND TRADE 1994  
GENERAL INTRODUCTORY COMMENTARY  
1. The primary basis for custom s value under this Agreement is "transaction value" as defined 
in Article  1. Article 1 is to be read together with Article 8 which provides, inter alia, for 
adjustments to the price actually paid or payable in cases where certain specific elements which 
are considered to form a part of the value for customs purposes are incurred by the buyer but are 
not included in the price actually paid or payable for the imported goods.  Article 8 also provides for 
the inclusion in the transaction value of certain conside rations which may pass from the buyer to 
the seller in the form of specified goods or services rather than in the form of money.  Articles 2 
through 7 provide methods of determining the customs value whenever it cannot be determined 
under the provisions of Article  1. 
2. Where the customs value cannot be determined under the provisions of Article 1 there 
should normally be a process of consultation between the customs administration and importer 
with a view to arriving at a basis of value under the provisions  of Article 2 or 3.  It may occur, 
for example, that the importer has information about the customs value of identical or similar 
imported goods which is not immediately available to the customs administration in the port 
of importation.  On the other hand, the customs administration may have information about 
the customs value of identical or similar imported goods which is not readily available to 
the importer.  A process of consultation between the two parties will enable information to be 
exchanged, subjec t to the requirements of commercial confidentiality, with a view to determining 
a proper basis of  value for customs purposes.  
3. Articles 5 and 6 provide two bases for determining the customs value where it cannot be 
determined on the basis of the transact ion value of the imported goods or of identical or similar 
imported goods.  Under paragraph  1 of Article 5 the customs value is determined on the basis 
of the price at which the goods are sold in the condition as imported to an unrelated buyer in 
the countr y of importation.  The importer also has the right to have goods which are further 
processed after importation valued under the provisions of Article 5 if the importer so requests.  
Under Article 6 the customs value is determined on the basis of the computed  value.  Both these 
methods present certain difficulties and because of this the importer is given the right, under 
the provisions of Article 4, to choose the order of application of the two methods.  
4. Article 7 sets out how to determine the customs value in cases where it cannot be 
determined under the provisions of any of the preceding Articles.  
Members,  
Having  regard  to the Multilateral Trade Negotiations;  
Desiring  to further the objectives of GATT  1994 and to secure additional benefits for the 
internati onal trade of developing countries;  
Recognizing  the importance of the provisions of Article VII of GATT  1994 and desiring to  
elaborate rules for their application in order to provide greater uniformity and certainty in their 
implementation;  
Recognizing  the need for a fair, uniform and neutral system for the valuation of goods for 
customs purposes that precludes the use of arbitrary or fictitious customs values;  
Recognizing  that the basis for valuation of goods for customs purposes should, to the 
greatest ex tent possible, be the transaction value of the goods being valued;  
Recognizing  that customs value should be based on simple and equitable criteria consistent 
with commercial practices and that valuation procedures should be of general application without 
distinction between sources of supply;  G/VAL/N/1/ECU/3  
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  Recognizing  that valuation procedures should not be used to combat dumping;  
Hereby agree as follows:  
PART I  
RULES ON CUSTOMS VALUATION  
Article 1  
1. The customs value of imported goods shall be the transaction value, th at is the price 
actually paid or payable for the goods when sold for export to the country of importation adjusted 
in accordance with the provisions of Article 8, provided:  
(a) that there are no restrictions as to the disposition or use of the goods by the  buyer other 
than restrictions which:  
(i) are imposed or required by law or by the publi c authorities in the country 
of importation;  
(ii) limit the geographical area in which the goods may be resold;  or 
(iii) do not substantially affect the value of the go ods; 
(b) that the sale or price is not subject to some condition or consideration for which a  value 
cannot be determined with respect to the goods being valued;  
(c) that no part of the proceeds of any subsequent resale, disposal or use of the goods by the 
buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be 
made in accordance with the provisions of Article 8;  and 
(d) that the buyer and seller are not related, or where the buyer and seller are related, that the 
transaction value is acceptable for customs purposes under the provisions of  paragraph 2.  
2.(a) In determining whether the transaction value is acceptable for the purposes of paragraph  1, 
the fact that the buyer and the seller are related within the meaning of  Article  15 shall not in 
itself be grounds for regarding the transaction value as unacceptable.  In such case the 
circumstances surrounding the sale shall be examined and the transaction value shall be 
accepted provided that the relationship did not influen ce the price.  If, in the light 
of information provided by the importer or  otherwise, the customs administration has 
grounds for considering that the relationship influenced the price, it shall communicate its 
grounds to the importer and the importer shall be given a reasonable opportunity to 
respond.  If the importer so requests, the communication of the grounds shall be in writing.  
(b) In a sale between related persons, the transaction value shall be accepted and the goods 
valued in accordance with the prov isions of paragraph  1 whenever the importer 
demonstrates that such value closely approximates to one of the following occurring at or 
about the same time:  
(i) the transaction value in sales to unrelated buyers of identical or similar goods for 
export to th e same country of importation;  
(ii) the customs value of identical or similar goods as determined under the  provisions 
of Article 5;  
(iii) the customs value of identical or similar goods as determined under the  provisions 
of Article  6; 
In applying the fore going tests, due account shall be taken of demonstrated differences in 
commercial levels, quantity levels, the elements enumerated in Article  8 and costs incurred 
by the seller in sales in which the seller and the buyer are not related that are not incurre d 
by the seller in sales in which the seller and the buyer are related.  
(c) The tests set forth in paragraph 2(b) are to be used at the initiative of the importer and only 
for comparison purposes.  Substitute values may not be established under the provisio ns 
of paragraph 2(b).  G/VAL/N/1/ECU/3  
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  Article 2  
1.(a) If the customs value of the imported goods cannot be determined under the  provisions 
of Article  1, the customs value shall be the transaction value of identical goods sold for 
export to the same country of importation and exported at or about the  same time as the 
goods being valued.  
(b) In applying this Article, the transaction value of identical goods in a sale at the same 
commercial level and in substantially the same quantity as the goods being valued shall be 
used t o determine the customs value.  Where no such sale is found, the transaction value 
of identical goods sold at a different commercial level and/or in different quantities, adjusted 
to take account of differences attributable to commercial level and/or to qua ntity, shall be 
used, provided that such adjustments can be made on the basis of demonstrated evidence 
which clearly establishes the reasonableness and accuracy of the adjustment, whether the 
adjustment leads to an increase or a  decrease in the value.  
2. Where the costs and charges referred to in paragraph  2 of Article 8 are included in the 
transaction value, an adjustment shall be made to take account of significant differences in such 
costs and charges between the imported goods and the identical goods in  question arising from 
differences in distances and modes of transport.  
3. If, in applying this Article, more than one transaction value of identical goods is found, 
the lowest such value shall be used to determine the customs value of the imported goods.  
Article 3  
1.(a) If the customs value of the imported goods cannot be determined under the  provisions 
of Articles  1 and 2, the customs value shall be the transaction value of  similar goods sold for 
export to the same country of importation and exported at o r about the same time as the 
goods being valued.  
(b) In applying this Article, the transaction value of similar goods in a sale at the same 
commercial level and in substantially the same quantity as the goods being valued shall be 
used to determine the cus toms value.  Where no such sale is found, the transaction value 
of similar goods sold at a different commercial level and/or in different quantities, adjusted 
to take account of differences attributable to commercial level and/or to quantity, shall be 
used,  provided that such adjustments can be made on the basis of demonstrated evidence 
which clearly establishes the reasonableness and accuracy of the adjustment, whether the 
adjustment leads to an increase or a decrease in the value.  
2. Where the costs and ch arges referred to in paragraph  2 of Article 8 are included in 
the transaction value, an adjustment shall be made to take account of significant differences in 
such costs and charges between the imported goods and the similar goods in question arising from 
differences in distances and modes of transport.  
3. If, in applying this Article, more than one transaction value of similar goods is found, 
the lowest such value shall be used to determine the customs value of the imported goods.  
Article 4  
If the customs value of the imported goods cannot be determined under the provisions 
of Articles  1, 2 and 3, the customs value shall be determined under the provisions of Article 5 or, 
when the customs value cannot be determined under that Article, under the provisions o f Article 6 
except that, at the request of the importer, the order of application of Articles 5 and 6 shall be 
reversed.  
Article 5  
1.(a) If the imported goods or identical or similar imported goods are sold in the country 
of importation in the condition as  imported, the customs value of the imported goods under 
the provisions of this Article shall be based on the unit price at which the imported goods or 
identical or similar imported goods are so sold in the greatest aggregate quantity, at or G/VAL/N/1/ECU/3  
- 13 - 
  about the time  of the importation of the goods being valued, to persons who are not related 
to the persons from whom they buy such goods, subject to deductions for the following:  
(i) either the commissions usually paid or agreed to be paid or the additions usually 
made for profit and general expenses in connection with sales in such country 
of imported goods of the same class or kind;  
(ii) the usual costs of transport and insurance and associated costs incurred within the 
country of importation;  
(iii) where appropriate, the costs and c harges referred to in paragraph  2 of Article  8; and 
(iv) the customs duties and other national taxes payable in the country of  importation by 
reason of the importation or sale of the goods.  
(b) If neither the imported goods nor identical nor similar imported go ods are sold at or about 
the time of importation of the goods being valued, the customs value shall, subject 
otherwise to the provisions of paragraph 1(a), be based on the unit price at which the 
imported goods or identical or similar imported goods are so ld in the country of importation 
in the condition as imported at the earliest date after the importation of the goods being 
valued but before the expiration of 90 days after such importation.  
2. If neither the imported goods nor identical nor similar impor ted goods are sold in 
the country of importation in the condition as imported, then, if the importer so requests, 
the customs value shall be based on the unit price at which the imported goods, after further 
processing, are  sold in the greatest aggregate q uantity to persons in the country of importation 
who are not related to the persons from whom they buy such goods, due allowance being made 
for the value  added by such processing and the deductions provided for in paragraph 1(a).  
Article 6  
1. The customs v alue of imported goods under the provisions of this Article shall be based on 
a computed value.  Computed value shall consist of the sum of:  
(a) the cost or value of materials and fabrication or other processing employed in producing the 
imported goods;  
(b) an amou nt for profit and general expenses equal to that usually reflected in sales of  goods 
of the same class or kind as the goods being valued which are made by producers in the 
country of exportation for export to the country of importation;  
(c) the cost or value o f all other expenses necessary to reflect the valuation option chosen by 
the Member under paragraph  2 of Article 8.  
2. No Member may require or compel any person not resident in its own territory to produce 
for examination, or to allow access to, any accou nt or other record for the purposes of determining 
a computed value.  However, information supplied by the producer of the goods for the purposes of 
determining the customs value under the provisions of this Article may be verified in another 
country by the  authorities of the country of importation with the agreement of the producer and 
provided they give sufficient advance notice to the government of the country in question and the 
latter does not object to the investigation.  
Article 7  
1. If the customs val ue of the imported goods cannot be det ermined under the provisions 
of Articles  1 through 6, inclusive, the customs value shall be determined using reasonable means 
consistent with the principles and general provisions of this Agreement and of Article  VII 
of GATT  1994 and on the basis of data available in the country of importation.  
2. No customs value shall be determined under the provisions of this Article on the basis of:  
(a) the selling price in the country of importation of goods produced in such countr y; 
(b) a system which provides for the acceptance for customs purposes of the higher of two 
alternative values;  
(c) the price of goods on the domestic market of the country of exportation;  G/VAL/N/1/ECU/3  
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  (d) the cost of production other than computed values which have be en determined for identical 
or similar goods in accordance with the provisions of Article 6;  
(e) the price of the goods for export to a country other than the country of importation;  
(f) minimum customs values;  or 
(g) arbitrary or fictitious values.  
3. If the importer so requests, the importer shall be informed in writing of the customs value 
determined under the provisions of this Article and the method used to determine such value.  
Article 8  
1. In determining the customs value under the provisions of Arti cle 1, there shall be added 
to the price actually paid or payable for the imported goods:  
(a) the following, to the extent that they are incurred by the buyer but are not included in the 
price actually paid or payable for the goods:  
(i) commissions and bro kerage, except buying commissions;  
(ii) the cost of containers which are treated as being one for customs purposes with the 
goods in question;  
(iii) the cost of packing whether for labour or materials;  
(b) the value, apportioned as appropriate, of the foll owing goods and services where supplied 
directly or indirectly by the buyer free of charge or at reduced cost for use in connection 
with the production and sale for export of the imported goods, to the extent that such value 
has not been included in the pr ice actually paid or payable:  
(i) materials, components, parts and similar items incorporated in the imported goods;  
(ii) tools, dies, moulds and similar items used in the production of the imported goods;  
(iii) materials consumed in the production of the imported goods;  
(iv) engineering, development, artwork, design work, and plans and sketches undertaken 
elsewhere than in the country of importation and necessary for the production of the 
imported goods;  
(c) royalties and licence fees related to the goods being valued that the buyer must pay, either 
directly or indirectly, as a condition of sale of the goods being valued, to the extent that 
such royalties and fees are not included in the price actually paid or payable;  
(d) the value of any part of the proce eds of any subsequent resale, disposal or use of the 
imported goods that accrues directly or indirectly to the seller.  
2. In framing its legislation, each Member shall provide for the inclusion in or the exclusion 
from the customs value, in whole or in par t, of the following:  
(a) the cost of transport of the imported goods to the port or place of importation;  
(b) loading, unloading and handling charges associated with the transport of the imported goods 
to the port or place of importation;  and 
(c) the cost of insurance.  
3. Additions to the price actually paid or payable shall be made under this Article only on the 
basis of objective and quantifiable data.  
4. No additions shall be made to the price actually paid or payable in determining the customs 
value exc ept as provided in this Article.  
Article 9  
1. Where the conversion of currency is necessary for the determination of the customs value, 
the rate of exchange to be used shall be that duly published by the competent authorities of the 
country of importation concerned and shall reflect as effectively as possible, in respect of the 
period covered by each such document of publication, the current value of such currency in 
commercial transactions in terms of the currency of the country of importation.  G/VAL/N/1/ECU/3  
- 15 - 
  2. The conv ersion rate to be used shall be that in effect at the time of exportation or the time 
of importation, as provided by each Member.  
Article 10  
All information which is by nature confidential or which is provided on a confidential basis for 
the purposes of cu stoms valuation shall be treated as strictly confidential by the authorities 
concerned who shall not disclose it without the specific permission of the person or government 
providing such information, except to the extent that it may be required to be disc losed in the 
context of judicial proceedings.  
Article 11  
1. The legislation of each Member shall provide in regard to a determination of customs value 
for the right of appeal, without penalty, by the importer or any other person liable for the payment 
of the duty.  
2. An initial right of appeal without penalty may be to an authority within the customs 
administration or to an independent body, but the legislation of each Member shall provide for the 
right of appeal without penalty to a judicial authority.  
3. Notice of the decision on appeal shall be given to the appellant and the reasons for such 
decision shall be provided in writing.  The appellant shall also be informed of any rights of further 
appeal.  
Article 12  
Laws, regulations, judicial decisions and admi nistrative rulings of general application giving 
effect to this Agreement shall be published in conformity with Article X of GATT  1994 by 
the country of importation concerned.  
Article 13  
If, in the course of determining the customs value of imported goods,  it becomes necessary 
to delay the final determination of such customs value, the importer of the goods shall 
nevertheless be able to withdraw them from customs if, where so required, the importer provides 
sufficient guarantee in the form of a surety, a de posit or some other appropriate instrument, 
covering the ultimate payment of customs duties for which the goods may be liable.  The legislation 
of each Member shall make provisions for such circumstances.  
Article 14  
The notes at Annex I to this Agreement fo rm an integral part of this Agreement and the 
Articles of this Agreement are to be read and applied in conjunction with their respective notes.  
Annexes II and III also form an integral part of this Agreement.  
Article 15  
1. In this Agreement:  
(a) "customs v alue of imported goods" means the value of goods for the purposes of  levying 
ad valorem  duties of customs on imported goods;  
(b) "country of importation" means country or customs territory of importation;  and 
(c) "produced" includes grown, manufactured and  mined.  
2. In this Agreement:  
(a) "identical goods" means goods which are the same in all respects, including physical 
characteristics, quality and reputation.  Minor differences in appearance would not preclude 
goods otherwise conforming to the definition from being regarded as identical;  G/VAL/N/1/ECU/3  
- 16 - 
  (b) "similar goods" means goods which, although not alike in all respects, have like 
characteristics and like component materials which enable them to perform the same 
functions and to be commercially interchangeable.  The quality of the goods, their reputation 
and the existence of a trademark are among the factors to be considered in determining 
whether goods are similar;  
(c) the terms "identical goods" and "similar goods" do not include, as the case may be, goods 
which inc orporate or reflect engineering, development, artwork, design work, and plans and 
sketches for which no adjustment has been made unde r paragraph  1(b)(iv) of Article  8 
because such elements were undertaken in the country of importation;  
(d) goods shall not be regarded as "identical goods" or "similar goods" unless they were 
produced in the same country as the goods being valued;  
(e) goods produced by a different person shall be taken into account only when there are no 
identical goods or similar goods, as th e case may be, produced by the same person as the 
goods being valued.  
3. In this Agreement "goods of the same class or kind" means goods which fall within a group 
or range of goods produced by a particular industry or industry sector, and includes identica l or 
similar goods.  
4. For the purposes of this Agreement, persons shall be deemed to be related only if:  
(a) they are officers or directors of one another's businesses;  
(b) they are legally recognized partners in business;  
(c) they are employer and employee;  
(d) any pers on directly or indirectly owns, controls or holds 5 % or more of the outstanding 
voting stock or shares of both of them;  
(e) one of them directly or indirectly controls the other;  
(f) both of them are directly or indirectly controlled by a third person;  
(g) together th ey directly or indirectly control a third person;  or 
(h) they are members of the same family.  
5. 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 sha ll be deemed to be related 
for the purposes of this Agreement if they fall within the criteria of paragraph 4.  
Article 16  
Upon written request, the importer shall have the right to an explanation in writing from the 
customs administration of the country of  importation as to how the customs value of the 
importer 's goods was determined.  
Article 17  
Nothing in this Agreement shall be construed as restricting or calling into question the rights 
of customs administrations to satisfy themselves as to the truth or accuracy of any statement, 
document or declaration presented for customs valuation purposes.  
PART II  
ADMINISTRATION, CONSULTATIONS AND DISPUTE SETTLEMENT1 
Article 18  
Institutions  
1. There is hereby established a Committee on Customs Valuation (referred to in this 
Agreement as "the Committee") composed of representatives from each of the Members.  
The Committee shall elect its own Chairman and shall normally meet once a year, or as is 
                                                
1 In the GATT, the word " diferencias " in Spanish has the same meaning attributed to " controversias " 
in other organizations (this note only c oncerns the Spanish text).  G/VAL/N/1/ECU/3  
- 17 - 
  otherwise envisaged by the relevant provisions of this Agreement, for the p urpose of affording 
Members the opportunity to consult on matters relating to the administration of the customs 
valuation system by any Member as it might affect the operation of this Agreement or the 
furtherance of its objectives and carrying out such oth er responsibilities as may be assigned to it 
by the Members.  The WTO Secretariat shall act as the secretariat to the Committee.  
2. There shall be established a Technical Committee on Customs Valuation (referred to in this 
Agreement as "the Technical Commit tee") under the auspices of the Customs Co -operation Council 
(referred to in this Agreement as "the CCC"), which shall carry out the responsibilities described in 
Annex II to this Agreement and shall operate in accordance with the rules of procedure contai ned 
therein.  
Article 19  
Consultation s and Dispute Settlement  
1. Except as otherwise provided herein, the Dispute Settlement Understanding is applicable to 
consultations and the settlement of disputes under this Agreement.  
2. If any Member considers that an y benefit accruing to it, directly or indirectly, under this 
Agreement is being nullified or impaired, or that the achievement of any objective of this 
Agreement is being impeded, as a result of the actions of another Member or of other Members, 
it may, wi th a view to reaching a mutually satisfactory solution of this matter, request 
consultations with the Member or Members in question.  Each Member shall afford sympathetic 
consideration to any request from another Member for consultations.  
3. The Technical C ommittee shall provide, upon request, advice and assistance to Members 
engaged in consultations.  
4. At the request of a party to the dispute, or on its own initiative, a panel established to 
examine a dispute relating to the provisions of this Agreement ma y request the Technical 
Committee to carry out an examination of any questions requiring technical consideration.  
The panel shall determine the terms of reference of the Technical Committee for the particular 
dispute and set a time period for receipt of th e report of the Technical Committee.  The panel shall 
take into consideration the report of the Technical Committee.  In the event that the 
Technical  Committee is unable to reach consensus on a matter referred to it pursuant to this 
paragraph, the panel shou ld afford the parties to the dispute an opportunity to present their views 
on the matter to the panel.  
5. Confidential information provided to the panel shall not be disclosed without formal 
authorization from the person, body or authority providing such i nformation.  Where such 
information is requested from the panel but release of such information by the panel is not 
authorized, a non -confidential summary of this information, authorized by the person, body or 
authority providing the information, shall be p rovided.  
PART III  
SPECIAL AND DIFFERENTIAL TREATMENT  
Article 20  
1. Developing country Members not party to the Agreement on Implementation of Article  VII 
of the General Agreement on Tariffs and Trade done on 1 2 April 1 979 may delay application of the 
provisions of this Agreement for a period not exceeding five years from the date of entry into force 
of the WTO Agreement for such Members.  Developing country Members who choose to delay 
application of this Agreement shall notify the Director -General of the WTO  accordingly.  
2. In addition to paragraph 1, developing country Members not party to the Agreement on 
Implementation of Article  VII of the General Agreement on Tariffs and Trade done on 
12 April 1979 may delay application of paragraph  2(b)(iii) of Article 1 and Article 6 for a period not 
exceeding three years following their application of all other provisions of this Agreement.  G/VAL/N/1/ECU/3  
- 18 - 
  Developing country Members that choose to delay application of the provisions specified in this 
paragraph shall notify the Directo r-General of the WTO accordingly.  
3. Developed country Members shall furnish, on mutually agreed terms, technical assistance to 
developing country Members that so request.  On this basis developed country Members shall draw 
up programmes of technical assist ance which may include, inter alia, training of personnel, 
assistance in preparing implementation measures, access to sources of information regarding 
customs valuation methodology, and advice on the application of the provisions of this Agreement.  
PART IV  
FINAL PROVISIONS  
Article 21  
Reservations  
Reservations may not be entered in respect of any of the provisions of this Agreement 
without the consent of the other Members.  
Article 22  
National Legislation  
1. Each Member shall ensure, not later than the date o f application of the provisions of this 
Agreement for it, the conformity of its laws, regulations and administrative procedures with the 
provisions of this Agreement.  
2. Each Member shall inform the Committee of any changes in its laws and regulations rele vant 
to this Agreement and in the administration of such laws and regulations.  
Article 23  
Review  
The Committee shall review annually the implementation and operation of this Agreement 
taking into account the objectives thereof.  The Committee shall annually  inform the Council for 
Trade in Goods of developments during the period covered by such reviews.  
Article 24  
Secretariat  
This Agreement shall be serviced by the WTO Secretariat except in regard to those 
responsibilities specifically assigned to the Technic al Committee, which will be serviced  by the 
CCC Secretariat.  
ANNEX I  
INTERPRETATIVE NOTES  
General Note  
Sequential Application of Valuation Methods  
1. Articles 1 through 7 define how the customs value of imported goods is to be determined 
under the provisio ns of this Agreement.  The methods of valuation are set out in a sequential order 
of application.  The primary method for customs valuation is defined in Article 1 and imported 
goods are to be valued in accordance with the provisions of this Article whenever  the conditions 
prescribed therein are fulfilled.  G/VAL/N/1/ECU/3  
- 19 - 
  2. Where the customs value cannot be determined under the provisions of Article 1, it is to be 
determined by proceeding sequentially through the succeeding Articles to the first such Article 
under which the  customs value can be determined.  Except as provided in Article 4, it is only when 
the customs value cannot be determined under the provisions of a particular Article that the 
provisions of the next Article in the sequence can be used.  
3. If the importer d oes not request that the order of Articles  5 and 6 be reversed, the normal 
order of the sequence is to be followed.  If the importer does so request but it then proves 
impossible to determine the customs value under the provisions of Article 6, the customs value is 
to be determined under the provisions of Article 5, if it can be so determined.  
4. Where the customs value cannot be determined under the provisions of Articles 1 through 6 
it is to be determined under the provisions of Article 7.  
Use of Generally  Accepted Accounting Principles  
1. "Generally accepted accounting principles" refers to the recognized consensus or substantial 
authoritative support within a country at a particular time as to which economic resources and 
obligations should be recorded as  assets and liabilities, which changes in assets and liabilities 
should be recorded, how the assets and liabilities and changes in them should be measured, what 
information should be disclosed and how it should be disclosed, and which financial statements 
should be prepared.  These standards may be broad guidelines of general application as well as 
detailed practices and procedures.  
2. For the purposes of this Agreement, the customs administration of each Member shall utilize 
information prepared in a manner  consistent with generally accepted accounting principles in the 
country which is appropriate for the Article in question.  For example, the determination of usual 
profit and general expenses under the provisions of Article 5 would be carried out utilizing 
information prepared in a manner consistent with generally accepted accounting principles of the 
country of importation.  On the other hand, the determination of usual profit and general expenses 
under the provisions of Article  6 would be carried out utiliz ing information prepared in a manner 
consistent with generally accepted accounting principles of the country of production.  As a further 
example, the determination of an element provided for in paragraph  1(b)(ii) of Article  8 
undertaken in the country of i mportation would be carried out utilizing information in a manner 
consistent with the generally accepted accounting principles of that country.  
Note to Article 1  
Price actually paid or payable  
1. The price actually paid or payable is the total payment made  or to be made by the buyer to 
or for the benefit of the seller for the imported goods.  The payment need not necessarily take the 
form of a transfer of money.  Payment may be made by way of letters of credit or negotiable 
instruments.  Payment may be made di rectly or indirectly.  An example of an indirect payment 
would be the settlement by the buyer, whether in whole or in part, of a debt owed by the seller.  
2. Activities undertaken by the buyer on the buyer's own account, other than those for which 
an adjustm ent is provided in Article 8, are not considered to be an indirect payment to the seller, 
even though they might be regarded as of benefit to the seller.  The costs of such activities shall 
not, therefore, be added to the price actually paid or payable in d etermining the customs value.  
3. The customs value shall not include the following charges or costs, provided that they are 
distinguished from the price actually paid or payable for the imported goods:  
(a) charges for construction, erection, assembly, maintena nce2 or technical assistance, 
undertaken after importation on imported goods such as industrial plant, machinery or 
equipment;  
                                                
2 By means of an Act published by the Director -General of the WTO in document WT/Let/147, the word 
"entretenimiento " in Spanish was officially corrected and the correction " mantenimiento " was included in the 
authenticated text of  the Agreement.  G/VAL/N/1/ECU/3  
- 20 - 
  (b) the cost of transport after importation;  
(c) duties and taxes of the country of importation.  
4. The price actually paid or payable re fers to the price for the imported goods.  Thus the flow 
of dividends or other payments from the buyer to the seller that do not relate to the imported 
goods are not part of the customs value.  
Paragraph 1(a)(iii ) 
 Among restrictions which would not render a  price actually paid or payable unacceptable are 
restrictions which do not substantially affect the value of the goods.  An example of such 
restrictions would be the case where a seller requires a buyer of automobiles not to sell or exhibit 
them prior to a fixed date which represents the beginning of a model year.  
Paragraph 1(b ) 
1. If the sale or price is subject to some condition or consideration for which a value cannot be 
determined with respect to the goods being valued, the transaction value shall not b e acceptable 
for customs purposes.  Some examples of this include:  
(a) the seller establishes the price of the imported goods on condition that the buyer will also 
buy other goods in specified quantities;  
(b) the price of the imported goods is dependent upon the pr ice or prices at which the  buyer 
of the imported goods sells other goods to the seller of the imported goods;  
(c) the price is established on the basis of a form of payment extraneous to the imported goods, 
such as where the imported goods are semi -finished go ods which have been provided by the 
seller on condition that the seller will receive a specified quantity of  the finished goods.  
2. However, conditions or considerations relating to the production or marketing of the 
imported goods shall not result in reje ction of the transaction value.  For example, the fact that 
the buyer furnishes the seller with engineering and plans undertaken in the country of importation 
shall not result in rejection of the transaction value for the purposes of Article 1.  Likewise, if  the 
buyer undertakes on the buyer 's own account, even though by agreement with the seller, activities 
relating to the marketing of the imported goods, the value of these activities is not part 
of the customs value nor shall such activities result in rejec tion of the transaction value.  
Paragraph 2  
1. Paragraphs 2(a) and 2(b) provide different means of establishing the acceptability 
of a transaction value.  
2. Paragraph 2(a) provides that where the buyer and the seller are related, the circumstances 
surroundi ng the sale shall be examined and the transaction value shall be accepted as the customs 
value provided that the relationship did not influence the price.  It is not intended that there should 
be an examination of the circumstances in all cases where the bu yer and the seller are related.  
Such examination will only be required where there are doubts about the acceptability of the price.  
Where the customs administration have no doubts about the acceptability of the price, it should be 
accepted without requesti ng further information from the importer.  For example, the customs 
administration may have previously examined the relationship, or it may already have detailed 
information concerning the buyer and the seller, and may already be satisfied from such 
examina tion or information that the relationship did not influence the price.  
3. Where the customs administration is unable to accept the transaction value without further 
inquiry, it should give the importer an opportunity to supply such further detailed informa tion as 
may be necessary to enable it to examine the circumstances surrounding the sale.  In this context, 
the customs administration should be prepared to examine relevant aspects of the transaction, 
including the way in which the buyer and seller organize  their commercial relations and the way in 
which the price in question was arrived at, in order to determine whether the relationship 
influenced the price.  Where it can be shown that the buyer and seller, although related under 
the provisions of Article 15 , buy from and sell to each other as if they were not related, this would 
demonstrate that the price had not been influenced by the relationship.  As an example of this, G/VAL/N/1/ECU/3  
- 21 - 
  if the price had been settled in a manner consistent with the normal pricing practices of the 
industry in question or with the way the seller settles prices for sales to buyers who are not related 
to the seller, this would demonstrate that the price had not been influenced by the relationship.  
As a further example, where it is shown that the  price is adequate to ensure recovery of all costs 
plus a profit which is representative of the firm's overall profit realized over a representative period 
of time (e.g. on an annual basis) in sales of goods of the same class or kind, this would 
demonstrat e that the price had not been influenced.  
4. Paragraph 2(b) provides an opportunity for the importer to demonstrate that the transaction 
value closely approximates to a "test" value previously accepted by the customs administration 
and is therefore accepta ble under the provisions of Article 1.  Where a test under paragraph 2(b) 
is met, it is not necessary to examine the question of influence under paragraph 2(a).  If the 
customs administration has already sufficient information to be satisfied, without furthe r detailed 
inquiries, that one of the tests provided in paragraph 2(b) has been met, there is no reason for it 
to require the importer to demonstrate that the test can be met.  In paragraph 2(b) the term 
"unrelated buyers" means buyers who are not related t o the seller in any particular case.  
Paragraph 2(b ) 
A number of factors must be taken into consideration in determining whether one value 
"closely approximates" to another value.  These factors include the nature of the imported goods, 
the nature of the ind ustry itself, the season in which the goods are imported, and, whether the 
difference in values is commercially significant.  Since these factors may vary from case to case, 
it would be impossible to apply a uniform standard such as a fixed percentage, in e ach case.  
For example, a small difference in value in a case involving one type of goods could be 
unacceptable while a large difference in a case involving another type of goods might be 
acceptable in determining whether the transaction value closely appro ximates to the "test" values 
set forth in paragraph  2(b) of Article  1. 
Note to Article 2  
1. In applying Article 2, the customs administration shall, wherever possible, use a sale 
of identical goods at the same commercial level and in substantially the same  quantities as the 
goods being valued.  Where no such sale is found, a sale of identical goods that takes place under 
any one of the following three conditions may be used:  
(a) a sale at the same commercial level but in different quantities;  
(b) a sale at a differe nt commercial level but in substantially the same quantities;  or 
(c) a sale at a different commercial level and in different quantities.  
2. Having found a sale under any one of these three conditions adjustments will then be made, 
as the case may be, for:  
(a) quantity factors only;  
(b) commercial level factors only;  or 
(c) both commercial level and quantity factors.  
3. The expression "and/or" allows the flexibility to use the sales and make the necessary 
adjustments in any one of the three conditions described above.  
4. For the purposes of Article 2, the transaction value of identical imported goods means 
a customs value, adjusted as provided for in paragraphs 1(b) and 2, which has already been 
accepted under Article  1. 
5. A condition for adjustment because of different com mercial levels or different quantities 
is that such adjustment, whether it leads to an increase or a decrease in the value, be made only 
on the basis of demonstrated evidence that clearly establishes the reasonableness and accuracy 
of the adjustments, e.g.  valid price lists containing prices referring to different levels or different 
quantities.  As an example of this, if the imported goods being valued consist of a shipment 
of 10 units and the only identical imported goods for which a transaction value exis ts involved 
a sale of 500 units, and it is recognized that the seller grants quantity discounts, the required G/VAL/N/1/ECU/3  
- 22 - 
  adjustment may be accomplished by resorting to the seller's price list and using that price 
applicable to a sale of 10 units.  This does not requir e that a sale had to have been made in 
quantities of 10 as long as the price list has been established as being bona  fide through sales 
at other quantities.  In the absence of such an objective measure, however, the determination 
of a customs value under th e provisions of Article 2 is not appropriate.  
Note to Article 3  
1. In applying Article 3, the customs administration shall, wherever possible, use a sale 
of similar goods at the same commercial level and in substantially the same quantities as the 
goods be ing valued.  Where no such sale is found, a sale of similar goods that takes place under 
any one of the following three conditions may be used:  
(a) a sale at the same commercial level but in different quantities;  
(b) a sale at a different commercial level but in su bstantially the same quantities;  or 
(c) a sale at a different commercial level and in different quantities.  
2. Having found a sale under any one of these three conditions adjustments will then be made, 
as the case may be, for:  
(a) quantity factors only;  
(b) commercial  level factors only;  or 
(c) both commercial level and quantity factors.  
3. The expression "and/or" allows the flexibility to use the sales and make the necessary 
adjustments in any one of the three conditions described above.  
4. For the purpose of Article 3, t he transaction value of similar imported goods means 
a customs value, adjusted as provided for in paragraphs 1(b) and 2, which has already been 
accepted under Article  1. 
5. A condition for adjustment because of different commercial levels or different quan tities is 
that such adjustment, whether it leads to an increase or a decrease in the value, be made only on 
the basis of demonstrated evidence that clearly establishes the reasonableness and accuracy 
of the adjustment, e.g. valid price lists containing pri ces referring to different levels or different 
quantities.  As an example of this, if the imported goods being valued consist of a shipment 
of 10 units and the only similar imported goods for which a transaction value exists involved a sale 
of 500 units, an d it is recognized that the seller grants quantity discounts, the required adjustment 
may be accomplished by resorting to the seller's price list and using that price applicable to a sale 
of 10 units.  This does not require that a sale had to have been made  in quantities of 10 as long as 
the price list has been established as being bona  fide through sales at other quantities.  In the 
absence of such an objective measure, however, the determination of a customs value under the 
provisions of Article 3 is not ap propriate.  
Note to Article 5  
1. The term "unit price at which ... goods are sold in the greatest aggregate quantity" means 
the price at which the greatest number of units is sold in sales to persons who are not related to 
the persons from whom they buy suc h goods at the first commercial level after importation at 
which such sales take place.  
2. As an example of this, goods are sold from a price list which grants favourable unit prices for 
purchases made in larger quantities.  
Sale quantity  Unit price  Number of sales  Total quantity  sold at  each price 
1-10 units  100 10 sales of 5 units  
5 sales of 3 units  65 
11-25 units  95 5 sales of 11 units  55 
over 25 units  90 1 sale of 30 units  
1 sale of 50 units  80 
 G/VAL/N/1/ECU/3  
- 23 - 
  The greatest number of units sold at a price is 80;  therefore, the unit price in the greatest 
aggregate quantity is 90.  
3. As another example of this, two sales occur.  In the first sale 500 units are sold at a price 
of 95 currency units each.  In the second sale 400 units are sold at a price of 90 currency unit s 
each.  In this example, the greatest number of units sold at a particular price is 500;  therefore, the 
unit price in the greatest aggregate quantity is 95.  
4. A third example would be the following situation where various quantities are sold at various 
prices. 
 (a) Sales  
Sale quantity  Unit price  
40 units  100 
30 units  90 
15 units  100 
50 units  95 
25 units  105 
35 units  90 
5 units  100 
 
 (b) Totals  
Total quantity sold  Unit price  
65 90 
50 95 
60 100 
25 105 
 
 In this example, the greatest number of un its sold at a particular price is 65;  therefore, 
the unit price in the greatest aggregate quantity is 90.  
5. Any sale in the importing country, as described in paragraph  1 above, to a person who 
supplies directly or indirectly free of charge or at reduced cost for use in connection with the 
production and sale for export of the imported goods any of the elements specified in 
paragraph  1(b) of Article  8, should not be taken into account in establishing the unit price for the 
purposes of Article  5. 
6. It shou ld be noted that "profit and general expenses" referred to in paragraph  1 of Article  5 
should be taken as a whole.  The figure for the purposes of this deduction should be determined on 
the basis of information supplied by or on behalf of the importer unles s the importer's figures are 
inconsistent with those obtained in sales in the country of importation of imported goods of the 
same class or kind . Where the importer's figures are inconsistent with such figures, the amount for 
profit and general expenses ma y be based upon relevant information other than that supplied by 
or on behalf of the importer.  
7. The "general expenses" include the direct and indirect costs of marketing the goods in 
question.  
8. Local taxes payable by reason of the sale of the goods for  which a deduction is not made 
under the provisions of paragraph  1(a)(iv) of Article  5 shall be deducted under the provisions 
of paragraph  1(a)(i) of Article  5. 
9. In determining either the commissions or the usual profits and general expenses under the 
provisions of paragraph  1 of Article 5, the question whether certain goods are "of the same class 
or kind" as other goods must be determined on a case -by-case basis by reference to the 
circumstances involved.  Sales in the country of importation of the narrow est group or range 
of imported goods of the same class or kind, which includes the goods being valued, for which the 
necessary information can be provided, should be examined.  For the purposes of Article 5, "goods 
of the same class or kind" includes goods imported from the same country as the goods being 
valued as well as goods imported from other countries.  G/VAL/N/1/ECU/3  
- 24 - 
  10. For the purposes of paragraph  1(b) of Article 5, the "earliest date" shall be the date by 
which sales of the imported goods or of identical or simi lar imported goods are made in sufficient 
quantity to establish the unit price.  
11. Where the method in paragraph  2 of Article 5 is used, deductions made for the value added 
by further processing shall be based on objective and quantifiable data relating t o the cost of such 
work.  Accepted industry formulas, recipes, methods of construction, and other industry practices 
would form the basis of the calculations.  
12. It is recognized that the method of valuation provided for in paragraph  2 of Article  5 would 
normally not be applicable when, as a result of the further processing, the imported goods lose 
their identity . However, there can be instances where, although the identity of the imported goods 
is lost, the value added by the processing can be determined a ccurately without unreasonable 
difficulty.  On the other hand, there can also be instances where the imported goods maintain their 
identity but form such a minor element in the goods sold in the country of importation that the use 
of this valuation method w ould be unjustified.  In view of the above, each situation of this type 
must be considered on a case -by-case basis.  
Note to Article 6  
1. As a general rule, customs value is determined under this Agreement on the basis 
of information readily available in the  country of importation.  In order to determine a computed 
value, however, it may be necessary to examine the costs of producing the goods being valued 
and other information which has to be obtained from outside the country of importation.  
Furthermore, in m ost cases the producer of the goods will be outside the jurisdiction of the 
authorities of the country of importation.  The use of the computed value method will generally be 
limited to those cases where the buyer and seller are related, and the producer is  prepared to 
supply to the authorities of the country of importation the necessary costings and to provide 
facilities for any subsequent verification which may be necessary.  
2. The "cost or value" referred to in paragraph  1(a) of Article  6 is to be determi ned on the 
basis of information relating to the production of the goods being valued supplied by or on behalf 
of the producer.  It is to be based upon the commercial accounts of the producer, provided that 
such accounts are consistent with the generally acc epted accounting principles applied in 
the country where the goods are produced.  
3. The "cost or value" shall include the cost of elements specified in paragraphs  1(a)(ii) and 
(iii) of Article  8. It shall also include the value, apportioned as appropriate under the provisions 
of the relevant note to Article  8, of any element specified in paragraph  1(b) of Article 8 which has 
been supplied directly or indirectly by the buyer for use in connection with the production of the 
imported goods.  The value of the el ements specified in paragraph  1(b)(iv) of Article 8 which are 
undertaken in the country of importation shall be included only to the extent that such elements 
are charged to the producer.  It is to be understood that no cost or value of the elements referre d 
to in this paragraph shall be counted twice in determining the computed value.  
4. The "amount for profit and general expenses" referred to in paragraph  1(b) of Article  6 is to 
be determined on the basis of information supplied by or on behalf of the prod ucer unless the 
producer's figures are inconsistent with those usually reflected in sales of goods of the same class 
or kind as the goods being valued which are made by producers in the country of exportation for 
export to the country of importation.  
5. It should be noted in this context that the "amount for profit and general expenses" has to 
be taken as a whole.  It follows that if, in any particular case, the producer's profit figure is low and 
the producer's general expenses are high, the producer's prof it and general expenses taken 
together may nevertheless be consistent with that usually reflected in sales of goods of the same 
class or kind.  Such a situation might occur, for example, if a product were being launched in the 
country of importation and the  producer accepted a nil or low profit to offset high general 
expenses associated with the launch.  Where the producer can demonstrate a low profit on sales 
of the imported goods because of particular commercial circumstances, the producer's actual profit 
figures should be taken into account provided that the producer has valid commercial reasons to 
justify them and the producer's pricing policy reflects usual pricing policies in the branch G/VAL/N/1/ECU/3  
- 25 - 
  of industry concerned.  Such a situation might occur, for example, wh ere producers have been 
forced to lower prices temporarily because of an unforeseeable drop in demand, or where they sell 
goods to complement a range of goods being produced in the country of importation and accept 
a low profit to maintain competitivity.  Where the producer's own figures for profit and general 
expenses are not consistent with those usually reflected in sales of goods of the same class or kind 
as the goods being valued which are made by producers in the country of exportation for export to 
the country of importation, the amount for profit and general expenses may be based upon 
relevant information other than that supplied by or on behalf of the producer of the goods.  
6. Where information other than that supplied by or on behalf of the producer  is used for the 
purposes of determining a computed value, the authorities of the importing country shall inform 
the importer, if the latter so requests, of the source of such information, the data used and the 
calculations based upon such data, subject to  the provisions of Article  10. 
7. The "general expenses" referred to in paragraph  1(b) of Article 6 cover the direct and 
indirect costs of producing and selling the goods for export which are not included under 
paragraph  1(a) of Article 6.  
8. Whether certa in goods are "of the same class or kind" as other goods must be determined 
on a case -by-case basis with reference to the circumstances involved.  In determining the usual 
profits and general expenses under the provisions of Article 6, sales for export to th e country of 
importation of the narrowest group or range of goods, which includes the goods being valued, for 
which the necessary information can be provided, should be examined.  For the purposes of 
Article  6, "goods of the same class or kind" must be from  the same country as the goods being 
valued.  
Note to Article 7  
1. Customs values determined under the provisions of Article 7 should, to the greatest extent 
possible, be based on previously determined customs values.  
2. The methods of valuation to be emplo yed under Article 7 should be those laid down in 
Articles  1 through  6 but a reasonable flexibility in the application of such methods would be in 
conformity with the aims and provisions of Article  7. 
3. Some examples of reasonable flexibility are as follow s: 
(a) Identical goods  - the requirement that the identical goods should be exported at or about 
the same time as the goods being valued could be flexibly interpreted;  identical imported 
goods produced in a country other than the country of exportation of the goods being valued 
could be the basis for customs valuation;  customs values of identical imported goods already 
determined under the provisions of Articles 5 and 6 could be used.  
(b) Similar  goods  - the requirement that the similar goods should be exported at or about the 
same time as the goods being valued could be flexibly interpreted;  similar imported goods 
produced in a country other than the country of exportation of the goods being valued could 
be the basis for customs valuation;  customs values of similar  imported goods already 
determined under the provisions of Articles 5 and 6 could be used.  
(c) Deductive  method  - the requirement that the goods shall have been sold in the "condition as 
imported" in paragraph  1(a) of Article 5 could be flexibly interpreted;  the "90 days" 
requirement could be administered flexibly.  
Note to Article 8  
Paragraph 1(a)(i ) 
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 goo ds being valued.  G/VAL/N/1/ECU/3  
- 26 - 
  Paragraph 1(b)(ii ) 
1. There are two factors involved in the apportionment of the elements specified in 
paragraph  1(b)(ii)  of Article  8 to the imported goods - the value of the element itself and the way 
in which that value is to be apporti oned to the imported goods.  The apportionment of these 
elements should be made in a reasonable manner appropriate to the circumstances and in 
accordance with generally accepted accounting principles.  
2. Concerning the value of the element, if the importer acquires the element from a seller not 
related to the importer at a given cost, the value of the element is that cost.  If the element was 
produced by the importer or by a person related to the importer, its value would be the cost 
of producing it.  If the e lement had been previously used by the importer, regardless of whether it 
had been acquired or produced by such importer, the original cost of acquisition or production 
would have to be adjusted downward to reflect its use in order to arrive at the value o f the 
element.  
3. Once a value has been determined for the element, it is necessary to apportion that value to 
the imported goods.  Various possibilities exist.  For example, the value might be apportioned to the 
first shipment if the importer wishes to pay duty on the entire value at one time.  As another 
example, the importer may request that the value be apportioned over the number of units 
produced up to the time of the first shipment.  As a further example, the importer may request that 
the value be apport ioned over the entire anticipated production where contracts or firm 
commitments exist for that production.  The method of apportionment used will depend upon the 
documentation provided by the importer.  
4. As an illustration of the above, an importer provid es the producer with a mould to be used in 
the production of the imported goods and contracts with the producer to buy 10,000 units.  By the 
time of arrival of the first shipment of 1,000 units, the producer has already produced 4,000 units.  
The importer ma y request the customs administration to apportion the value of the mould over 
1,000  units, 4,000 units or 10,000 units.  
Paragraph 1(b)(iv ) 
1. Additions for the elements specified in paragraph  1(b)(iv) of Article  8 should be based on 
objective and quantifia ble data.  In order to minimize the burden for both the importer and 
customs administration in determining the values to be added, data readily available in the buyer's 
commercial record system should be used in so far as possible.  
2. For those elements sup plied by the buyer which were purchased or leased by the buyer, 
the addition would be the cost of the purchase or the lease.  No addition shall be made for those 
elements available in the public domain, other than the cost of obtaining copies of them.  
3. The ease with which it may be possible to calculate the values to be added will depend on 
a particular firm's structure and management practice, as well as its accounting methods.  
4. For example, it is possible that a firm which imports a variety of products  from several 
countries maintains the records of its design centre outside the country of importation in such 
a way as to show accurately the costs attributable to a given product.  In such cases, a direct 
adjustment may appropriately be made under the prov isions of Article  8. 
5. In another case, a firm may carry the cost of the design centre outside the country 
of importation as a general overhead expense without allocation to specific products.  In this 
instance, an appropriate adjustment could be made unde r the provisions of Article  8 with respect 
to the imported goods by apportioning total design centre costs over total production benefiting 
from the design centre and adding such apportioned cost on a unit basis to imports.  
6. Variations in the above circu mstances will, of course, require different factors to be 
considered in determining the proper method of allocation.  G/VAL/N/1/ECU/3  
- 27 - 
  7. In cases where the production of the element in question involves a number of countries and 
over a period of time, the adjustment should  be limited to the value actually added to that element 
outside the country of importation.  
Paragraph 1(c ) 
1. The royalties and licence fees referred to in paragraph  1(c) of Article  8 may include, among 
other things, paymen ts in respect to patents, trade marks and copyrights.  However, the charges 
for the right to reproduce the imported goods in the country of importation shall not be added to 
the price actually paid or payable for the imported goods in determining the customs value.  
2. Payments made by the b uyer for the right to distribute or resell the imported goods shall not 
be added to the price actually paid or payable for the imported goods if such payments are not 
a condition of the sale for export to the country of importation of the imported goods.  
Paragraph 3  
Where objective and quantifiable data do not exist with regard to the additions required 
to be made under the provisions of Article 8, the transaction value cannot be determined under 
the provisions of Article  1. As an illustration of this, a ro yalty is paid on the basis of the price in 
a sale in the importing country of a litre of a particular product that was imported by the kilogram 
and made up into a solution after importation.  If the royalty is based partially on the imported 
goods and parti ally on other factors which have nothing to do with the imported goods (such as 
when the imported goods are mixed with domestic ingredients and are no longer separately 
identifiable, or  when the royalty cannot be distinguished from special financial arrang ements 
between the buyer and the seller), it would be inappropriate to attempt to make an addition for 
the royalty.  However, if the amount of this royalty is based only on the imported goods and can be 
readily quantified, an addition to the price actually paid or payable can be made.  
Note to Article 9  
For the purposes of Article 9, "time of importation" may include the time of entry for 
customs purposes.  
Note to Article 11  
1. Article 11 provides the importer with the right to appeal against a valuation dete rmination 
made by the customs administration for the goods being valued.  Appeal may first be to a higher 
level in the customs administration, but the importer shall have the right in the final instance to 
appeal to the judiciary.  
2. "Without penalty" means  that the importer shall not be subject to a fine or threat of fine 
merely because the importer chose to exercise the right of appeal.  Payment of normal court costs 
and lawyers' fees shall not be considered to be a fine.  
3. However, nothing in Article 11 s hall prevent a Member from requiring full payment 
of assessed customs duties prior to an appeal.  
Note to Article 15  
Paragraph 4  
For the purposes of Article 15, the term "persons" includes a legal person, where 
appropriate.  
Paragraph 4(e ) 
For the purposes o f this Agreement, one person shall be deemed to control another when 
the former is legally or operationally in a position to exercise restraint or direction over the latter.  G/VAL/N/1/ECU/3  
- 28 - 
  ANNEX II  
TECHNICAL COMMITTEE ON CUSTOMS VALUATION  
1. In accordance with Article 18  of this Agreement, the Technical Committee shall be 
established under the auspices of the CCC with a view to ensuring, at the technical level, 
uniformity in interpretation and application of this Agreement.  
2. The responsibilities of the Technical Committ ee shall include the following:  
(a) To examine specific technical problems arising in the day -to-day administration of the 
customs valuation system of Members and to give advisory opinions on appropriate 
solutions based upon the facts presented;  
(b) to study, as r equested, valuation laws, procedures and practices as they relate to this 
Agreement and to prepare reports on the results of such studies;  
(c) to prepare and circulate annual reports on the technical aspects of the operation and 
status of this Agreement;  
(d) to fu rnish such information and advice on any matters concerning the valuation 
of imported goods for customs purposes as may be requested by any Member or the 
Committee.  Such information and advice may take the form of advisory opinions, 
commentaries or explana tory notes;  
(e) to facilitate, as requested, technical assistance to Members with a view to furthering 
the international acceptance of this Agreement;  
(f) to carry out an examination of a matter referred to it by a panel under Article  19 
of this Agreement;  and 
(g) to exercise such other responsibilities as the Committee may assign to it.  
General  
3. The Technical Committee shall attempt to conclude its work on specific matters, especially 
those referred to it by Members, the Committee or a panel, in a reasonably short p eriod of time.  
As provided in paragraph  4 of Article 19, a panel shall set a specific time period for receipt 
of a report of the Technical Committee and the Technical Committee shall provide its report within 
that period.  
4. The Technical Committee shall b e assisted as appropria te in its activities by the 
CCC Secretariat.  
Representation  
5. Each Member shall have the right to be represented on the Technical Committee.  
Each Member may nominate one delegate and one or more alternates to be its representatives on 
the Technical Committee.  Such a Member so represented on the Technical Committee is referred 
to in this Annex as a "member of the Technical Committee".  Representatives of members of the 
Technical Committee may be assisted by advisers.  The WTO Secretaria t may also attend such 
meetings with observer status.  
6. Members of the CCC which are not Members of the WTO may be represented at meetings 
of the Technical Committee by one delegate and one or more alternates.  Such representatives 
shall attend meetings of  the Technical Committee as observers.  
7. Subject to the approval of the Chairman of the Technical Committee, the Secretary -General 
of the CCC (referred to in this Annex as "the Secretary -General") may invite representatives 
of governments which are neithe r Members of the WTO nor members of the CCC and 
representatives of international governmental and trade organizations to attend meetings of the 
Technical Committee as observers.  
8. Nominations of delegates, alternates and advisers to meetings of the Techni cal Committee 
shall be made to the Secretary -General.  G/VAL/N/1/ECU/3  
- 29 - 
  Technical Committee Meetings  
9. The Technical Committee shall meet as necessary but at least two times a year.  The date 
of each meeting shall be fixed by the Technical Committee at its preceding session . The date of the 
meeting may be varied either at the request of any member of the Technical Committee concurred 
in by a simple majority of the members of the Technical Committee or, in cases requiring urgent 
attention, at the request of the Chairman.  Notwithstanding the provisions in sentence 1 of this 
paragraph, the Technical Committee shall meet as necessary to consider matters referred to it by 
a panel under the provisions of Article 19 of this Agreement.  
10. The meetings of the Technical Committee shal l be held at the headquarters of the CCC 
unless otherwise decided.  
11. The Secretary -General shall inform all members of the Technical Committee and those 
included under paragraphs 6 and 7 at least 30 days in advance, except in urgent cases, of the 
opening  date of each session of the Technical Committee.  
Agenda  
12. A provisional agenda for each session shall be drawn up by the Secretary -General and 
circulated to the members of the Technical Committee and to those included under paragraphs 6 
and 7 at least 3 0 days in advance of the session, except in urgent cases.  This agenda shall 
comprise all items whose inclusion has been approved by the Technical Committee during its 
preceding session, all items included by the Chairman on the Chairman's own initiative, a nd all 
items whose inclusion has been requested by the Secretary -General, by the Committee or by any 
member of the Technical Committee.  
13. The Technical Committee shall determine its agenda at the opening of each session.  
During  the session the agenda may  be altered at any time by the Technical Committee.  
Officers and Conduct of Business  
14. The Technical Committee shall elect from among the delegates of its members a Chairman 
and one or more Vice -Chairmen.  The Chairman and Vice -Chairmen shall each hold of fice for 
a period of one year.  The retiring Chairman and Vice -Chairmen are eligible for re -election.  
The mandate of a Chairman or Vice -Chairman who no longer represents a member of the 
Technical Committee shall terminate automatically.  
15. If the Chairman is absent from any meeting or part thereof, a Vice -Chairman shall preside.  
In that event, the latter shall have the same powers and duties as the Chairman.  
16. The Chairman of the meeting shall participate in the proceedings of the Technical Committee 
as such and not as the representative of a member of the Technical Committee.  
17. In addition to exercising the other powers conferred upon the Chairman by these rules, the 
Chairman shall declare the opening and closing of each meeting, direct the discussion, accord the 
right to speak, and, pursuant to these rules, have control of the proceedings.  The Chairman may 
also call a speaker to order if the speaker's remarks are not relevant.  
18. During discussion of any matter a delegation may raise a point of order.  In this event, 
the Chairman shall immediately state a ruling.  If this ruling is challenged, the Chairman shall 
submit it to the meeting for decision and it shall stand unless overruled.  
19. The Secretary -General, or officers of the CCC Secretariat designat ed by the 
Secretary -General, shall perform the secretarial work of meetings of the Technical Committee.  G/VAL/N/1/ECU/3  
- 30 - 
  Quorum and Voting  
20. Representatives of a simple majority of the members of the Technical Committee shall 
constitute a quorum.  
21. Each member of the T echnical Committee shall have one vote.  A decision of the Technical 
Committee shall be taken by a majority comprising at least two thirds of the members present.  
Regardless of the outcome of the vote on a particular matter, the Technical Committee shall be  
free to make a full report to the Committee and to the CCC on that matter indicating the different 
views expressed in the relevant discussions.  Notwithstanding the above provisions of this 
paragraph, on matters referred to it by a panel, the Technical Com mittee shall take decisions by 
consensus.  Where no agreement is reached in the Technical Committee on the question referred to 
it by a panel, the Technical Committee shall provide a report detailing the facts of the matter and 
indicating the views of the m embers.  
Languages and Records  
22. The official languages of the Technical Committee shall be English, French and Spanish.  
Speeches or statements made in any of these three languages shall be immediately translated into 
the other official languages unless a ll delegations agree to dispense with translation.  Speeches or 
statements made in any other language shall be translated into English, French and Spanish, 
subject to the same conditions, but in that event the delegation concerned shall provide the 
translat ion into English, French or Spanish.  Only English, French and Spanish shall be used for the 
official documents of the Technical Committee . Memoranda and correspondence for the 
consideration of the Technical Committee must be presented in one of the officia l languages.  
23. The Technical Committee shall draw up a report of all its sessions and, if the Chairman 
considers it necessary, minutes or summary records of its meetings.  The Chairman or a designee 
of the Chairman shall report on the work of the Technica l Committee at each meeting of the 
Committee and at each meeting of the CCC.  G/VAL/N/1/ECU/3  
- 31 - 
  ANNEX III  
1. The five -year delay in the application of the provisions of the Agreement by developing 
country Members provided for in paragraph  1 of Article  20 may, in practice, be  insufficient for 
certain developing country Members.  In such cases a developing country Member may request 
before the end of the period referred to in paragraph  1 of Article  20 an extension of such period, it 
being understood that the Members will give sy mpathetic consideration to such a request in cases 
where the developing country Member in question can show good cause.  
2. Developing countries which currently value goods on the basis of officially established 
minimum values may wish to make a reservation  to enable them to retain such values on a limited 
and transitional basis under such terms and conditions as may be agreed to by the Members.  
3. Developing countries which consider that the reversal of the sequential order at the request 
of the importer pr ovided for in Article 4 of the Agreement may give rise to real difficulties for them 
may wish to make a reservation to Article 4 in the following terms:  
"The Government of … reserves the right to provide that the relevant provision of  Article  4 
of the Agre ement shall apply only when the customs authorities agree to the request to 
reverse the order of Articles  5 and  6.". 
If developing countries make such a reservation, the Members shall consent to it under 
Article  21 of the Agreement.  
4. Developing countries  may wish to make a reservation with respect to paragraph  2 
of Article  5 of the Agreement in the following terms:  
"The Government of … reserves the right to provide that paragraph  2 of Article 5 of  the 
Agreement shall be applied in accordance with the prov isions of the relevant note thereto 
whether or not the importer so requests." . 
If developing countries make such a reservation, the Members shall consent to it under 
Article  21 of the Agreement.  
5. Certain developing countries may have problems in the impl ementation of Article  1 of the 
Agreement insofar as it relates to importations into their countries by sole agents, sole distributors 
and sole concessionaires.  If such problems arise in practice in developing country Members 
applying the Agreement, a study  of this question shall be made, at the request of such Members, 
with a view to finding appropriate solutions.  
6. Article 17 recognizes that in applying the Agreement, customs administrations may need to 
make enquiries concerning the truth or accuracy of a ny statement, document or declaration 
presented to them for customs valuation purposes.  The Article thus acknowledges that enquiries 
may be made which are, for example, aimed at verifying that the elements of value declared or 
presented to customs in conne ction with a determination of customs value are complete and 
correct.  Members, subject to their national laws and procedures, have the right to expect the full 
cooperation of importers in these enquiries.  
7. The price actually paid or payable includes all payments actually made or to be made as 
a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to 
a third party to satisfy an obligation of the seller.  G/VAL/N/1/ECU/3  
- 32 - 
  ANNEX 2 
RESOLU TION  No. 846 
Community Regulations implementing Decision No. 571 - Customs Valu ation  
of Imported Goods  
THE GENERAL SECRETARIAT OF THE ANDEAN COMMUNITY,  
CONSIDERING : The Treaty Establishing the Court of Justice of the Andean Community, 
Articles 3 and 58 of the Cartagena Agreement, Decision No. 571 of the Committe e on Customs 
Valuation of Imported Goods and the Regulations on Administrative Procedures by the 
General  Secretariat, contained in Decision No. 425 of the Andean Council of Foreign Ministers ; and 
WHEREAS : Pursuant to the First Transitional Provision of Dec ision No. 571, the 
General  Secreta riat shall adopt the Community r egulations implementing the Decision 's provisions, 
together with the Andean Customs Value Declaration;  
The Commission of the Andean Community approved Decision No. 571 of 
12 December  2003 by  which the Agreement on Customs Valuation of the World Trade Organization 
(WTO) was adopted as the subregional regulations on the customs valuation of goods;  
The existence of uniform regulations on the procedures for  implementing Decision No. 571 
must be e nsured ; 
It is necessary to have a single Community procedure that treats all goods imported into 
Community Customs Territory without discrimination;  
HEREBY DECIDES : 
Single Article .-The Community r egulations on implementation of the customs valuation 
of goods imported into Community Customs Territory are hereby adopted and are attached as 
an Annex to th is Resolution, setting out the details and procedures for implementing 
Decision  No. 571. 
To be communicated to member countries and to enter into forc e upon p ublication in the 
Official Gazette  of the Cartagena Agreement.  
Done in the city of Lima, Peru, on the sixth day of August in the year two  thousand  and four.  
ANTONIO ARANIBAR QUIROGA  
Director -General in charge in the General Secretariat  G/VAL/N/1/ECU/3  
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  ANNEX  
COMMUNITY REG ULATIONS IMPLEMENTING DECISION No. 571 - CUSTOMS 
VALU ATION  OF IMPORTED GOODS  
TITLE I  
GENERAL PROVISIONS  
Article 1. Customs valu ation  of imported goods  
1. The customs value of imported goods is the taxable base for payment of ad valorem 
customs duties and shal l be determined in accordance with the methods and procedures in the 
WTO Customs Valuation Agreement, in conjunction with the provisions in Decision No. 571 and in 
these Regulations.  
2. The customs value may be taken into account for the purpose of determinin g the taxable 
base for other import duties and tax es defined in the Community regulations , in accordance with 
the provisions in these r egulation s and in relevant domestic legislation.  
Article 2. Definitions  
For the purposes of applying the provisions conta ined in the WTO Customs Valuation 
Agreement, in Decision No.  571 and in these regulations, the following definition s are adopted to 
complement those already contained in the said Agreement.  
(a) WTO Customs Valuation Agreement : the Agreement on Implementation o f Article VII of the 
General Agreement on Tariffs and Trade 1994 of the World Trade Organization;  
(b) objective and quantifiable da ta: data that can be proved by physical elements such as 
written documents or magnetic media, and can be the subject of mathemati cal calculations 
and/or verification;  
(c) goods: any good that can be transported, classified in the NANDINA nomenclature an d be 
subject to customs control;  
(d) goods of the same class or kind:  the term "goods of the same class or kind" means goods 
which fall with in a group or range of goods produced by a particular industry or industry 
sector and includes , but is not limited to, identical or similar goods;  
(e) about the same time : the period as close as possible to the time or date of  importation, 
exportation or sale,  during which commercial practices and market conditions affe cting the 
price remain the same;  
(f) commercial level : the rank or position occupied by the buyer in the scale of marketing and 
whose commercial conditions are of genuine benefit to the buyer as an i ndustrial user, 
wholesaler, retailer, dealer, end user or otherwise;  
(g) reference prices:  international prices identical or analogous to the goods being valued , taken 
from specialized international sources such as books, reviews, catalogues, price lists, 
estimates, prior import prices for the goods to be inspected by the  Customs and those taken 
from the customs data banks , including prices for goods  obtained by studying values ; 
(h) benefits : goods and services supplied, directly or indirectly, by the buyer to the producer, 
free of charge or at reduced cost, to be used for production and sale  of the goods for export 
to Community Customs Territory;  
(i) Community customs t erritory : the territory that includes the national customs territories 
of the five countries belongin g to the Andean Community, within which the rules on customs 
valuation have effect and are fully applied;  
(j) test values : the customs values indicated in Article 1.2(b) of the WTO Customs Valuation 
Agreement, accepted in advance by the customs authority  and used for the p urposes 
of comparison, without ever  replacing the value declared;  
(k) sale: commercial transaction by which the ownership of a good is transferred in exchange 
for payment of a price, which may be in different forms, a sum of money, a letters of cr edit, 
a negotiable instrument or any other compatible security and, in general, any form 
of consideration implying the existence of the price paid;  
(l) tie-in sales : sales in which a condition or consideration concerning the price, the sale of th e 
goods or bot h has been agreed;  G/VAL/N/1/ECU/3  
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  (m) successive sales : series of sales of the good prior to its import.  
TITLE II . DETERMINATION OF THE CUSTOMS VALUE General Provision  
Article 3.  Methods for determining the customs value  
 The methods for determining the customs value or taxa ble base for the payment of customs 
duty or the customs value to be taken into account as the taxable base for other import duties, 
taxes or charges are those indicated in Article 3 of Decision No. 571. 
Chapt er I First Method : Transaction v alue of the impo rted g oods  
Article 4.  General aspects of the transaction v alue 
1. For the valuation of imported goods using the first or principal method called the transaction 
value, the provisions of Articles 1 and 8 of the WTO Customs Valuation Agreement and the 
relevant Interpretative Notes shall be taken into account, together with the general guidelines in 
Decision  No. 571 and the provisions in  these r egulations.  
2. The transaction v alue is defined as the price actually paid or payable for the goods when 
sold for export to  the Community Customs Territory, adjusted in accordance with the additions 
provided in Article 18  and the deductions indicated in Article  31 of these r egulations, provided that 
the require ments set out in the following A rticle are met.  
3. The customs value u sing the transaction v alue method shall be calculated on Part II of the 
Andean Customs Value Declaration form in accordance with the provisions in Article  8 of Decision 
No. 571 and the Resolution adopting the format for the aforesaid Declaration.  
Section I  Aspects essential for a pplication  
Article 5.  Requirements for applying the transaction value m ethod  
 In order to permit the transaction value m ethod to be applied and accepted by the Customs 
Administration, the requirements set out in this Article shall b e met, as indicated below:  
(a) The goods to be valued have been the subject of an actual international transaction 
involving a sale for export to Community Customs Territory;  
(b) an actual price has been agreed implying the existence of a payment, irrespective of  the 
date on which the transaction occurred and any subsequent change in prices;  
(c) in the foregoing terms, the price actually paid or payable, directly or indirectly, to the seller 
of the imported good can be substantiated in the form indicated in  Article  8 of these 
regulations;  
(d) all the conditions required pursuant to subparagraphs (a), (b), (c) and (d) of  paragraph 1 of 
Article  1 of the WTO Customs Valuation Agreement have been met;  
(e) if appropriate, the price actually paid or payable for the imported goods may  be adjusted in 
accordance with objective and quantifiable data, as provided in Article  18 of these 
regulations ; and 
(f) the imported goods correspond to the terms of the contract, taking into account the 
indications in Article  16 of these r egulations.  
Article  6. Sale 
1. The transaction value m ethod may only be applied if import ation is obligatorily the result 
of a sale, as defined in Article  2(k) of these r egulations.  If there is no such sale, the subsequent 
methods indicated in subparagraph s 2 to 6 of Article  3 of Decision  No. 571 shall be used, 
in sequence  and in the order laid down in Article  4 of the aforesaid Decision.  
2. Non-exhaustive instances of cases in which there is no sale include the following:  
(a) Free gifts, such as presents, dona tions, samples, p romotion al items;  
(b) goods imported on consignment;  G/VAL/N/1/ECU/3  
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  (c) goods imported by intermedia ries that have not bought them but sell them after they have 
been imported ; 
(d) goods imported where the importer a nd supplier are the same person;  
(e) goods imported by subsidiaries that are not  legal persons ; 
(f) goods imported in execution of a hire or leasing contract;  
(g) goods supplied on loan that remai n the property of the consignor;  
(h) goods (residues) imported for destruction in the country of import ation; and 
(i) straightforward bartering, when the tr ansaction is not expressed in monetary terms and 
there are no objective and quantifiable data for determining the elements constituting 
a sale. 
3. In the case of barter or offsetting transactions, considered to be an exchange of goods or 
services of more or l ess the same value without any exchange of money or those which are partly 
expressed in monetary terms , it shall be determined whether or not a sale has occurred.  
 Offsetting transactions or barter operations expressed in monetary terms may be deemed 
sales provided that a price has actually been paid or is payable determined on the basis of a form 
of payment related to the imported goods.  
 In such cases, account shall be taken of whether this type of transaction entails a condition 
whose value may be determ ined in accordance with Article  1(b) of the WTO Customs Valuation 
Agreement.  
Article 7.  Sale for export  
1. The sale shall be for export to Community Customs Territory where the goods are to be 
imported, and this shall be proven to the satisfaction of the cust oms authorities.  
2. If the goods have been sold for the sole purpose of introducing them into the 
Customs  Territory, this shall be taken into account as a sufficient indication that they have 
been sold for export to this Territory.  
3. The actual international tr ansfer of ownership of goods introduced into Community Customs 
Territory shall also be considered an indication that the sale has been for export to the aforesaid 
Territory.  
4. The fact that the goods have been sold at prices that are not domestic prices in t he country 
of export for the sole purpose of introducing them into Community Customs Territory shall be 
regarded as an additional indication that they have been sold for export to the aforesaid Territory.  
5. In the case of successive sales before importation,  the indication appearing in the preceding 
paragraphs shall only be used with regard to the last sale which led to the introduction of the 
goods into Community Customs Territory or a sale taking place in the aforesaid Territory before 
acceptance of the cus toms declaration for the goods submitted for the purpose of their 
importation.  
Article 8.  Price actually paid or payable  
1. Pursuant to Article 4.2 above, the fundamental basis on which the method involving the 
transaction v alue of the imported goods rests is  the price actually paid or payable for the goods as 
incidental to their sale.  
2. The price actually paid or payable is the price of the imported goods and represents the total 
payment for these goods actually made or to be made by the buyer to the seller, di rectly and/or 
indirectly for the benefit of the said seller.  
3. Direct payments shall be reflected in commercial invoices or contracts relating to the goods 
imported.  
4. Indirect payments are those made to a third party for the benefit of the seller or to meet 
a commitment by the seller as a condition imposed for the transaction and are decisive in G/VAL/N/1/ECU/3  
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  determining the total price agreed for the goods.  The common trait is that such payments are 
separate from the direct payment made for the goods imported.  
 Such paymen ts shall be declared to the customs authorities and duly substanti ated in 
writing by the importer . 
5. Where advance payments are made or when there are prior payments or payments covered 
by two or more commercial invoices or contracts incidental to the buying  or selling of the good to 
be valued, all such payments shall form part of the price actually paid or payable and shall be 
declared.  
6. All payments made by the buyer for the sale of the imported goods shall be verified in order 
to establish  whether any indir ect payments to be used to determine the price actually paid or 
payable by the buyer to the seller for the goods have not been declared and accordingly to 
determine the correct customs value.  
7. Any acts by the buyer on his /her own behalf and not imposed by t he seller, other than those 
for which an adjustment is provided ac cording to Article  18 of these r egulations, shall not be 
considered indirect payment to the seller, even if they are for the seller 's benefit, and therefore 
the costs in curred  in carrying ou t such acts shall not form part of the customs value.  
 Such acts by the buyer may concern the marketing of the imported goods, including that 
under an agreement with the seller, buying  commission s, tests or analyses, or the cost 
of obtaining a letter of credit. 
8. Likewise, payments by the buyer to the seller unrelated to the imported goods, for example, 
dividends paid to the seller in his /her capacity as a shareholder, do not form part of the customs 
value of such goods.  
9. Payment of the price of the imported g oods need not necessarily take the form of money 
and may be made in other forms, for example, a letter of credit, a negotiable instrument or 
any other relevant security, as well as any form of consideration implying the existence of the 
price and the payme nt. Bills of exchange, transfer of shares or bonds or, in certain cases, 
of any negotiable document are also valid.  
10. When transfer prices have been agreed between related parties, the importer shall prove to 
the satisfaction of the Customs Administration th at such prices do not consist simply of accounting 
entries, that they correspond to the price actually paid or payable as indicated in this Article and 
that they comply with the other requ irements in Article  5 of these r egulations.  If this is not the 
case, they shall be rejected  for the purpose of utilizing the t ransaction v alue method.  
Article 9.  Price discounts or rebates  
1. Discounts or rebates given by the seller of the imported good shall be taken into account 
when determining the customs value inasmuch a s the actual and total payments by the buyer to 
the seller co nstitute the bas is for the transaction v alue method.  The price actually paid or payable 
obtained after applying such discounts or rebates shall be accepted provided that:  
i. The discount is related to the goods to be valued;  
ii. the discount is specified prior to shipment of the goods as part of the business transaction 
between the seller and the buyer;  
iii. it is not a retroactive discount given for go ods imported before the importa tion to which the 
rebate o r discount applies, corresponding to transactions other than that relating to the 
goods to be valued.  
The buyer is actually benefiting from the discount, in other words, the assumptions that 
gave rise to the discount apply.  
iv. the discount is clearly distingu ished from the price of the goods in the commercial invoice 
and/or sales contract and the form and am ount of the rebate is specified;  G/VAL/N/1/ECU/3  
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  v. all the goods that are the subject of the transaction have been sold for export to Community 
Customs Territory and bought by the same person.  
If any of the aforementioned requirements is not met, the discounts given by the seller shall 
be dismissed  by the customs a uthority for the purposes of determining the customs value of the 
imported goods.  In such cases, the said discoun ts shall be considered to be part of the price paid 
or payable for the purpose of calculating the customs value.  
2. Discounts for cash payment are acceptable, even if at the time of valuation total payment 
has not yet been made.  As it is the price paid or pay able, the amount to be paid by the importer 
for the goods shall be accepted as the basis for valuation.  
3. For discounts for volume, the total volume agreed for shipment within a specified period 
shall be taken into account and this applies to partial deliver ies. 
4. Retroactive discounts shall not be accepted inasmuch as the amount of the discount 
represents a sum already paid to the seller and, consequently, is part of the price actually paid, 
in other words, it is part of the total payment for the imported good s made or to be made to the 
seller and consequently constitutes part of the customs value.  
5. The transaction value may not be rejected simply because the declared  value of the goods is 
lower tha n current market prices for identical or similar goods.  A price lower than current market 
prices shall be accepted provided that the value declared corresponds to the price actually paid 
or payable, as indicated in the preceding Article.  
6. The price resulting from "dumping ", subsidization or export premiums may be accept ed for 
the purposes of valuation if it is the price actually paid or payable by the buyer to the seller and 
the other requirements provided in Article 5 of these r egulations are met.  In order to combat such 
practices, the relevant rules in existence shall be followed, in accordance with Article  23 
of Decision  No. 571. 
Article 10. Restrictions  
1. Restrictions imposed on the buyer by the seller for the  disposal or use of the goods after 
they have been imported and which s ignificantly  affect their price shall res ult in rejection of the 
transaction value.  Such restrictions occur, for example, when the goods imported are to be used 
for a specific purpose, as prototypes, for charitable or educational purposes, or are imported for 
promotional purposes, and are sold at  a reduced or symbolic price.  
2. The transaction value shall not be rejected when the restrictions correspond to any of the 
provisions in Article 1.1(a) of the WTO Customs Valuation Agreement, namely:  
i. restrictions imposed by national or community requirements  or regulations under the law 
or by the authorities of Community Customs Territory;  
ii. restrictions relating to the resale of the imported goods in certain te rritorial or geographical 
areas;  
iii. restrictions that do not substantially affect the value of the impor ted goods and do not 
prevent acceptance of the transaction value.  
Article 11 . Conditions  
1. For the purposes of customs valuation, conditions mean s those contractual requirements 
imposed by the seller concerning the price or sale of the imported goods.  If the  conditions cannot 
be quantified, in other words, it cannot be determined to what extent they are reflected in the 
price agreed, the transaction value shall be rejected ; for this purpose, the examples cited in the 
Interpretative Note to Article  1, paragrap h 1(b) , of the WTO Customs Valuation Agreement  shall 
be taken in account.  
The value of the condition, where it is known and is related to the goods importe d, forms 
part of the price actually paid or payable and does not lead to rejection of the transaction  value.  G/VAL/N/1/ECU/3  
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  2. According to the definition of related  sales in Article 2.1 of these r egulations, where the 
condition refers to the price, it shall be deemed that this does not constitute the sole con sideration  
inasmuch as it depends on conditions relating to othe r transactions between the seller and buyer 
whose value cannot be determined in relation to the goods to be valued, therefore, the transaction 
value shall be rejected.  
 Where the condition refers to the sale, it is a question of offsetting transactions, in  other 
words, sales to a particular country depend on sales from that country and the payment 
mechanism consists of an exchange of goods or even services.  In such case s, it shall be 
ascertained wh ether the requirements for the transaction v alue method appl y and the value of the 
condition shall be added, provided that it can be quantified.  
3. Conditions or considerations relating to the production or marketing of imported goods shall 
not lead to rejection of the transaction value.  Likewise, the value of marketi ng conditions sh all not 
be included in the customs value, even if they have been agreed between the seller and the buyer.  
Article 12. Accruals  
1. Pursuant to Article 1.1(c) of the WTO Customs Valuation Agreement, fo r the purposes 
of applying the first m ethod indicated in Article 3 of Decision No. 571, no part of the proceeds 
of resale or any subsequent disposal or use of the goods by the buyer shall accrue directly or 
indirectly to the seller, unless an appropriate corresponding adjustment can be made in 
accor dance with Article  8 of the aforesaid Agreement.  
The proceeds referred to in the preceding paragraph mean the profit o r earnings resulting 
from the sale, dispos al or use of a good after it has been imported.  
2. The most typical cases consist of transactions w ith sharing of profits , in which the two 
parties to the sale agree to share a specified percentage of the profits  earned from the sale of the 
goods in the Community Customs Territory into which they are imported.  
Accrual to the seller of profits, earnings or benefits obtained from resale of the goods after 
they have been imported should not be confused with payment of dividends inasmuch as these are 
based on a company 's overall  profits.  
Where there is accrual, an adjustment shall be made in accordance with the provisio ns in 
Article  18.1(d) of these r egulations.  If the adjustment cannot be made,  the transaction v alue 
method may be applied.  
Article 13. Relat ionship  
1. The existence of a relation ship between the buyer and seller, in accordance with the 
definition given in Article 15.4 of the WTO Customs Valuation Agreement, does not in itself 
constitute sufficient reason to consider the transaction value to be unacceptable.  If the relationship 
has had no effect on the price agree d between the related parties, the t ransaction v alue method 
shall not be rejected.  
2. For the purposes of the relation ship indicated in Article 15.4(b) of the said Agreement 
concerning  a business association , this shall only be considered to be  a partnership if the national 
legal requirements f or the creation of a partnership are satisfied.  In this connection, Adv isory 
Opinion  21.1 of the Committee on Customs Valuation defines a partner as "one who is associate d 
with one or more persons in the same business  and shares with them its profits and r isks; 
a member of a partnership ". 
3. According to the Interpretative Note to Article 15.4 (e) of the WTO Customs Valuation 
Agreement, one person shall be deemed to control another when the former is legally or 
operationally in a position to exercise restraint or direction over the latter, in other words, has 
decisi ve authority over the latter 's decisions or management in any way.  G/VAL/N/1/ECU/3  
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  4. To complement Article 15.4(h) of the WTO  Customs Valuation Agreement regarding family 
relationships, the following shall be deemed t o be members of the same family:  
(a) Husband or wife;  
(b) children;  
(c) parents; 
(d) brothers and sisters;  
(e) grandchildren;  
(f) grandparents;  
(g) uncles or aunts, or nephews or nieces;  
(h) father s- or mother s-in-law or son s- or daughter s-in-law. 
(i) brothers - or sisters -in-law. 
5. In the case  of sole agents, sole distributors or sole concessionaires, in order to determine 
whether or not there is a relationship, each transaction shall be examined in accordance with 
the criteria laid down in Article 15.4 of the WTO Customs Valuation Agreement.  
6. In the case of subsidiaries , if they are not recognized as independent legal persons, 
the existence of a relationship requiring  the existence of at least two parties cannot be presumed ; 
in such cases, it shall be considered that no sale has taken place.  
Article 14. Influence of the relationship  
1. Where  the relationship between the buyer and the seller of the imported goods has 
influenced  the price agreed between the parties, the declarant shall notify this in the 
Andean  Customs Value Declaratio n; in such cases , the transaction v alue method may not be 
applied and the imported goods shall be valued  utilizing in sequence the other methods indicated 
in Articles 3 and 4 of Decision No. 571. 
2. Where  no specific declaration has been made in this respect and the Customs Administration 
has justified  grounds for consider ing that the relationship has influenced  the price, it shall inform 
the importer in writing of the reasons for which the transaction value is deemed unacceptable, 
giving a reasonable period for reply, provid ing evidence to prove that the relationship has not 
influenced  the price, if this is the case.  In such cases, the provisions in Articles 16, 17 and 18 
of Decision  No. 571 shall be taken into account.  
3. Proof that the relationship has not influenced  the price  shall consist of evidence to enable 
the application of one of the following two procedures:  
(a) Examination of the circumstances of the sale, covering special terms for the transaction  
which governed the price and which apply equally to independent buyers in the absence 
of any relationship, for example, market prices obtained from other unrelated sellers, sales 
contracts, the seller 's price lists, the amounts bought.  
 In considering the circumstances surrounding  the transaction, the Customs Administration 
shall examine the following aspects : 
i. The way in which the buyer and seller organize their commercial relations ; and 
ii. the way in which the price in question was arrived at.  
 Where it can be shown that the buyer and seller, although related, buy from and sell to each 
other as if they were unrelated, this would demonstrate that the price had not been influenced by 
the relationship.  
 There are three situations  which the Customs Administration may consider to be proof:  
i. the price had been adjusted in a manner consiste nt with the normal pricing practices of the 
industry in question;  
ii. the price had been adjusted in a way consistent with the method by w hich the seller settles 
selling prices to buyers who are not related to him ; or G/VAL/N/1/ECU/3  
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  iii. the price is adequate to recover all costs  plus a profit indicative  of the firm 's overall profit 
over a representative period of time for the sale of goods of the same kind or class.  
 In any event and without being requested by the Customs Administration, the importer may 
request that a study of t he circumstances of the sale be conducted with regard to its relations with 
its foreign suppliers, providing the necessary information for this purpose.  
(b) Use of a test value as indicated in the following Article, in other words, a  demonstration that 
the dec lared value of the goods complies with one of the customs values indicated as a test 
in Article 1.2(b) of the WTO Customs Valuation Agreement and  is, therefore, acceptable for 
the purposes of the provisions in Article  1 of the said Agreement.  
4. After the all otted time has expired and the importer has not responded or if the explanations 
provided were not sufficient to consider the transaction value to be acceptable, in application 
of Article 17 of Decision No. 571, the customs a uthority shall determine the cu stoms value of the 
imported goods using the other methods, in accordance with the provisions in Chapter II of this 
Title. 
5. In considering whether the relationship has influenced the price, demonstrated  facts shall be 
taken into account, in particular, the g uidelines in paragraph 2 of the  Interpretative Note 
to Article  1 of the WTO Customs Valuation Agreement.  
Article 15. Test values  
1. With regard to the defin ition in Article 2(j) of these r egulations, a value shall only be 
considered a test value if it has bee n accepted  by the customs a uthority for identical or similar 
goods imported by other importers unrelated to the seller and provided that:  
(a) The customs value of the identical or similar good used for the purposes of  comparison has 
been determined by applying  the transaction v alue method and is in effect at or about the 
same time as that of export of the good to be valued to Community Customs Territory;  
(b) the customs value of the identical or similar good used for the purposes of comparison has 
been determined b y applying the d eductive method and is in effect at or about the same 
time as that of sale of the good to be valued  to Community Customs Territory;  
(c) the customs value of the identical or similar good used for the purposes of comparison has 
been determined b y applying the computed v alue method and is in effect at or about the 
same time as that of import of the good to be valued . 
For this purpose, the definition of "about the same time " in Article 2(e) of these Regulations 
shall be taken into account.  
The valu e determined for the imported goods in accordance with Articles 2, 3 and 7 of the 
WTO Customs Valuation Agreement shall not be considered a test value.  
2. Test values may only be used where importers are related to the seller, solely for the 
purposes of compa rison in order to ensure acceptance of the transaction value, without prejudice 
to the other requirements l aid down in Article  5 of these r egulations for its application and 
provided that the value declared closely approximates to one of the values indicat ed in 
subparagraphs (a), (b) or (c) above.  
3. The test value s in Article 1 of the WTO Customs Valuation Agreement may never replace the 
declared value.  
4. Where one of the test value applies, it is not necessary to examine the influence of the 
relationship on th e price.  
 If the Customs Administration already has sufficient information to consider that one of the 
test values applies or if it finds that there is a previously accepted customs value i n its records that 
may be used as a test value, but is unknown to t he importer, this test value may be used to 
determine the acceptability of the price in question, without any such request from the importer.  G/VAL/N/1/ECU/3  
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  In such cases, it is not necessary to require the importer to demonstrate that the test value 
applies . 
5. Adjustments  for differences in the commercial level, in quantity or in aspects covered in 
Article  18 of these r egulations shall be taken into account when applying test values.  
Article 16. Goods that do not comply with the terms of the contract  
1. If imported goods are found not to comply with the terms of the contract or agreement at 
the time of valuation, for example, the goods have perished or been damaged, there are mistakes 
or items missing in deliveries, or the goods do not correspond to the samples supplied or the  
terms agreed, they may not be valued according to the principal method of the transaction value.  
2. If the buyer accepted the goods in the condition as received, at the price originally agreed, 
the transaction value method may be used if the requirements l aid down in Article 5 of these 
regulations are met.  If this is not the case, the valuation shall be based on the provisions in the 
other methods, in particular, that resulting from application of the so -called "fall-back" method, 
as provided in Section V of Chapter II and Chapter III of this Title.  
3. In this regard, the Community or domestic provisions adopted shall be taken into account, 
together with the directions given in Explanatory Note 3.1 of the Technical Committee on Customs 
Valuation.  
Article 17. Time  and quantity aspect  
1. When determining the customs value using the transaction value m ethod, the time at which 
the sal e was agreed shall not be taken into account.  The price invoiced shall be accepted as the 
basis for calculating the customs value unless th ere are other reasons for rejecti ng it, irrespective 
of the time at which the transaction took place according to the invoice or bill of sale and provided 
that the said transaction complies with commercial usage for the goods imported.  
 For the foregoing r eason, market fluctuations that occur after the date of signature of the 
contract shall not be taken into account.  
2. The total agreed quantity of the goods to be valued shall be considered fo r the purposes 
of applying the transaction v alue method, therefore,  this is the quantity to be taken into account 
for determination of the unit price of the goods to be valued, even in the case of  partial or 
staggered deliveries  or incomplete loads.  
Section II Elements to be included and excluded when determining the tran saction value  
Part I Adjustments  
Article 18. Additions to the price actually paid or payable  
1. In determini ng the customs value using the transaction v alue method, all the factors 
indicated below shall be added to the price actually paid or payable for the i mported goods, 
in accordance with Article  8 of the WTO Customs Valuation Agreement:  
(a) The following, to the extent that they are incurred by the buyer but are not included in the 
price actually paid or payable for the goods:  
i. commissions  and brokerage, exc ept buying commissions;  
ii. the cost of containers which are tr eated as being one for customs purposes with the 
goods in question;  
iii. the cost of packing whether for labour or materials.  
(b) the value, apportioned as appropriate, of the following goods and s ervices where supplied 
directly or indirectly by the buyer free of charge or at reduced cost for use in connection 
with the production and sale for export of the imported goods, to the extent that such value 
has not been included in the price actually paid  or payable:  G/VAL/N/1/ECU/3  
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  i. materials , components, parts and similar items incorporated in the imported goods;  
ii. tools, dies, moulds and similar items used in the production of the imported goods;  
iii. materials consumed in the production of the imported goods;  
iv. engineering, development, artwork, design work, and plans and sketches undertaken 
elsewhere than in Community Customs Territory and necessary for the production of 
the imported goods;  
(c) royalties and licence fees related to the goods being valued that the bu yer must pay, either 
directly or indirectly, as a condition of sale of the goods being valued, to the extent that 
such royalties and fees are not included in the price actually paid or payable;  
(d) the value of any part of the proceeds of any subsequent resale , disposal or use of the 
imported goods that accrues directly or indirectly to the seller.  
(e) the cost of transport of the imported goods to the port or place of importation;  
(f) loading, stevedoring, unloading , handling and other charges associated with the tran sport of 
the imported goods to the port or place of importation , except for unloading and handling 
charges at the place of importation, provided that they are distinguished from the overall 
transport costs ; and 
(g) the cost of insurance.  
2. No additions may be ma de to the price actually paid or payable in determining the customs 
value except as provided in paragraph 1 above.  
3. Additions to the price actually paid or payable as a result of factors provided in paragraph 1 
above may only be made on the basis of objecti ve and quantifiable data, as duly shown in the 
relevant supporting documents.  
Article 19. Brokers or a gents  
1. A broker or agent means the person acting on behalf of a principal or client and facilitating 
conclusion of the sales contract, representing either the seller or the buyer.  
 Accordingly, a broker  acting on behalf of the seller shall be called the "sales broker " and that 
acting on behalf of the buyer shall be called "the buying  broker ". 
 For the purposes of identifying them correctly, the broker 's activities shall determine the 
nature of his/her role.  
2. If a broker  issues another invoice for the goods, the price actually paid or payable to be 
used in determining the customs value shall still be that agreed between the buyer and the seller, 
as shown in the  commercial invoice issued by the seller of the goods, without prejudice to 
consideration of other appropriate supporting documents when the transaction involves indirect 
payments or other elements constituting the price.  
Article 20. Commission  
1. For the pur poses of these r egulations, commission means the remuneration paid by the 
buyer or seller of the imported goods to an intermediary termed the agent or broker for the 
services rendered  to facilitate conclusion of the sales contract for the said goods.  
 The remuneration received is usually in the form of a percentage of the price of the goods.  
2. Sales commission and buying commission mean , respectively,  the payment received by the 
sales agent or the buying  agent, as appropriate.  
 The terms "sales agent and comm ission " and "buying  agent and commission " shall reflect 
the status of the person on whose behalf the services are provided and not the fact that 
a commission is paid.  G/VAL/N/1/ECU/3  
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  Article 21. Sales commission  
1. Sales commission shall be added to the price actually paid o r payable, provided that the 
following requirements are met : 
i. It is not included in the said price;  
ii. it is payable by the buyer.  
2. Where the sales commission is paid by the seller and charged to the buyer by including it in 
the price billed for the good s sold, for the purposes of valuation, no adjustment to the price paid or 
payable shall be made as the commission has already been included therein.  
3. The term "incurred by the buye r" in Article 18.1(a) of these r egulations means that the 
buyer has to pay th e commission to the intermediary in addition to paying the price of the goods 
to the seller.  In such cases, the amount of the commission shall be added to the price actually paid 
or payable for the purposes of valuing the imported goods, irrespective of th e fact that the 
payment has been made in the Community Customs Territory where the goods are imported, even 
in the national currency.  
4. It shall be considered that sales commission is paid, irrespective of the form in which the 
seller, buyer and agent are in volved in the transaction, in the following circumstances:  
(a) The buyer imports the goods, the seller invoices the buyer for the goods, including the 
amount of the commission, and the agent receives his /her payment from the seller;  
(b) the buyer imports the goods , the seller invoices the buyer for the goods without including 
the amount of the commission, and the agent receives his /her payment from the buyer;  
(c) the seller's agent imports the goods, the seller invoices the agent for the goods, including 
the amount of the commission, the agent in turn re -invoices the goods to the buyer once 
they have been imported and the agent receives his /her payment from the seller;  
(d) the seller 's agent imports the goods, the seller invoices the agent for the goods without 
including th e amount of the commission, the agent in turn re -invoices the goods to the 
buyer once they have been imported, including his /her commission, and the agent receive s 
his/her payment from the buyer.  
In these four cases, the agent acts on b ehalf of the seller and the amount  of the sales 
commission forms part of the customs value, irrespective of whether it is paid by the seller or 
buyer of the goods.  As the sales commission is not included in the price actual paid or payable in 
cases (b)  and (d), its amount sha ll be added in order to calculate the customs value of the goods.  
Whatever action is taken by the sales agent in the cases mentioned above, the commercial 
invoice originally issued by the se ller shall be submitted to the customs a uthority in support of the  
price paid for the sale of the goods, inasmuch as the payment made to the seller is the 
fundamental basis for the transaction value.  
Article 22. Buying commission  
1. The buying commission is the fee paid by an importer to his /her agent for the service  
of representing him abroad in the purchase of the goods being  valued.  
 For the purposes of determining the buying commission, the "importer " means the "buyer " 
of the goods.  
2. The buying commission is paid to the buying agent by the buyer for an act which the buyer  
undertakes voluntarily and not because this is a requirement on the  part of the seller ; accordingly, 
as the agent is acting on behalf of the buyer, the commission shall not be added to the price 
actually paid or payable for the goods importe d, as provided  in Articles 18.1 (a)(i) and 31.2(a) 
of these r egulations.  
3. The importer shall submit to the customs a uthority the written commission contract and/or 
other supporting documents which clearly show the buying agent 's role in  facilitating the 
agreement on the s ale. In the absence of such proof or where it is insufficient to substantiate the G/VAL/N/1/ECU/3  
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  situation, the fee paid shall not be considered a buying commission and shall form part of the 
customs value.  
4. Where the buyer submits to the C ustoms a commercial invoice issu ed by the buying agent 
which includes the amount of his /her fee in addition to the price of the goods, in order to 
determine the customs value, the customs a uthority shall require , in addition to the documents 
indicated in the preceding paragraph , submissi on of the invoice originally issued by the seller in 
support of the price paid for the sale of the goods, inasmuch as the payment made to the seller is 
the fundamental basis for the transaction value.  
 Where the so -called agent has ownership rights over th e goods and/or acts on his /her own 
behalf, he may not be considered a buying agent.  
5. When C ustoms is conducting its controls, special care shall be taken as regard s the charges 
made by the buying agent in his/her invoice.  If the invoice includes services pa id by the agent on 
behalf of the buyer and which form part of the customs value, for example, transport , handling 
and delivery costs abroad up to the place of shipment, the total amount paid may not be 
considered a buying commission and only the amount cor responding to the intermediation service 
as such may be considered not to form part of the customs value.  
Article 23. Brokers and brokerage  
1. A broker is an intermediary in a transaction who is not specifically linked to either the buyer 
or seller and whose essential role is to bring together the parties at a commercial level and to 
facilitate the conclusion of transactions or operations ensuing therefrom.  
2. Brokerage means the fee paid to the broker, which includes the remuneration paid by the 
buyer and/or sel ler of the goods imported for the services provided.  It may be in the form 
of a fixed amount or a percentage of the agreed transaction.  
3. Where the seller pays the brokerage and includes it in the invoice, there shall not be 
any adjustment to the price actua lly paid or payable.  Where the buyer pays the brokerage, and 
provided that the amount is not included in the commercial invoice issued by the seller of the 
imported goods, it shall be added to the price actually paid or payable for the purposes 
of determin ing the customs value.  
Article 24. Containers or packaging  
1. Containers or packaging generally mean the internal receptacles used for unit sale 
(jars,  bottles, pots, boxes, inter alia ) and the external elements needed for domestic transport in 
the country of  export and for international transport (polystyrene, cartons, inter alia ) used to carry 
and/or protect the goods, together with the necessary means for wrapping, folding and fixing 
them.  
2. In addition to the cost of the containers and packaging, the customs  value includes all costs 
incurred in supplying  the elements mentioned in paragraph 1 above and deemed to be part of the 
imported goods.  The costs incurred by placing the goods in boxes, receptacles, etc. and the cost 
of putting the goods in containers or packaging shall also be included.  
3. Where the containers do not form a whole with the goods but can be used several times for 
imports, the part of the cost of using the containers for each import separately shall be added to 
the value of the goods.  
4. The cost of containers and packaging shall not be included in the value of the goods if they 
do not form a whole with the goods inasmuch as such containers and packaging are subject to 
separate customs treatment.  
5. The cost incurred for the use of containers, pallets , jerry cans, drums and other items 
of international transport which can be used or reused as a means of transport entails 
an adjustme nt of Article 18.1(e) of these r egulations, pursuant to the provisions of Article 28.4 
thereof.  G/VAL/N/1/ECU/3  
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  Article 25.  Benefits  
1. Accor ding to the defin ition in Article 2(h) of these r egulations, benefits  are divided into 
two categories of goods and services list ed in Article 18.1(b) of these r egulations.  
2. The value of a benefit  provided by the buyer may be determined on the basis of:  
(a) The value of the sale or rental  paid by the buyer if the benefit  is purchased or rented  
from an unrelated person;  
(b) the cost of providing the benefit , if it was provided by the buyer or by a related 
person.  
3. In the cases of the benefits  indicated i n Artic le 18.1(b)(ii) of these r egulations, in order to 
include them in the customs value, adjustments shall be made to take into account their prior use.  
Likewise, the value of repairs or modifications undertaken after the buyer has purchased or 
provided the benefits shall also be taken into account.  
 In such cases, in addition to the transport and related costs for transfer to the country 
of production indicated in the paragraph below, the cost of return to the country of import, where 
applicable, shall also be included.  
4. The cost incurred for transfer to the place where the goods are to be produced shall also be 
added to the cost or value of the benefit  where it has been paid by the buyer, in accordance with 
the following:  
(a) Transport and related costs incurred  for supply of the benefit ; 
(b) transport insurance paid;  
(c) duties, taxes or levies paid on import into the country where the goods are to be produced.  
5. Where necessary, after the value of the benefit  has been determined, it shall be apportioned  
among the  goods  imported a s follows , at the request of the importer:  
(a) The value may be apportioned to the first shipment if the importers wishes to pay duty on 
the entire value at one time;  
(b) the importer may request that the value be apportioned over the numb er of units produced 
up to the time of the first shipment where contracts or firm commitments exist for such 
production;  
(c) the importer may request that the value be apportioned over the entire anticipated 
production where contracts or firm commitments e xist for such production;  
(d) the value may be apportioned among the number of years of the benefit  or the number 
of units that can be produced.  
Whichever method is followed, the generally accepted accounting principles indicated in 
Article  58 of these reg ulations shall be taken into account and the information shall be 
substantiated by documentary evidence.  
6. The value of the goods and services indicated in subparagraph s (i), (ii), (iii) and (i v) 
of Article  18.1(b) of these r egulations shall only be added to  price paid or payable if:  
(a) They have been supplied by the buyer for production and sale for export of the imported 
goods free -of-charge or at reduced cost;  
(b) the have been supplied directly or indirectly;  
(c) their value has not been included in the price actually paid or payable.  
7. The benefits  indicated i n Article 18.1(b)(iv) of these r egulations shall not be added to the 
price paid or payable if they have be en supplied in Community Customs Territory.  G/VAL/N/1/ECU/3  
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  Article 26. Royalties and licence fees  
1. "Royalties and licence fees " generally mean payments for the intellectual property rights 
needed to: 
(a) Produce or sell a product or good that uses or incorporates patents, trademarks, industrial 
designs, models , technical know -how, manufacturing or manufacturing proces ses or any 
other industrial property right covered by Decision No. 486 or any decision superseding or 
amending it . 
(b) use, manufacture or resell a product or good that makes use of copyright or related rights 
covered by Decision No. 351 o r any decision supers eding or amending it ; 
(c) produce or sell a product or good that uses  new plant breeders ' rights covered by Decision 
No. 345 or any decisions superseding or amending it ; 
(d) produce or sell a product or good that uses  rights of access to genetic resources covered by 
Decision No. 391 or any decisions superseding or amending it. 
2. The royalty or licence fee shall only be added to the price actually paid or payable if th is 
payment:  
(a) Is related to  the good s being  valued;  
(b) constitutes a condition  of sale  of those goods ; 
(c) is based on objective and quantifiable data;  
(d) is not included in the price actually paid or payable.  
If the buyer pays royalties or licence fee s to a third party, the requirement  that it be related  
to the good s being  valued and that it constitute a condition  of sale of these goods shall not be 
considered as met unless  the seller , or a person related to him , requires the buyer to make that 
payment.  
For this purpose, i t shall be considered that the condition  of sale does not necessarily have 
to be specified in th e contract but can be demonstrated by means of factual elements relating to 
the commercial transaction.  
Where the method of calculation of the amount of a royalty or licence fee derives from the 
price of the imported good s, it may be assumed , in the absenc e of evidence to the contrary , that 
payment of that royalty or licence fee is related to the goods being valued.  
3. If royalties or licence fees relate not only to the imported good s but also to other 
components, for example, goods or services added to the go ods after their importation, the price 
actually paid or payable for the imported good s may only be adjusted by making an appropriate 
apportionment on the basis of objective and quantifiable data, in accordance with paragraph 3 
of the Interpretative Note to  Article 8 of the WTO Customs Valuation Agreement and with the 
provisions in Article 60 of these regulations.  
4. Adjustments for royalties and licence fees shall apply regardless of the country of residence 
of the beneficiary of the payment, whether within or  outside Community Customs Territory.  
5. If the exact amount of the royalties or licence fees is not known at the time of importation  
because it is determined as a percentage of the resale price of the imported good s, the adjustment 
may be made by indicating it in the Andean Customs Value Declaration , estimating a provisional 
amount therein but notifying that this is the case.  The procedure set out in the Resolution adopting 
the Andean Customs Value Declaration  shall then be followed.  
6. Payments made by the buye r for the right to distribute or resell the imported goods shall not 
be added to the price actually paid or payable if such payments are not a condition of the sale for 
export to the Community Customs Territory where they are to be imported.  Charges for th e right 
to reproduce the imported goods in the country of importation shall not under any circumstances 
be added.  G/VAL/N/1/ECU/3  
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  Article 27. Proceeds of the resale, assignment or use of the goods  
 If the exact amount of the proceeds is not known at the time of import ation because it is 
determined as a percentage of the resale price of the imported good s, the adjustment may be 
made by indicating it in the Andean Customs Value Declaration , estimating a provisional  amount 
therein but notifying that this is the case.  The proc edure set out in the Resolution adopting the 
Andean Customs Value Declaration  shall then be followed.  
Article 28. Cost of delivery to the place of import ation  
1. Pursuant to the provisions in Chapter III of Decision No. 571, the cost of delivery indicated 
in Article  18.1(e), (f) and (g) of these r egulations means all the costs, including carriage, 
manipulation , adaptation for export, handling and delivery of the goods to the port or place 
of shipment, transport from the first place of shipment to the place of importation in to Community 
Customs Territory, loading, unloading and handling in a foreign port and insurance paid on 
carriage  of the goods.  
2. The procedure for adjusting for such costs shall depend on the terms for delivery of the 
goods agreed between the s eller and the buyer.  The costs may or may no t be included in the price 
invoiced by the seller, even if the goods are subsequently delivered to a place other than the place 
of importation identified.  
3. For the purposes of the last paragraph of Article  6 of De cision No. 571, the rates or 
premiums usually applicable may be obtained from information contained in records concerning 
other imports with due justification, from tables drawn up by Customs Administrations showing 
data or rates that are regularly updated , or from information provided by companies that provide 
such services.  
 In order to determine the customs value of vehicles entering the country by their own 
means where it is not possible to obtain data on the freight charges usually applicable, the 
transport costs may be calculated according to the cost of the fuel consumed and the cost of other 
operations over the route taken from the place of delivery abroad up to the place of importation 
into Community Customs Territory.  
4. If the payment cannot be subst antiated by objective and quantifiable data and it is not 
possible to apply the provisions in the preceding paragraph, the transaction value shall be 
dismissed and the goods shall be valued using the secondary methods, taking into account the 
provisions in  Articles 3 and 4 of Decision No. 571 and those in Chapter II of this Title.  
Article 29. Transport costs  
1. Transport costs include all transport -related costs from the place of delivery of the goods 
abroad up to the place of importation into Community Custom s Territory.  
 They include, inter alia, carriage and handling abroad , international transport as agreed by 
the parties in the transport contract, loading and unloading in foreign ports, the cost of dispatching 
transport documents, the cost of paying shippi ng at destination, fuel consumption, the cost 
of consolidation and deconsolidation, stevedoring services at the foreign port, endorsement and 
communications costs, penalties for delays in the foreign port.  
 These costs form part of the customs value and sh all be adjusted in order to determine the 
transaction value, without prejudice to the person paying them on behalf of the buyer, the method 
of payment, or whether such payment s are made within or outside Community Customs Territory 
and before or after impo rtation.  
2. If the transport costs are included in the commercial invoice and the amount agreed 
between the seller and buyer is not the same as that actually paid by the seller to a third party, 
the costs actually paid definitively for transport and related c osts to the place of importation 
in accordance with the transport document shall be taken into account.  G/VAL/N/1/ECU/3  
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   If the commercial invoice shows transport costs higher than those appearing in the transport 
document, the difference shall form part of the transport cost for the purpose of calculating the 
customs value of the good s, unless the importer shows that the difference was repaid or will not 
be paid.  
3. If the good s have taken several routes before arriving in Community Customs Territory, 
when determining the ad justment all such costs for all the journeys shall be taken into account.  
4. The cost o r rental of containers, cylinders, tanks or similar items to be used for the transport 
of the goods are also transport costs that form part of the customs value and the pro per 
apportionment shall be made, where applicable, and shall be substantiated by objective and 
quantifiable data.  
5. Likewise, the cost of temporary storage of the goods in the port of export and 
of international transit during their transport are costs incur red for transport of the goods and shall 
therefore be adjusted in conformity with the provisions in Article 18.1(e) of these Regulations.  
Article 30. Cost of insurance  
1. The amount to be taken into account for insurance is that of the insurance premium actua lly 
paid. Any statement of theoretical or estimated amounts or not substantiated by documents shall 
under no circumstances be accepted.  
2. Insurance means the cost of the service required to cover the risk of damage or loss during 
transport, loading, unloadin g or handling of the goods up to the place of importation.  
3. The document proving the cost of insurance is the policy issued by the insurance company 
or the individual insurance certificate.  
Part II Elements that do not form part of customs value  
Article 31.  Elements to be deducted or which may not be added to the price paid or 
payable  
1. The customs value shall not include the elements listed below:  
(a) Construction, erection, installation, assembly, maintenance or technical assistance 
undertaken after importation of goods such as industrial plant, machinery or equipment;  
(b) import duties and taxes or other charges payable in Community Customs Territory for 
import or sale of the good s in question;  
(c) transport, carriage and insurance costs after the goods have arrived at the place 
of importation into Community Customs Territory, as well as  the cost of temporary st orage 
of the goods for reasons of carriage after arrival at the place of importation;  
(d) unloading and handling charges at the place of importation into Community Cu stoms 
Territory, and the charges paid for ships ' berthing in ports in the Territory;  
(e) charges for i nterest included in the commercial invoice, paid under a financing arrangement 
entered into by the buyer and relating to the purchase of the imported goods, p roviding that 
the circumstances indicated in Decision No. 3.1 of the WTO  Committee on Customs 
Valuation apply.  If any of these circumstances do es not apply, it shall be considered that the 
amount attributed to interest forms part of the transaction value.  
These elements may be deducted from the price paid or payable by the buyer to the seller 
provided that they are included therein and are distinguished, in other words, have been invoiced 
by the seller and are specified separately in the commercial document s. 
2. The customs value shall not include the following elements either and they shall not be 
added to the price actually paid or payable for the imported goods:  
(a) Buying commission;  
(b) the right to reproduce the imported good in Community Customs Territory;  G/VAL/N/1/ECU/3  
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  (c) payme nts by the buyer for the right to distribute or resell the imported goods if such 
payment s do not constitute a condition of sale of the goods for their export  to Community 
Customs Territory;  
(d) activities by the buyer in Community Customs Territory in order t o market the imported 
goods, advertising, guarantees, attendance at fairs, etc. even if they may be deemed to 
benefit the seller;  
(e) payment of dividends to the seller as a shareholder or other payments unrelated to the 
imported goods;  
(f) domestic taxes payable on the goods in question in the country of origin or export, provided 
that it can be demonstrated to the satisfaction of the customs authorities that the said goods 
have been or will be exempt from such taxes to the benefit of the buyer;  
(g) in general, the co st of any activities undertaken by the buyer on his /her own behalf and in 
respect of which no adjustment has to be made in accordance with the pr ovision in 
Article  18 of these r egulations and provided that this can be demonstra ted to the satisfaction 
of the Customs A uthorities.  
Chapter II Secondary Methods  
Article 32. Application of secondary methods  
1. If the requirements s pecified in Article 5 of these r egulations for application of the 
transaction value method for imported goods are not met, the secondary v aluation methods set 
out in paragraph s 2 to 6 of Article 3 of Decision No. 571 shall be used in the sequential order 
indicated in Article  4 thereof.  
2. In determining the customs value u sing the secondary methods, in a ddition to the 
Andean  Customs Value Decla ration  for the goods being value d and the corresponding supporting 
documents, any other information that may be provided by the importer or obtained from other 
sources shall be taken into account in the form and under the conditions laid down in domestic 
legislation . 
Section I Second Method : Transaction Value of Identical Goods  
Article 33. General aspects of application  
1. If the transaction value method indicated in Chapter  I of these r egulations cannot be 
applied, the customs value shall be determined  using the transaction value of identical goods 
method, taking into account the provisions of Article  2 of the WTO Customs Valuation Agreement, 
the Interpretative Note there to, and the definitions and requirements in Article  15 of the said 
Agreement.  
2. The customs authority shall first identify which other imported goods may be deemed 
identical and, subsequently, ascertain that they correspond to customs values determined using 
the transaction value method, as provided in Chapter I above.  These value s shall have bee n 
previously accepted by the Customs, in accordance with paragraph 4 of the Interpretative Note to 
Article  2 of the aforementioned Agreement and pursuant to the provision s in Article  59 of these 
regulations.  
3. In applying this method, the transaction value of identi cal goods in a sale at the same 
commercial level and in substantially the same quantities as the goods being valued  shall be used 
to determine the customs value . Where no such sale is found, the necessary adj ustments shall be 
made to take account of differences attributable to commercial level or quantity.  
Article 34. Adjustments  
1. If no transaction values are available for identical goods in a sale at the same commercial 
level and in substantially the same quantit y as the goods being valued, the nece ssary adjustments 
shall be made to take account of differences in commercial level and/or quantity between the 
imported good s and the identical good s in question . Likewise, adjustments shall be made to take 
account of any differences in costs and charges f or transport and insurance arising from G/VAL/N/1/ECU/3  
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  differences in modes of transport and distance if the identical goods have been exported from 
a country other than the country of export of the goods being valued.  
2. A condition for adjustment because of different comm ercial levels or different quantities 
shall be that such adjustment, whether it leads to an increase or decrease in the value, be made 
on the basis of objective and quantifiable data that clearly establish the reasonableness and 
accuracy of the adjustment.  
3. The data contained in current and reliable price lists showing the prices corresponding to 
different commercial levels and quantities, inter alia,  shall be considered objective and quantifiable 
data. Such lists shall be confirmed by other imports made at the same prices.  
Article 35. Time e lement  
 In determining the customs value applying the transaction value for identical goods method, 
the time to be taken into account is that of export to Community Customs Territory.  Accordingly, 
only goods that have bee n exported at the same time or at about the same time as the goods 
being valued shall be taken into account, having regard to the definition of "about the same time " 
in Article 2 (e) of these r egulations.  
Article 36. Absence of prior transaction values for identical goods  
 If no previously accepted transaction value for identical goods in accordance with the 
provision in Chapter I of this Title is available or all the requirements for the second method are 
not met, the transaction value of similar goods shal l be used, as set out in Section II below.  
Section II Third Method : Transaction Value of Similar Goods  
Article 37. General aspects of application  
1. If the transaction value of identical goods method cannot be applied, the customs value shall 
be determined  using the transaction value of similar goods method, taking into account the 
provisions of Article  3 of the WTO Customs Valuation Agreement, the Interpretative Note there to, 
and the definitions and requirements in Article 15 of the said Agreement.  
2. The custom s authority shall first identify which other imported goods may be deemed similar 
and, subsequently, ascertain that they correspond to customs values determined using the 
transaction value method, as provided in Chapter I above.  These values shall have bee n previously 
accepted by the Customs, in accordance with paragraph 4 of the Interpretative Note to Article  3 of 
the aforementioned Agreement and pursuant to the provision s in Article  59 of these r egulations.  
3. In applying this method, the transaction value o f similar goods in a sale at the same 
commercial level and in substantially the same quantities as the goods being valued  shall be used 
to determine the customs value . Where no such sale is found, the necessary adjustments shall be 
made to take account of differences attributable to commercial level or quantity.  
Article 38. Adjustments  
1. If no transaction values are available for similar goods in a sale at the same commercial 
level and in substantially the same quantities as the goods being valued, the necess ary 
adjustments shall be made taking into account differences attributable to commercial level and/or 
quantity between the imported good and the similar good in question.  Likewise, adjustments shall 
be made to take into account any differences in relation to costs and charges for transport and 
insurance arising from differences in modes of transport and distance if the similar goods have 
been exported from a country other than the country of export of the goods being valued.  
2. Any adjustment arising from diff erences in commercial level or quantity, whether resulting in 
an increase or reduction in value, shall comply with the condition that it be made on the basis 
of objective and quantifiable data which clearly establish the reasonableness and accuracy of the 
adjustment.  G/VAL/N/1/ECU/3  
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  3. The data contained in current and reliable price lists showing the prices corresponding to 
different commercial levels and quantities, inter alia,  shall be considered objective and quantifiable 
data. Such lists shall be confirmed by other impor ts made at the same prices.  
Article 39. Time e lement  
 In determining the customs value applying the transaction value for similar goods method, 
the time to be taken into account is that of export to Community Customs Territory.  Accordingly, 
only goods that  have been exported at the same time or at about the same time as the goods 
being valued shall be taken into account, having regard to the definition of "about the same time " 
in Article 2 (e) of these r egulations.  
Article 40. Absence of prior transaction va lues for similar goods  
 If no previously accepted transaction value for similar goods in accordance with the 
provision in Chapter I of this Title is available or all the requirements for the se cond method are 
not met, the ded uctive method shall be used, as  set out in Section III below.  
Section III  Fourth Method : Deductive Value 
Article 41. General aspects of application  
1. In valuing goods using this method, the basis shall be the selling price of the imported 
goods in Community Customs Territory, or of identi cal or similar goods, with the deductions 
indicated in Article 5.1(a) of the WTO Customs Valuation Agreement, taking into account the other 
provisions in the aforesaid Article and the Interpretative Note there to. 
2. Two situations shall be distinguished when applying the deductive method:  
(a) The goods are sold in the condition as imported.  
 The customs value shall be based on the unit price corresponding to the greatest volume of 
sales of the imported goods or, if they are not imported for sale or at the time of valuation  have 
not been sold, it shall be the unit price for the sale of other imported goods that are identical or 
similar to the goods being valued to buyers in Community Customs Territory who are not related 
to the importer, at the first commercial leve l at which such sales are made after importation.  
For this purpose, the first sale of the goods after importation in sufficient quantity to determine the 
corresponding unit price shall be taken into account.  
(b) The goods are sold after having undergone subseq uent working or processing.  
Pursuant to Article  5 of Decision No. 571, if the imported goods or other identical or similar 
imported goods are not sold in Community Customs Territory in the condition as imported, 
whether or not requested by the importer, th e customs value shall be based on the unit price 
corresponding to the greatest aggregate quantity of the imported goods sold at the first 
commercial level after importation at which such sales are made, after having undergone 
subsequent additional working or processing, to buyers in Community Customs Territory who are 
not related to the importer.  In any event, the first sale of a sufficient quantity of the goods after 
importation that enables the corresponding unit price to be determined shall be taken into  
account.  
For this purpose, the value added by processing shall be taken into account, together with 
the deductions mentioned in Article 5.1(a) of the WTO Customs Valuation Agreement.  
In deducting value added for processing, the cost of the work or operati ons needed to 
undertake such processing shall be taken into account, having regard to the relevant supporting 
documents.  
3. The data to be used to apply this method shall be determined on the basis of information 
supplied by the importer.  If the importer is u nable to substantiate the information provided, the 
data to be applied may be based on relevant information other than that supplied by the importer.  G/VAL/N/1/ECU/3  
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   The selling price communicated by the importer shall be substantiated by the respective 
invoices for dome stic sale, as provided in domestic legislation.  The deductions made shall be based 
on objective and quantifiable data duly supported by documents.  
 When using this method, values that are arbitrary or fict itious may under no circumstances 
be used.  
Article 42. Time element  
1. In determining the customs value applying the deductive method, the time to be taken into 
account is the dat e of importation of the goods being value d or about the same time, as defined in 
Article 2 (e) of these r egulations.  
2. Only the sellin g price of goods that have been sold in Community Customs Territory at the 
time they are imported or on the closest date after their importation, but not exceeding 90  days, 
shall be taken into account.  
Section IV Fifth Method : Computed Value 
Article 43. Ge neral aspects of application  
1. In valuing goods using this method, the provisions of Article  6 of the WTO Customs 
Valuation Agreement and the Interpretative Note thereto shall be taken into account.  
2. This method is based on the cost of producing the imported goods.  It consists 
of determining the customs value on the basis of the constitu ent elements of the price, taking into 
account the data available in Community Customs Territory, supplied by the producer of the good 
in question, without prejudice to examina tion of the cost of producing the goods being valued and 
other information that may be obtained from outside the country of importation, with the consent 
of the producer and applying the due procedure provided in the WTO Customs Valuation 
Agreement.  
 The c ost or value of the goods shall include the cost of the elements specified in 
Article 18.1(ii) and (iii) of these r egulations, as well as the value of any element specified in 
paragraph 1(b) of the Article, apportioned as appropriate under the provisions o f the relevant note 
to Article 8 of the WTO Customs Agreement, which has been supplied directly or indirectly by the 
buyer for use in connection with the production of the imported goods.  The value of the elements 
specified in the aforementioned paragraph 1(b)(iv) which have been undertaken in the country 
of importation shall be included only to the extent that such elements are charged to the producer.  
3. The total amount of the elements used to calculate the computed value shall take into 
account the cost or  value of all the delivery costs mentioned in Article 18 (e), (f) and (g) of these 
regulations, pursuant to the relevant provision in Article  6 of Decision No. 571. 
4. The use of this method shall generally be limited to those cases where the buyer and seller 
are related and the producer is prepared to supply to the Customs Administration the necessary 
costings and to provide facilities for any subsequent verification that may be necessary.  
Section V Sixth method : "Fall-back " 
Article 44. Procedure  
1. In valuing go ods using this method, the provisions of Article  7 of the WTO Customs 
Valuation Agreement and the Interpretative Note thereto shall be taken into account.  
2. The customs value determined using the rules applicable under this method shall, to the 
greatest exte nt possible, be based on the valuation methods specified above.  
3. If the customs value of the imported good cannot be determined by using the methods 
indicated in Article 3.1 to 3.5 of Decision No. 571, as indicated in Chapters I and II in this Title, 
the "fall-back" method shall be applied as follows:  G/VAL/N/1/ECU/3  
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  (a) Reasonable flexibility  
 For this purpose, the first five methods in the WTO Customs Valuation Agreement shall be 
applied in the order established therein, as provided in Article  4 of Decision  No. 571, but 
emplo ying reasonable flexibility when considering the requirements contained in each of them, 
until encountering the first method that enables the customs value to be determined.  
 In order to apply the rules provided for application of this method with reasonab le flexibility, 
in the cases applicable, periods of time longer than one  hundred  and eighty (180)  days but not 
more than three  hundred  and sixty five (365) days  may be used to determine "at about the same 
time". 
 Any elements  which constitute a basis for u sing the transaction value method and non -
compliance with which led to its rejection at the time, for example, the relationship had no 
influence on the price agreed, the existence of a sale such as that de fined in Article 2(k) of these 
regulations, the exi stence of an actual price tied to such a sale and use of information or data with 
documentary support, inter alia , may not be considered flexib ly. 
 Taking into account goods that were not identical or similar to those imported and which, at 
that time, prev ented application of the second or third methods of valuation may not be 
interpreted  flexib ly either.  
 In applying the deductive method, sales between related parties may not be taken into 
account flexibly . 
 In general, with a view to flexibility, none of the prohibitions det ermined in Article  45 
of these r egulations may be utilized or the basic principles of the WTO Customs Valuation 
Agreement and Article VII of the GATT be disregarded, and estimated or t heoretical  values may 
not be taken into account.  
(b) Reasonable criteria  
 If it is not possible to value the goods using the five first methods in the WTO Customs 
Valuation Agreement , even when applied flexibly , the use of reasonable criteria and procedures 
consistent with the principles and provisions of the a forementioned Agreement and with Article  VII 
of the GATT 1994 may be used on the basis of data available in Community Customs Territory.  
 These reasonable criteria and procedures include special cases of valuation, which may be 
determined by domestic legis lation in member countries in the absence of Community rules, 
without prejudice to use of reference prices in accordance with Article 53.5  of these r egulations.  
Article 45. Prohibitions  
1. Notwithstanding the flexibility allowed for application of the "fall-back" method or the 
possibility of utilizing reasonable criteria, this may not be interpreted as meaning that arbitrary 
procedures contrary to the principles and provisions of the WTO Customs Valuation Agreement and 
Article  VII of the GATT may be followed . 
2. The customs valu e determined using the "fall-back" method shall not be based on:  
(a) The selling price in Community Customs Territory of goods produced therein;  
(b) a system which provides for the acceptance for customs valuation purposes of the higher 
of two alte rnative values;  
(c) the price of goods on the domestic market in the country of exportation;  
(d) a cost of production other than the computed value which has been determined for identical 
or similar goods in accordance with the provisions of Article  6 of the WTO  Customs Valuation 
Agreement;  
(e) the price of goods sold for export to a country outside Community Customs Territory;  
(f) minimum customs values;  
(g) arbitrary or fictitious values.  G/VAL/N/1/ECU/3  
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  Chapter III Special cases of valuation  
Article 46. General considerations  
1. If it is not possible to apply the main method of the transaction value or the secondary 
methods indicated in Chapters I and II of this Title, even taking into account the flexibility allowed 
by the "fall-back" method , owing to the particular nature of the goods to be valued or to the 
circumstances surrounding the essential import transaction , or because there has been a change in 
the customs regime or destination, the customs value shall be determine d in accordance with the 
provisions adopted governing special cases of  valuation, without prejudice to the use of reference 
prices acco rding to Article 53.5 of these r egulations.  
 In such cases, the provisions of Articles 44 and 45 of these regulations shall be followed, 
using reasonable criteria consistent with the general principles and provisions in the WTO Customs 
Valuation Agreement and Article VII of the GATT.  
2. The procedure to be followed in each special case is that indicated  in Section s I, II and III 
of this Chapter, taking into account the appropriate adjustments ind icated in Section  II 
of Chapter  I of this Title.  
 The General Secretariat, by means of a Resolution, shall determine the special cases 
subsequently arising as a result of the practices of Customs Administrations or, in their absence, 
the domestic legislati on of each member country  shall apply . 
3. In any event, the controls provided in Title III of these Regulations shall be exercised.  
Article 47. Indicative list of special cases of valuation  
 For the purposes of the preceding Article, special cases of valuatio n shall include the 
following:  
1. Depending on the condition or nature of the imported goods:  
(a) Used goods;  
(b) spoiled, damaged or deteriorated goods;  
(c) goods transported in bulk that have suffered changes (losses) in quantity or weight during 
their transport;  
2. Owing  to the circumstances surrounding the essential import transactions : 
(a) International mail or delivery service s; 
(b) imported goods of no commercial value;  
(c) imported goods with no commercial purpose, including luggage, household effects , etc.; 
(d) goods imported under  a hire or financi al leasing arrangement with or without a  purchase 
option.  
3. Owing to application of a specific customs regime or destination : 
(a) Goods from free zones:  
i. goods produced or processed in free zones;  
ii. goods of foreign origin stored in free zones;  
(b) goods reimported after outward proce ssing: 
i. produced or manufactured;  
ii. repaired, processed, reconditioned or rebuilt.  
(c) goods entering temporarily for inward process ing with suspension of payment of customs 
duties and subsequently put up for consumption  
i. if they are declared under the temporary admission for inward processing regime;  
ii. if they are declared under the import for consumption regime.  G/VAL/N/1/ECU/3  
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  TITLE III CUSTOMS CONTROLS  
Article 48. General  
1. Further to the provisions in Chapter V of Decision  No. 571, the Customs Ad ministrations 
of Andean Community member countries shall apply the harmonized control systems provided for 
the Community Customs Territory.  
2. Customs control of valuation at the time of clearance shall include verification of the 
customs declaration for the imported goods and the information contained in the Andean Customs 
Value Declaration  and its supporting documents.  If necessary, the Customs Administration may 
request further proof and justification.  
 During post-clearance  control, commercial information from interested parties recorded in 
their books and systems shall also be controlled, and  subsequent  submission of proof and 
justification shall be requested, taking into account the provisions in Article 13(c), 16, 17 and 18 
of Decision  No. 571. 
3. Controls shall be selective on the basis of risk factors and according to programmes 
previously drawn up by the Customs Administrations.  
Article 49. Risk factors  
 The customs a uthority 's controls and checks  may bring to light discrepancies with regard to 
the follow ing aspects, inter alia : 
(a) Ostensibly low prices;  
(b) indirect payments;  
(c) relationship between the buyer and seller;  
(d) advantages , notably those concerning intangible goods or services;  
(e) payment of royalties for the use of the intellectual property rights sp ecified in Article  26 
of these r egulations;  
(f) inaccurate declaration of costs incurred by the sale and delivery of the goods;  
(g) invoices  that are likely to be false or inaccurate;  
(h) double invoicing;  
(i) the customs declaration and the value are inconsistent and do not corr espond to the 
relevant supporting documents;  
(j) inaccurate completion of the Andean Customs Value Declaration ; 
(k) incomplete or imprecise description of the goods;  
(l) values declared for good s imported into Community Customs Territory that are markedly 
lower than t hose for other identical or similar good s imported from the same country 
of origin;  
(m) values declared for goods from a free zone or special customs zone equal to or less than the 
value at which the same goods or identical or similar goods entered the said zo ne from the 
same country of origin;  
(n) values declared for good s imported into Community Customs Territory that are markedly 
lower than th ose for other identical or similar good s imported into another country from the 
same country of origin;  
(o) goods from a free  zone or special customs zone;  
(p) inhabitual levels of discounts;  
(q) type of goods;  
(r) country of origin or source.  
 If there is reasonable doubt based on the aforementioned risk factors or any oth er factors 
that may arise, the customs a uthority shall notify this i n writing, indicating the corresponding 
evidence.  If there are grounds for such doubts, an investigation into the value shall be initiated, 
giving the importer an opportunity to provide the evidence required, taking into account the 
provisions in Articles 16, 17 and 18 of Decision No. 571. G/VAL/N/1/ECU/3  
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  Article 50. Additional verifications and controls  
1. If necessary, the Customs Administration shall undertake additional verification and controls 
in the offices, facilities or plants of the importers or any person directly or indirectly concerned by 
the import transactions for the good s in question or by subsequent transactions  involving  the same 
goods, or of any other person in possession of documents or data relating to the customs 
declaration  for the imported goods  and th e Andean Customs Value Declaration , in order to ensure 
application of the measures to guarantee determination of the relevant customs value.  
 Such controls may also include physical inspection of the goods.  
2. The parties concerned shall cooperate fully with the Customs Administrations in their 
investigations and shall accordingly facilitate the ir conduct  and shall also appear in person when so 
requested.  
Article 51. Doubts concerning the truth or accuracy  of the value declared and 
the supporting documents  
 Pursuant to Article 13 and Chapter V of Decision  No. 571, the Customs Administrations 
of Andean Community member countries shall follow  the procedure set forth below for verif ying 
and check ing the declared value:  
1. For the purposes of the provision in Article 17 of Decision No. 571, the following shall be 
taken in account:  
(a) If the Customs Administration has reason to doubt the Andean Customs Value Declaration  
submitted with regard to the tru th, accuracy or completeness  of the elements appearing 
therein or in rel ation to the documents produced in support of this declaration, it shall 
request the importer to provide further explanation s, including documents or other evidence, 
in order to carry out the necessary checks and determine the customs value  applicable ; 
(b) if, after receiving further information or in the absence of a response, the Customs 
Administration still has reasonable doubts about the truth, accuracy or completeness  of the 
declared value, it may, bearing in mind the provisions of Article  11 of the WTO  Customs 
Valuation Agreement, decide that the customs value of the imported goods cannot be 
determined by applying the transaction value method and the goods shall be valued in 
accordance with the secondary methods, as indicated in Article 3.2 to 3.6 of Decis ion 
No. 571; 
(c) before taking a final decision, the Customs Administration shall inform  the importer in 
writing of its reasons for doubting the truth or accuracy of the information and documents 
submitted and shall give the importer a reasonable time to respo nd. When  a final decision 
has been taken , the C ustoms Administration shall notify it to the importer in writing, giving 
the grounds for the decision.  
Where such control is conducted during clearance, the importer may withdraw the goods 
if he provides an ad equate guarantee in the form of a bond, a deposit or some other appropriate 
instrument to cover payment of the import duties, taxes and charge s to which the goods might 
finally be subject.  
2. If the supporting documents provided for the purpose of applying any of the secondary 
methods do not meet the requirements of the Customs Administration or are not furnished, 
the following methods may be applied, utilizing the elements available.  
Article 52. Supporting documents  
1. In addition to the commercial invoice, the transport document and the insurance document 
showing the amount for which the goods have been insured, the importer shall also submit other 
documents required in support of the customs value declared or the value to be determined.  
The Customs shall examin e these documents in order to verify the elements of fact and the 
commercial circumstances of the transaction , and compliance with the provisions of the 
WTO Customs Valuation Agreement, Decision No. 571 and these r egulations.  G/VAL/N/1/ECU/3  
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   These documents may be submit ted in hard copy or electronically.  The requirements and 
time-limit for their submission shall be determined in domestic legislation, taking into account the 
provisions in paragraph 1(c) of the preceding Article.  
2. The type of documents that may be required in order to verify or check the value declared 
depends on the stage of the controls being conducted by the Customs Administration and the 
valuation method utilized.  
These documents concern, inter alia : 
i. Documents in support of any other transport cost;  
ii. documents in support of any other insurance cost paid to cover transport risks;  
iii. proof that the goods have been paid;  
iv. bank communications concerning payment, for example, fax, telex, email , etc.;  
v. credit cards;  
vi. documents submitted in order to obtain loans ; 
vii. price lists, catalogues;  
viii. contracts;  
ix. licensing agreements setting out the terms for using copyright, industrial property 
rights or any other intellectual property right;  
x. agreements or letters appointing agents or agencies and relating to payment 
of commission;  
xi. proof of the acquisition of benefits ; 
xii. correspondence and other commercial information;  
xiii. accounts documents;  
xiv. domestic invoices showing the resale price in Community Customs Territory;  
xv. documents in support of costs related to such resale ; and 
xvi. in general , any d ocument proving  the conditions that permit use of one of the 
valuation  methods , in sequential order.  
 Other documents which may be considered documents in support of the facts or 
circumstances relating to the commercial transaction or the customs value to be determined are 
the corresponding records drawn  up by the customs a uthority concerning oral statements by the 
importer or his /her legal representative o r an authorized person, duly endorsed by the latter and 
the customs officer.  
 Submission of the aforem entioned documents alone does not imply acceptanc e of the 
declared value by the customs a uthority, which shall depend on the checks undertaken.  
3. The type of document or evidence , and the procedures, conditions and requirements for 
requests t o be made outsid e the customs territory of Andean Community member countr ies for the 
purpose of customs valuation shall be subject to the provisions in Andean and domestic legislation, 
taking into account the provision s in Article  16 of Decision  No. 571 and Article  62 of these 
regulations.  
 Article 27 of Decision No. 574 or any provisions amending or superseding them  shall apply 
to obtaining evidence . 
Article 53. Use of reference prices  
1. In implementation of the defin ition in Article 2(g) of these r egulations, reference pri ces shall 
correspond to information on the international market over a specified period in order to ensure 
their validity and effectiveness.  
2. Reference prices shall not be contrary to the provision s in Article  7 of the WTO Customs 
Valuation Agreement and, i n particular, to the provision s in Article  45 of these r egulations 
concerning the prohibitions on applying the "fall-back" method.  
3. Reference prices sh all be taken as indicative for controlling the declared value of the 
imported goods.  Accordingly, they may be used to substantiate doubts arising  between the G/VAL/N/1/ECU/3  
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  customs a uthority and the declarant regarding the declared value, in accordance with the 
provisions in Article  51 of these r egulations.  
4. In view of the provision in the preceding paragraph, the same refere nce price used for the 
purposes of comparison may be used for payment of the amount of the surety to be provided in 
order to obtain release  of the goods, in accordance with the prov isions in Article  61 of these 
regulations.  
5. Reference prices may also be use d as a basis for valuation, but only when the m ethods 
indicated in Article 3 .1 to 3.5  of Decision  No. 571 have been exhausted in sequence  and use 
of a reasonable criterion for application of the "fall-back" method is required.  
 For this purpose, identical or similar goods from the same country of origin shall be taken 
into account or, if not available, from different countries but as far as possible taking due 
precautions concerning the country 's level of development and its production costs, which affect 
the price level of the goods considered.  
6. The reference prices shall be in effect at the same time or at about the same time as the 
date of the commercial invoice or the sales contract.  If no reference prices in effect at the time 
of the transaction are avai lable, prices corresponding to the closest possible economic period, the 
periods indicated above, may be used, updating them as appropriate.  
7. The Customs Administrations of member countries, in accordance with the provision s in 
Article  25 of Decision  No. 571, shall regularly update the reference prices, where necessary using 
the price or inflation indexes for the country of export or origin and continuously enter  them in the 
data ba ses set up for this purpose.  
Article 54. F raudulent documents  
1. The Customs Adm inistration s of Andean Community member countries shall not accept 
documents submitted for the purpose of valuation which they deem to be counterfeit or false.  
 In such cases, the customs a uthority shall notify the lack of conformity in writing, giving the  
grounds therefor, and shall initiate the relevant investigation, taking into account the provision s in 
Chapter  V of Decision  No. 571 and in this Title, without prejudice to proceeding with 
an examination of the value or bringing  any criminal proceedings t hat may be applicable.  
2.  If in the course of valuation or after having determined the customs value it is found that 
the supporting documents submitted are counterfeit or false, the examination of value initiated 
shall be suspended or the value already dete rmined shall be nullified, as app licable . 
The declaration of goods and of value shall remain without effect and the relevant measures and 
penalties shall be imposed in accordance with domestic legislation.  
3. If the prices declared are obviously and clearly  low and may involve a case of fra ud, the 
customs authority shall require the deposit of surety in the form of a bond, bank deposit in cash or 
of any other appropriate means, as in dicated in Article  61 of these r egulations, before allowing the 
goods to be re leased.  
 For payment of the surety, the reference prices referred to in the preceding Article may be 
taken into account . If there are no reference prices, the surety shall be sufficient to cover the 
amount of the import duties and taxes that may have been evaded, as provided in domestic 
legislation.  
 After release of the goods has been approved, the goods shall be valued in accordance with 
the provisions laid down in Title  II of these Regulations.  
 If, in the course of the i mport procedure, the customs a uthority has technical elements 
enabling a final decision on the value of the goods to be taken, they may be valued in accordance 
with the provisions in Title II of these r egulations and no surety need be required.  G/VAL/N/1/ECU/3  
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  4. Taking into account the provisions in Articl es 26 and 27 of Decision  No. 571, the Customs 
Administration s of Andean Community member countries shall be kept informed of the findings 
of any investigation into fraud in respect of valuation so that they may apply the necessary 
preventive and dissuasive  measures against the person who has committed the fraud and the 
procedure followed.  
 Likewise, the Committee Against Fraud, created by Decision No. 478 of the Commission of 
the Andean Community, shall be kept informed through the General Secretariat.  
Article 55. Mutual assistance and cooperation with third countries  
 If the Customs Administration s of Andean Community member countries have reason to 
doubt the price declared for goods imported into Community Customs Territory or any of the other 
elements com prising the customs value of the goods, they may seek assistance from the Customs 
Administration of the exporting country, particularly with regard to  the price declared upon export.  
 For this purpose, the agreements or decisions on cooperation and mutual assistance adopted 
within the World Trade Organization (WTO), the World Customs Organization (WCO), 
the Community r egulations and bilateral or multilateral agreements or conventions mutually 
concluded with third countries shall be taken into account.  
TITLE  IV 
FINAL PROVISIONS  
Article 56. Permanent adjustments of value  
1. If the additions refe rred to in Article  18 of these r egulations have to be made repeatedly for 
each importation, under identical circumstances and by the same importer, the Customs may 
decide on permanent adjustments of value, which shall be notified to the importer , who shall 
reflect them in the Andean Customs Value Declaration . 
 Such adjustments shall be in the form of a percentage to be applied to the price actually 
paid or payable for the g oods imported, as shown in the commercial invoice, without prejudice to 
any customs control of the value of the invoice in acco rdance with Title III of these r egulations.  
2. The adjustment shall  apply to imports that occurred  as of the date of the administrat ive 
decision determining them for the first time or the date on which the change occurred.  For imports 
prior to th is decision , the adjustment shall apply as prescribed  in domestic legislation.  
3. Permanent adjustments of value shall be determined either at th e request of the importer, 
in executi on of his /her customs commitments , or automatically following a proposal by the 
respective national valuation services as a result of their examinations and investigations.  
4. Such adjustments may be revised inasmuch as th eir amount is determined by the factual 
elements, circumstances and objective and quantifiable data known to the Customs Administration 
at the time and they remain valid until the Customs Administration issues another decision . 
 Any change that occurs in t he aforementioned factual elements, circumstances or data 
which gave rise to the adjustment shall immediately be brought to the attention of the Customs 
Administration for the purpose of making the necessary amendments.  
Article 57. Transfer prices  
1. Transfer  prices mean the prices agreed between related firms for the transfer of profits and 
losses for various purposes.  
2. As indi cated in Article 8.10 of these r egulations, in any agreement on transfer prices 
concluded between related parties, the importer shall p rove that it is not simply an accounting 
operation , that the price corresponds to the actual value of the goods and that it includes both 
costs and profits.  G/VAL/N/1/ECU/3  
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  3. If the requirements s pecified in Article  5 of these r egulations are not met, the transfer pri ces 
may not be taken as the basi s for valuing the goods imported.  
Article 58.  Generally accepted accounting principles  
1. "Generally accepted accounting principles" are those which enjoy recognized consensus or 
substantial authoritative support within Community Cus toms Territory at a particular time as to 
which economic resources and obligations should be recorded as assets and liabilities, which 
changes in assets and liabilities should be recorded, how the assets and liabilities and changes in 
them should be calcul ated, what information should be disclosed and how it should be disclosed, 
and which financial statements should be prepared.  
 Such standards may be broad generally applicable guidelines  or detailed practices and 
procedures.  
2. For the purposes of these r egulations, the Customs Administration shall utilize information 
prepared in a manner consistent with generally accepted accounting principles in Community 
Customs Territory, according to the valuation method being applied.  
 In applying the deductive or comput ed value methods, in order to determine normal general 
profits and costs, information prepared in accordance with the accounting principles generally 
accepted in Community Customs Territory or in the producing country shall be used.  
 Likewise, determinatio n of any of the elements provided in Article 18.1(b)(ii) of these 
regulations in Community Customs Territory shall utilize  information consistent with the 
accounting principles generally accepted in the Territory.  
Article 59. Values accepted by the Customs  
1. For the purposes of applying the test values refe rred to in Article  15 of these r egulations, 
the transaction value of ide ntical or similar goods method or  the "fall-back" method, the value 
shall be understood to have been accepted by the Customs if it has  been determined that it is 
consistent with the assumptions and requirements specified in the WTO Customs Valuation 
Agreement  for application of each of the methods . 
2. If figures showing exceptionally low customs values are submitted to the Customs with 
a view to considering them to be test values or background information for application of the 
aforementioned valuation methods, the Customs Administration shall also initiate the relevant 
investigation in order to confirm or nullify them.  
3. Values that are being  investigated or examined or values that have subsequently been 
nullified shall not be accepted.  
Article 6 0. Objective and quantifiable data  
1. Information or data submitted on any of the elements constituting the customs value shall 
be objective and quantifi able, in other words, they shall be known and appear in the respective 
supporting documents.  
2. The data shall be "objective ", meaning they shall be based solely on factual elements 
without any personal interpretation . They shall be "quantifiable ", meaning th at it shall be possible 
to determine their amount using quantities and figures.  They shall not be based on estimates, 
assessments or presumptions or on personal experience . 
In the absence of such objective and quantifiable data, the price paid or payable m ay not be 
adjusted and the transaction value method provided in Article  1 of the WTO Customs Valuation 
Agreement and the provision s in Article  5 of these r egulations may not be applied.  
Objective and quantifiable data shall also be required for application  of the other methods.  G/VAL/N/1/ECU/3  
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  3. Deductions from the price paid or payable for the goods or inclusion of elements that form 
part thereof in the customs value shall only be made if they are distinguished objectively.  
4. The expression "if they are distinguished objectiv ely" in connection with information or data 
on costs, charges, duties, profits or any other element  relating to the economic activity that is the 
subject of the transaction means that they must be known or be indicated separately from the 
price of the good s on the commercial invoice, in the sales or transport contract or in other 
commercial documents supplied for the purposes of customs valuation.  
5. If such elements  are not distinguished or are not indicated separately from the price of the 
goods, they shall be included in their customs value.  
Article 61 . Guarantees  
1. In instances where it proves necessary to postpone the final determination of the customs 
value of the imported goods, the importer may withdraw its goods if, where so required, 
it provides a suffi cient guarantee to cover payment of the customs duties and other charges which 
may apply to the said goods, in the form of sureties from banks or insurance companies, deposits 
or some other appropriate instrument.  
 If the delay in final determination of th e value is attributable to reasonable dou bts 
concerning the tru th regarding the price actually paid or payable and the amount of the customs 
duties and other charges to which the goods may be subject cannot be determined, the basis for 
payment of the guara ntee shall be 200 % of the duties and charges resulting from the declared 
value of the goods.  
 In the case of natural persons who are unable to provide sureties from banks o r insurance 
companies , at the request of the importer or when the Customs Administra tion so requires, 
personal guarantees may be given in the form of bank deposits.  
 Domestic  customs legislation shall define  the form s, procedures and time-limits for the 
posting of a guarantee.  
Article 62. Obligation to supply information  
1. In order to verif y and/or determine the customs value of the imported goods, the importer 
or any person directly or indirectly related to the import transaction for the goods in question 
or subsequent transactions  concerning the same goods, as well as any other person in p ossession 
of documents and information for the customs declaration of the imported goods and the 
Andean  Customs Value Declaration  shall, in a timely manner, supply the information, document s 
and evi dence required by the customs a uthority for this purpose according to the form and 
conditions prescribed in domestic legislation.  
2. In implementation of Article  10 of the WTO Customs Valuation Agreement, information 
provided which is , by its particular nature , confidential or which is provided on a confidential bas is 
shall not be disclosed by the customs a uthority without the specific permission of the person or 
government providing such information , unless ordered by the courts.  
3. Private documents such as contracts, especially sales, intelle ctual property, licensing , 
distribution and other contracts and, in general, information concerning the transaction and the 
importation of the goods shall be considered confidential by nature and may not be made public, 
being subject to the provision in the preceding paragraph.  
Article 63. Conclusion of agreements with the private sector  
 The Customs Administrations of Andean Community member countries may enter into 
agreements with the private sector that fall within their scope  when they deem it necessary for the 
proper applicati on of customs legislation and, in particular, to enable information to be exchanged 
in order to ensure the correct payment of customs duties and taxes, especially information that 
facilitates determi nation of the customs value of imported goods.  G/VAL/N/1/ECU/3  
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  Article 64 . Right of appeal  
1. Taking into account the provision in Article  11 of the WTO Customs Valuation Agreement, 
Andean Community member countries shall provide in their domestic legislation for a right 
of appeal by the importer or any other person liable for pay ment of customs duties and other 
import duties and taxes.  
2. The importer shall not be subject to payment of a fine or the threat of fine merely because 
he has chose n to exercise his /her right of appeal.  
 Non-imposition of a fine does not apply to cases of fr aud or to cases in which , prior to 
exercise of the right of appeal , payment or guarantee of a fine relating to the declaration of value 
has been determined , in accordance with the provisions in the applicable domestic legislation.  
3. The right of appeal shall  be exercised before the Customs Administration, an independent 
body or a judicial authority.  
Article 65. Implementing instruments  
1. The related implementing instruments in Article  22 of Decisions No. 571 concerning 
Decisions by the WTO Committee on Customs Valuation and the Advisory Opinions, Comments, 
Interpretative Notes, Case Studies and Studies of the WCO 's Technical Committee on Customs 
Valuation attached as an Annex form an in tegral part of these Community r egulations.  
2. The General Secretariat of the An dean Community, following a study by the Working Group 
of Government Experts on Customs Valuation of the Andean Committee on Customs Matters, shall 
be responsible for updating the aforementioned Annex, incorporating by means of resolutions the 
various inst ruments that may be adopted  by the issuing b odies after signature of these r egulations 
and their timely disclosure.  
Article 66. INCOTERMS  
1. In order to facilitate valuation of goods and, in particular, application of the adjustments 
covered in Section II of Chapter I of Title II of these r egulations, the international trade terms 
"INCOTERMS ", published by the International Chamber of Commerce, shall be used or any other 
description concerning the terms for delivery of the imported goods by the seller, agreed under 
a contract.  
2. The terms of delivery shall be set out in the commercial invoice and/or business contract 
and declared in the Andean Customs Value Declaration , as determined in the corresponding 
instructions.  G/VAL/N/1/ECU/3  
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  Appendix WORLD CUSTOMS ORGANIZATION (WCO)  
TEXTS OF THE TECHNICAL COMMITTEE ON CUSTOMS VALUATION  
PRELIMINARY TEXTS  
 The Technical Committee on Customs Valuation adopted the text of a study on the 
procedure for adopting instruments containing the information and advice furnished by the 
Committee, toge ther with guidelines for the designation and use of such instruments.  These texts, 
together with the updated guidelines, are as follows:  
STUDY  
1. Article  18 of the Agreement on Implementation of Article VII of the General Agreement on 
Tariffs and Trade 1994 p rovides that:  
(1) There is hereby established under this Agreement, a Committee on Customs Valuation 
(referred to in the Agreement as the "Committee "), composed of representative s from each 
of the Members.  The Committee shall elect its own Chairman and sha ll normally meet once 
a year, or as is otherwise envisaged by the relevant provisions of this Agreement, for the 
purpose of aff ording m embers the opportunity to consult on matters relating to the 
administration of the c ustoms valuation system by any M ember  as it might affect the 
operation of this Agreement or the furtherance of its objectives and carrying out such other 
responsibilities a s may be assigned to it by the M embers.  The WTO Secretariat shall act as 
the Secretariat of the Committee.  
(2) There shal l be established a Technical Committee on Customs Valuation ( referred to in the 
Agreement as the "Technical Committee "), under the auspices of the Customs Co -operation 
Council (hereinafter referred to as the CCC in this Agreement), which shall carry out th e 
responsibilities described in Annex II to this Agreement and shall operate in accordance with 
the rules of procedure contained therein.  
2. Annex II to the Agreement defines the functions of the Technical Committee on Customs 
Valuation, established under the  auspices of the CC C, namely:  
(a) To examine specific technical problems arising in the day -to-day administration of the 
customs valuation systems of Members and to give advisory opinions on appropriate 
solutions based upon the facts presented;  
(b) to study, as re quested, valuation laws, procedures and practices as they relate to the 
Agreement and to prepare reports on the results of such studies;  
(c) to prepare and circulate annual reports on the technical aspects of the operation and status 
of the Agreement;  
(d) to furnish such information and advice on any matters concerning the valuation of imported 
goods for customs purpo ses as may be requested by any M ember or the Committee.  Such 
information and advice may take the form of advisory opinions, comment aries or 
explanator y notes;  
(e) to facilitate, as requested, technical assistance to Members with a view to furthering the 
international acceptance of the Agreement;  
(f) to carry out an examination of a matter referred to it by a panel under Article  19 of the 
Agreement ; and 
(g) to exerc ise such other responsibilities as the Committee may assign to it.  
3. The Technical Committee may also exercise responsibilities in the consultation and dispute 
settlement proceedings provided in Article  19 of the Agreement.  Such responsibilities are covered 
in subparagraph (d) above.  
4. In addition, paragraph 23 of Annex II to the Agreement provides that the 
Technical  Committee shall draw up a report of all its sessions and, if the Chairman considers 
it necessary, minutes or summary records of its meetings.  The Chairman or his designee shall 
report on the  work of the Technical Committee at each meeting of the Committee and at each 
meeting of  the CCC. G/VAL/N/1/ECU/3  
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  5. The Agreement 's intention with regard to the reports which the Technical Committee has to 
submit in consultation a nd dispute settlement proceedings pursuant to Article  19 is clear.  
6. As a practical matter, the provisions in paragraph 23 of Annex II are sufficient with respect 
to the presentation of the reports of the Technical Committee to the Committee on Customs 
Valua tion and the CC C, it being understood that either body may request reconsideration or 
further consideration on any matter covered in a given report.  
7. In Annex  II it is provided that some of the Technical Committee 's work will be in the form 
of advisory opin ions, commentaries or explanatory notes, as required by the topic.  In accordance 
with the customary procedure, the texts of advisory opinions, commentaries or explanatory notes 
adopted by the Technical Committee shall be attached to the report of the sessi on and shall form 
part thereof.  
8. In considering the legal status of the decisions taken by the Technical Committee in exercise 
of its responsibilities in accordance with Annex II, it should not be forgotten that it derives clearly 
from the Agreement that th e Technical Committee has to draw up instruments that enable 
uniformity in interpretation and application of the Agreement to be achieved at the technical level.  
The instruments for this purpose shall be the advisory opinions, commentaries, explanatory not es, 
studies and reports.  Nevertheless, such instruments do not constitute international regulations 
Unlike the interpretative notes to the Agreement which appear in Annex I, none of the 
Agreement 's provisions imply that decisions by the Technical Committee  are legally binding on the 
signatories as long as they are not incorporated into their domestic legislation.  
9. Notwithstanding the foregoing, the text of Annex  II clearly shows that decisions by the 
Technical Committee are intended to play an important and essential role in achieving uniformity 
in the interpretation and application of the Agreement.  The most appropriate way of meeting this 
objective is to create a reporting system that enables both the Council and the Committee on 
Customs Valuation, each wit hin its own sphere of competence, the Council in accordance with its 
Convention and the Committee on Customs Valuation in accordance with the Agreement, to take 
into account the Technical Committee 's work.  
10. As Article  18 of the Agreement provides for the es tablishment of a Committee on Customs 
Valuation under the auspices of the CC C, it may be concluded that, as is the case for all the 
Council 's Committees, the Technical Committee 's report and any advisory opinion, explanatory 
note or other decision incorpor ated therein is subject to approval by the Council in respect 
of technical customs matters.  As indicated above, the Council may request that any part of the 
Committee 's report be reviewed or made subject to a more detailed study.  
11. Like the Council, the Comm ittee on Customs Valuation may consider it useful to request the 
Technical Committee to review a particular matter or to pursue its study.  
12. If no request is made by the Committee on Customs Valuation or the Council, all official 
decisions by the Technical C ommittee such as advisory opinions, studies, commentaries or 
explanatory notes shall be published by the CC C in the form of a collection of loose -leaf sheets for 
the guidance of Customs Administrations and commercial spheres.  
13. With regard to the practical i mplementation of the plan of work, Annex  II to the Agreement 
provides that the Technical Committee shall meet as necessary but at least two times a year, 
whereas Article  18 provided that the Committee on Customs Valuation shall normally meet once 
a year, w hen it prepared its annual report to WTO Members.  The Council also meets once a year.  
In order to avoid unnecessary delays in publication, therefore, it would be useful to submit 
a report on the instruments adopted by the Technical Committee to whichever o f the two bodies 
that has to approve them meets first.  The report in question should then be submitted to the first 
meeting of this body, accompanied by a statement of the measures already taken.  G/VAL/N/1/ECU/3  
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  GUIDELINES  
14. The general instruments to be published which con tain information and advice supplied by 
the Technical Committee may normally be entitled:  
 Advisory opinions;  
 commentaries;  
 explanatory notes;  
 case studies;  
 studies.  
This list is not necessarily exhaustive because the Committee on Customs Valuation may 
assign other responsibilities to the Technical Committee.  
15. The title given to a particular instrument will depend on the type of text adopted by the 
Technical Committee.  The choice will often be obvious, but sometimes there may be two or more 
possibilities.  As guidance for choosing the appropriate title, some definitions are given below , 
together with examples for each of them.  
16. An advisory opinion is a re sponse to a question on the methods for applying the Agreement 
to a series of actual or theoretical factual e lement s. Consequently, where the factual elements 
of a situation are identical to those described in the advisory opinion, Customs Administrations will 
have a clear -cut solution ; where they are not identical, the advisory opinion may not be directly 
applic able, although it could provide guidance for resolving the problem.  
Example  
Advisory opinion no.  4.1 on royalties and licence fees  
17. A commentary is a treatise consisting of a series of comments on part of the Agreement 
intended to clarify a situation where a literal reading of the text itself can usefully be 
supplemented by additional guidance.  Commentaries may include examples when necessary.  
Commentaries will general ly provide Customs Administrations with guidelines for applying 
a particular part of the Ag reement in a certain number of situations.  
Example  
Commentary on the treatment applicable to subsidized goods or export premiums . 
18. An explanatory note elucidates the Technical Committee's views on a question of a general 
nature arising from one or more prov isions of the Agreement.  An explanatory note may also 
examine trade practices relating to the question and reach the conclusions imposed.  It will assist 
Customs Administration s in applying a provision of the Agreement to a certain number 
of commercial situ ations to which it relates.  
Example  
Explanatory note on commissions and brokerage . 
19. A case study presents a set of facts based on an actual commercial transaction, which can 
be used to demonstrate the practical application of one or more provisions of the A greement.  
Example  
Case study with particu lar reference to Article 8.1(b) (iv) of the Agreement . 
20. A study sets out the results of an examination in some depth of any question related to the 
Agreement, in particular a question put to the Technical Committee un der paragraph  2(b) 
of Annex  II to the Agreement and which is not more suitably covered by any of the foregoing 
instruments.  A case study may also deal with matters internal to the Technical Committee or G/VAL/N/1/ECU/3  
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  in the form of a report to the Committee on Customs V aluation and, accordingly, is only disclosed 
in official circles.  
Example  
Study on the treatment applicable to used motor vehicles . 
PROCEDURE FOR CONSIDERATION OF MATTERS SUBMITTED TO THE 
TECHNICAL  COMMITTEE  
21. The following paragraphs describe the procedure normally to be followed for consideration 
of issues and/or for drawing up the instruments of the Technical Committee.  
22. If an issue has been raised and included in the provisional agenda of the Technical 
Committee in accordance with paragraph 12 of Annex II to the Agreement, the Secretariat shall 
submit this for consideration by the Technical Committee in the form of an information document.  
Preparation of this document would be facilitated if the administration or organization submitting 
the question provide d the maximum details possible using the format approved in Appendix  I 
(T. Pre. 7) of this section.  This would also guarantee the uniformity of such issues.  The Secretariat 
document shall set out the factual elements and, to the extent possible, provide an  analysis of the 
matter, proposing various solutions to the Technical Committee.  Members and observers shall also 
be invited to submit comments in writing.  
23. The Technical Committee shall consider the document and the written comments.  At this 
stage, it shal l decide what type of action will be required.  
24. The Technical Committee may, inter alia, adopt any of the following options:  
(i) Decide not to consider the issue;  
(ii) decide that, although it is not in a position to consider the matter or does not find it 
necessary to do so at that particular time, the issue may be raised again in the future.  If this 
is the case, the item shall be include d in Part III of the "Conspectus of Technical Valuation 
Questions "; 
(iii) decide that the most appropriate way of dealing  with the matter would be a report to be 
annexed to the report of the relevant meeting of the Technical Committee;  
(iv) decide that an instrument is required.  
25. If the Technical Committee decides that an instrument is required, it should instruct the 
Secreta riat with regard to the category and content of the proposed instrument.  The Secretariat 
will then prepare a draft instrument for circulation.  
26. When an instrument has been adopted, it shall be submitted to the Council and the 
Committee on Customs Valuation,  in accordance with the provision in paragraph 13 of the Study 
on the Texts of the Technical Committee on Customs Valuation.  
PROCEDURE FOR REVIEW OF INSTRUMENTS OF THE TECHNICAL COMMITTEE  
27. If a Member wishes to review an existing instrument, the procedure s et out below shall be 
followed:  
- The Member concerned shall forward a duly substantiated request to the Secretariat.  
The request shall describe in full and in detai l the problems or lacunae found;  
- the Secretariat shall send the appropriate notification regarding the request to all Members, 
giving them an opportunity to comment on it ; and 
- the request, together with the comments received by the Secretariat and, where applicable, 
comments by the Secretariat, shall be forwarded to the Technical Committee i n the form 
of an information document for its consider ation under the agenda item "Issues suggested 
since the previous session ". G/VAL/N/1/ECU/3  
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  28. When examining a request for review of an instrument, the Technical Committee may 
decide:  
(a) Not to review the instrument;  
(b) that al though the Committee is not in a position to review the matter or does not find it 
necessary to do so at that particular time, the issue may be raised again subsequently, and , 
if this is the case, the request for review shall be included in Part  III of the  "Conspectus 
of Technical Valuation Questions "; or 
(c) to review the instrument.  
29. If the Technical Committee decides to review the instrument, it may adopt, inter alia,  any 
of the following options:  
(i) Not to amend the instrument;  
(ii) to amend the instrument;  
(iii) to draw up a new instrument ; or 
(iv) to nullify the instrument and remove it from the Conspectus.  
INSTRUMENTS CONTAINING INFORMATION AND ADVICE PROVIDED BY 
THE TECHNICAL  COMMITTEE ON CUSTOMS VALUATION  
ADVISORY OPINIONS  
LIST OF ADVISORY OPINIONS  
1.1 The concept  of "sale" in the Agreement.  
2.1 Acceptability of a price below prevailing market prices for identical goods.  
3.1 Meaning of "provided that they are distinguished " in the Interpretative Not e to Article  1 
of the Agreement : duties and taxes of the country of importat ion. 
4.1 Royalties and licence fees under  Article  8.1(c) of the  Agreement.  
4.2 Ditto.  
4.3 Ditto. 
4.4 Ditto. 
4.5 Ditto. 
4.6 Ditto. 
4.7 Ditto. 
4.8 Ditto. 
4.9 Ditto. 
4.10 Ditto. 
4.11 Ditto. 
4.12 Ditto. 
4.13 Ditto. 
5.1 Treatment of cash discounts under the Agr eement.  
5.2 Ditto. 
5.3 Ditto. 
6.1 Treatment of barter or compensation deals under the Agreement.  
7.1 Acceptability of test values under Article 1.2(b)(i) of the Agreement.  
8.1 Treatment under the Agreement of credits in respect of earlier transactions.  
9.1 Treatment of anti-dumping and countervail ing duties when applying the ded uctive method.  
10.1 Treatment of fraudulent documents.  
11.1 Treatment of inadvertent errors and  of incomplete documentation.  
12.1 Flexib le application  of Article 7 of the Agreement.  
12.2 Hierarchical order in applying Article  7. 
12.3 Use of data from foreign source s in applying  Article 7.  
13.1 Scope of the word "insurance" under Article 8.2(c) of the Agreement.  
14.1 Meaning of the expression "sold for export to the country of importat ion". 
15.1 Treatment of quantity discounts.  
16.1 Treatment of a situation where the sale or price is subject to some condition or consideration 
for which a value can be determined with respect to the goods being valued.  
17.1 Scope and implication  of Articl e 11 of the Agreement.  
18.1 Implications of Article  13 of the Agreement.  G/VAL/N/1/ECU/3  
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  19.1 Application of Article  17 of the Agreement and paragraph  6 of Annex  III. 
20.1 Conversion of currency in cases where the contract provides for a fixed rate of exchange.  
21.1 Interpretation of the expression "partners in business " in Article  15.4(b).  
ADVISORY OPINION 1.1  
THE CONCEPT OF "SALE" IN THE AGREEMENT  
The Technical Committee on Customs Valuation expressed the opinion that:  
(a) The Agreement on implementation of Article VII of th e General Agreement on Tariffs and 
Trade 1994, hereinafter called the "Agreement ", contains no definition of "sale". Article  1, 
paragraph 1, merely stipulates a specific commercial operation satisfying certain  
requirements and conditions.  
(b) nevertheless in c onformity with the basic intention of the Agreement that the transaction 
value of imported goods should be used to the greatest ext ent possible for c ustoms 
valuation purposes, uniformity of interpretation and application can be achieved by taking 
the term "sale" in the widest sense, to be determined only under the provisions of Articles  1 
and 8 read together.  
(c) it would however be useful to prepare a list of cases which would not be deemed to 
constitute sales meeting the requirements and conditions of Article s 1 and 8 taken together.  
In these cases the valuation method to be used should of course be determined in 
accordance with the order of priority laid down by the Agreement.  
The list prepared pursuant to this opinion is appended.  It is not exhaustive and wi ll be added  
to in the light of experience.  
List of situations in which imported goods would not be deemed to have been 
the subject of a sale  
I. Free consignments  
Where transactions do not involve the payment of a price they cannot be regarded as sales 
under the Agreement.  
Examples : Gifts, samples, promotional items.  
II. Goods imported on consignment  
Under this trading practice, the goods are dispatched to the country of importation not as 
a result of a sale, but with the intention that they would be sold fo r the account of the supplier, 
at the best price obtainable . At the time of importation no sale has taken place.  
Example  
Producer P in the country of exportation E sends his agent X in the country of importation I 
a consignment of 50 carpets for sale by au ction.  The carpets are sold in the  country of importation 
at a total price of 500,000 c.u.  The sum to be transferred by X to producer P in payment of the 
imported goods will be 500,000 c.u., less the costs incurred by X in connection with the sale of the 
goods and his remuneration on the transaction.  
Importations on consignment should not be confused with profit -sharing transactions.  In the 
latter cases the goods are imported following a sale and provisionally invoiced at a certain price to 
which must be ad ded part of the profit made when the goods are sold on the market in the 
country of importation.  Transactions of this kind must be regarded as sales with a clause reserving 
determination of the final price ; the nature of the transaction does not preclude v aluation under 
Article 1 , but of course particular attention has to be paid to the condition laid down in 
paragraph  1(c) of that Article.  G/VAL/N/1/ECU/3  
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  III. Goods imported by intermediaries, who do not purchase the goods and who sell them after 
importation  
A distinction  must be made between the importations envisaged under this heading and 
importations of goods on consignment, dealt with under the previous heading ; the latter constitute 
a separate and specific trading practice . The present category covers a whole range o f situations 
encountered in commercial practice, whereby goods are delivered to intermediaries without having 
been the subject of a sale and in international usage are not universally considered as 
importations on consignment.  
Example  
Importer X in the cou ntry of importation I acts as an agent for the foreign manufacturer F in 
the country of exportation E.  The imported goods are cleared through Customs by X for 
replenishment of the agency stocks and later sold in the country of importation for the account 
and at the risk of F.  
It should be noted that agency importations for distribution made in pursuance of a contract 
of sale already concluded between the supplier and the customer - sometimes nominally between 
the agent and the customer - do constitute trans actions which can be used as a basis for valuation 
under Article  1. 
IV. Goods imported by branches which are not separate legal entities  
In cases where a branch cannot be regarded as a separate legal entity under the legislation 
concerned, there can be no sale, bearing in mind tha t a sale necessarily involves a transaction 
between two separate persons.  
V. Goods imported under a hire or leasing contract  
Hire or leasing transactions by their very nature do not constitute sales, even if the contract 
includes a n option to purchase the goods.  
VI. Goods supplied on loan, which remain the property of the sender  
 Goods (often machinery) are sometimes loaned by the owner to a customer . These 
transactions do not involve sales.  
Example  
Manufacturer F in country E loans  importer X in country of importation I a specialized 
machine for manufacturing packagings of plastic -coated paper.  
VII. Goods (waste or scrap) imported for destruction in the country of importation, with the 
sender paying the importer for his services  
This case relates to waste or scrap imported for destruction.  As costs are incurred in 
connection with this destruction, the exporter pays the importer an amount for his services.  
As the importer does not pay for the imported goods but, on the contrary, is pa id 
for accepting and destroying them, no sale can be considered to have taken place under the terms 
of the Agreement.  G/VAL/N/1/ECU/3  
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  ADVISORY OPINION 2.1  
ACCEPTABILITY OF A PRICE BELOW PREVAILING MARKET PRICES FOR IDENTICAL 
GOODS  
1. The question has been asked whether a pri ce lower than prevailing market prices for 
identical goods can be accepted for the purposes of Article  1 of the Agreement on I mplementation 
of Article  VII of the General Agreement on Tariffs and Trade 1994.  
2. The Committee considered this question and conclu ded that the mere fact that a price is 
lower than prevailing market prices for identical goods should not cause it to be rejected for the 
purposes of Article  1, subject of course to the provisions of Article  17 of the Agreement.  
ADVISORY OPINION 3.1  
MEANIN G OF "PROVIDED THAT THEY ARE DISTINGUISHED" IN THE INTERPRETATIVE 
NOTE TO ARTICLE 1 OF THE AGREEMENT: DUTIES AND TAXES OF THE COUNTRY 
OF IMPORTATION  
1. When the price paid or payable includes an amount for the duties and taxes of the country 
of importation, s hould these duties and taxes be deducted in those instances where they are not 
shown separately on the invoice and where the importer has not otherwise claimed a deduction in 
this respect?  
2. The Technical Committee on Customs Valuation expressed the follo wing view:  
Since the duties and taxes of the country of importation are by their nature distinguishable 
from the price actually paid or payable , they do not form part of the c ustoms value.  
ADVISORY OPINION 4.1  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. When a machine manufactured under a patent is sold for export to the country 
of importation at a price exclusive of the patent fee, which the seller has required the importer to 
pay to a third party who is the patent holder, should the roya lty be added to the price paid or 
payable under the provisions of Article  8.1(c)  of the Agreement?  
2. The Technical Committee on Customs Valuation expr essed the following view:  
The royalty should be added to the price actually paid or payable in accordance wi th the 
provisions of Article  8.1(c)  since the payment of the royalty by the buyer is related to the goods 
being valued and is a condition of sale of those goods.  
ADVISORY OPINION 4.2  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Phonogra ph records of a musical performance are purchased by an importer from 
a manufacturer.  Under the laws of the country of importation when he resells the records the 
importer is required to pay a royalty of 3 % of the sale price to a third party, the author of  the 
musical composition, who holds a copyright . No part of the royalty accrues directly or indirectly to 
the manufacturer, nor is it paid as an obligation under the contract of sale.  Should the royalty be 
added to the price actually paid or payable?  
2. The Technical Committee on Customs Valuation  expressed the following view:  
The royalty  should not be added to the price actually paid  or payable in determining the 
customs value ; payment of the royalty is not a condition of the sale for export of the importe d G/VAL/N/1/ECU/3  
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  goods but arises from a legal obligation on this importer to pay the copyright holder when the 
records are sold in the importing country.  
ADVISORY OPINION 4.3  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Importer I acquires the right to use a patented process for the manufacture of certain 
products and agrees to pay the patent holder H a royalty on the basis of the number of articles 
produced using that process . In a separate contract, I designs and purchases from foreign 
manufacturer E a machine which is specially intended to perform the patented process . 
Is the royalty on the patented process part of the price paid or p ayable for the imported machine ? 
2. The Technical Committee on Customs Valuation expressed the following view : 
Althou gh the payment of the royalty in question is for a process embodied in the machine 
and one which constitutes the sole use of the machine, t his royalty is not part of the c ustoms 
value since its payment is not a condition of the sale of the machine for expo rt to the importing 
country.  
ADVISORY OPINION 4.4  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. A patented concentrate is purchased by importer I from manufacturer M who is also the 
patent holder ; the imported concentrate is simply dilut ed with ordinary water and 
consumer -packed before it is sold in the importing country . In addition to the price of the goods, 
the purchaser is required to pay to manufacturer M, as a condition of sale, a royalty for the right to 
incorporate or use the pate nted concentrate in products intended for resale . The amount of the 
royalty is calculated on the sale price of the finished product.  
2. The Technical Committee on Customs Valuati on expressed the following view:  
The royalty is a payment related to the imported  goods that the buyer is required to pay as 
a condition of sale of those goods and accordingly should be added to the price actually paid or 
payable in accordance with Article 8.1 (c). This opinion refers to a royalty paid for the patent 
incorporated in the  imported goods and is without prejudice to other situations.  
ADVISORY OPINION 4.5  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Foreign manufacturer M owns a trademark protected in the country of importation . Importer  
I makes and sells under M 's trademark six types of cosmetics . I is required to pay M a royalty 
calculated as 5 % of his annual gross sales of all cosmetics sold under M 's trademark . All of the 
cosmetics are manufactured to M 's formula from ingredients obtained in the country  of 
importation, with the exception of one for which the essential ingredients are normally purchased 
from M . How is the royalty to be treated with resp ect to the imported ingredients ? 
2. The Technical Committee on Customs Valuation expressed the following  view:  
 The royalty is payable to M irrespective of whether I uses M 's ingredients or those from local 
suppliers ; it is therefore not a condition of sale of the goods, and for valuation purposes cannot be 
added by virtue of Article 8.1 (c) to the price actu ally paid or payable.  G/VAL/N/1/ECU/3  
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  ADVISORY OPINION 4.6  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. An importer makes two separate purchases of a concentrate from foreign manufacturer M . 
M owns a trademark which may or may not be applied to the goo ds when they are sold after 
dilution depending on the terms of a particular sale for importation . The fee for use of the 
trademark is paid on a per unit basis . The imported concentrate is simply diluted with ordinary 
water and consumer packed before sale.  
In the first purchase, the concentrate is diluted and resold without trademark with no 
requirement that the fee be paid.  In the second case, the concentrate is diluted and resold with 
trademark and as a condition of the sale for import there is a requireme nt for payment of the fee.  
2. The Technical Committee on Customs Valuati on expressed the following view:  
Since the goods in the first purchase are resold without the trademark and no fee is paid, an 
addition is not appropriate . In the second purchase the f ee required by M must be added to the 
price actually paid or payable for the imported goods.  
ADVISORY OPINION 4.7  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. An agreement is entered into between record company R and artist A, both esta blished in 
country of export X . According to the agreement, A is to receive a royalty payment for each 
recording sold at retail in consideration for A 's assignment of worldwide reproduction, marketing 
and distribution rights.  R subsequently enters into a d istribution and sales agreement with 
importer I to supply I with records which reproduce a performance by the artist A for resale in the 
country of importation.  As a part of that agreement, R subassigns the marketing and distribution 
rights to I and requir es from I, in return, a royalty payment of 10 % of the retail selling price of 
each record purchased and imported into the country of importation.  I submits the 10 % payment 
to R. 
2. The Technical Committee on Customs Valuation expressed the following view.  
- The royalty  payment is a condition of sale because I is required to pay this amount as 
a consequence of the distribution and sales agreement with R.  In order to protect his 
commercial interests R would not have sold the records to I if I had not agreed to t hose 
terms.  
- The payment is related to the goods being valued as it is made for the right to market and 
distribute the particular imported goods and the amount of the royalty will vary according to 
the actual selling price of a particular record.  
- The fa ct that R is obliged, in turn, to pay a "royalty " amount to A in respect of  worldwide 
sales of A 's performances, is not relevant vis -à-vis the contract between R and I.  I is making 
the payment directly to the seller and it is of no concern or interest to I  how R allocates his 
gross income receipts.  The 10 % royalty payment, therefore, should be added to the price 
actually paid or payable.  
ADVISORY OPINION 4.8  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Importer I enters into a licence/ro yalty agreement with licence holder L established in 
country X under which I agrees to pay L a fixed sum of royalty for each pair of shoes bearing the 
trademark of L imported into the country of importation.  Licence holder L provides art and design 
work re lating to the trademark.  Importer I concludes another agreement with manufacturer M 
of country X for the purchase of shoes bearing the trademark of L affixed to the shoes by M, 
supplying M with the art and design work provided by L.  Manufacturer M is not l icensed by L.  
This sales agreement does not contain any reference to the payment of royalty.  The manufacturer, 
the importer and the licensor are all unrelated.  G/VAL/N/1/ECU/3  
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  2. The Technical  Committee on Customs Valuati on expressed the following view:  
The importer is required to pay a royalty to obtain the right to use the trademark . 
This obligation results from a separate agreement unrelated to the sale for export of the goods to 
the country of importation . Goods are purchased from a supplier under another contract and 
payment of royalty is not a condition of sale of these goods . Therefore, the royalty payment in this 
case is not to be added to the price actually paid or payable.  
Whether the supply of the art and design work relating to the trademark would qualify as 
dutiab le under the provisions of Article 8 .1(b) is a separate consideration.  
ADVISORY OPINION 4.9  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. An agreement is entered into between the manufacturer/trademark holder of certain 
veterinary prepar ations and an import company.  Under the agreement, the manufacturer grants 
the importer the exclusive right to manufacture, use and sell in the country of importation, 
"Licensed Preparation ". These licensed preparations containing imported cortisone in a f orm 
suitable for veterinary use, are made from bulk cortisone supplied to the importer by or on behalf 
of the manufacturer.  Cortisone is a standard, non -patented, anti -inflammatory agent, available 
from different manufacturers and is one of the main ingred ients of the licensed preparations.  
The manufacturer also grants the importer the exclusive right and licence to use the 
trademark in connection with the manufacture and sale of licensed preparations in the country of 
importation.  
The payment provisions of  the A greement provide for the importer to pay the manufacturer 
a royalty at the rate of 8 % of the first 2  million  c.u. net sales of licensed preparations in any one 
calendar year, and 9 % of the next 2  million  c.u. net sales of licensed preparations in the  same 
calendar year.  A minimum royalty of 100,000 c.u. per year is also provided for.  Under various 
circumstances outlined in the agreement, both parties could convert the importer 's exclusive rights 
to non -exclusive rights.  In which case, the minimum roya lty would be reduced by 25 % or, in some 
cases by 50 %. Royalties based on sales could also be reduced under certain circumstances.  
Finally, royalties based on sales of licensed preparations are payable within 60  days 
following the end of each quarter of the  calendar year.  
2. The Technical Committee on Customs Valuati on expressed the following view:  
 The royalty payment is made for the right to manufacture the licensed preparations 
containing the imported product and eventually for the use of the trademark fo r the licensed 
preparation.  The imported product is a standard, non -patented anti -inflammatory agent.  The use 
of the trademark, therefore, is not related to the goods being valued.  Payment of royalty is not a 
condition of the sale for export of the importe d goods but a condition for manufacture and sale of 
the licensed preparations in the country of importation.  Accordingly, it would not be appropriate to 
add this payment to the price actually paid or payable.  
ADVISORY OPINION 4.10  
ROYALTIES AND LICENCE FEE S UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Outer garments are purchased by importer I in country P from manufacturer M located in 
country X.  M is also the holder of a trademark related to certain comic strip characters.  According 
to the provisions of the lice nce agreement between I and M, M would produce the garments only 
for I and affix the comic strip characters and the trademark before the importation and I would 
resell these garments in country P . In consideration of this right, I agrees to pay M, in addit ion to 
the price for the garments, a licence fee calculated as a percentage of the net selling price of the 
garments to which the comic strip characters and the trademark are affixed.  G/VAL/N/1/ECU/3  
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  2. The Technical Committee on Customs Valuati on expressed the following vie w: 
The payment of the licence fee for the right to resell the imported garments containing 
trademarked material is made a condition of the sale and relates to the imported goods . 
The imported goods cannot be bought and resold without the comic strip charac ters and the 
trademark . Therefore, this payment should be added to the price actually paid or payable.  
ADVISORY OPINION 4.11  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Sportswear manufacturer M and importer I are both related to paren t company C which 
owns the rights of a trademark which is affixed to the sportswear.  In the sales contract between 
M and I there is no requirement for the payment of royalty.  I, however, in accordance with 
a separate agreement with C, is obliged to pay a r oyalty to C in order to obtain the right to use the 
trademark which is affixed to the sportswear I purchased from M.  Is the royalty payment 
a condition of sale of, and related to, the imported sportswear?  
2. The Technical Committee on Customs Valuation expres sed the following view:  
The sales contract between M and I covering trademarked goods does not contain specific 
conditions with respect to royalty payments.  However, the payment in question is a condition 
of sale as I is obliged to pay the royalty to the p arent company as a result of buying the goods.  
I does not have the right to use the trademark without payment of the royalty.  The fact that there 
is no written contract with the parent company does not detract from the obligation of I to make 
a payment as required by the parent company.  For reasons stated above, payments for the right 
to use the trademark are related to the goods being valued and the amount of the payments 
should be added to the price actually paid or payable.  
ADVISORY OPINION 4.12  
ROYALTIE S AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Importer I and seller S enter into a sales contract for the supply of rolling mill equipment.  
This equipment is to be incorporated into a continuous copper rod plant already existing in the 
country o f importation.  Incorporated in the rolling mill equipment is technology involving 
a patented process which the rolling mill is intended to perform.  The importer, in addition to the 
price of the equipment has to pay 15  million  c.u. as licence fee for the ri ght to use the patented 
process.  Seller S will receive payment for the equipment and the licence fee from the importer, 
and will then transfer the entire amount of the licence fee to the licensor.  
2. The Technical  Committee on Customs Valuati on expressed the following view:  
The licence fee is for a technology incorporated in rolling mill equipment which enables it to 
perform the patented process.  The rolling mill equipment has been purchased specifically to carry 
out the patented production process.  Thus, sinc e the process for which the 15  million  c.u. licence 
fee is paid is related to the goods being valued and is a condition of the sale, it should be added to 
the price actually paid or payable for the imported rolling mill equipment.  
ADVISORY OPINION 4.13  
ROYALTIES AND LICENCE FEES UNDER ARTICLE 8.1( c) OF THE AGREEMENT  
1. Importer I purchases sports bags from foreign manufacturer M, as well as from other 
suppliers.  Importer I, manufacturer M and other suppliers are all unrelated.  
Importer  I, on the other hand, is  related to company C which holds the right of a trademark.  
Under the terms of a contract between I and C, C transfers the right to use the trademark to 
I against a royalty payment.  G/VAL/N/1/ECU/3  
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  Importer I furnishes manufacturer M and other suppliers with labels bearin g the trademark , 
which are affixed to the sports bags before the importation.  
Is the royalty re lated to the goods being valued ? Does the payment from I to C form part 
of a condition of sale between M and I and I and other s uppliers ? 
2. The Technical  Committee  on Customs Valuati on expressed the following view:  
Although the importer is required to pay a royalty to obtain the right to use the trademark, 
this results from a separate agreement unrelated to the sale for export of the goods to the country 
of importat ion. The imported goods are purchased from various suppliers under different contracts 
and the payment of the royalty is not a condition of the sale of these goods . The buyer does not 
have to pay the royalty in order to purchase the goods . Therefore, it sh ould not be added to the 
price actually paid or payable as an adjustment under Article 8 .1(c).  
Whether the supply of labels evidencing a trademark would qualify as dutiable under the 
provisions of  Article 8.1 (b) is a separate consideration.  
ADVISORY OPINIO N 5.1  
TREATMENT OF CASH DISCOUNTS UNDER THE AGREEMENT  
1. When, prior to the valuation of imported goods, a buyer has availed himself of a cash 
discount offered by the seller, should that cash discount be allowed in determining the transaction 
value of the goo ds? 
2. The Technical  Committee on Customs Valuati on expressed the following view:  
Since the transaction value under Article  1 of the Valuation Agreement is the price actually 
paid for the imported goods, the cash discount should be allowed in determining the transaction 
value.  
ADVISORY OPINION 5.2  
TREATMENT OF CASH DISCOUNTS UNDER THE AGREEMENT  
1. When a cash discount offered by the seller is available but payment for the goods has not 
yet been made at the time of valuation, would the requirements of Article 1. 1(b) of the Agreement 
preclude using the sale price as a basis for the transaction value?  
2. The Technical  Committee on Customs Valuati on expressed the following view:  
The fact that a cash discount, although available, has not been availed of because payment 
has not yet been made at the time of valuation, does not mean that the provisions of Article 1.1(b)  
apply ; there is, thus, nothing that precludes using the sale price in establishing transaction value 
under the Agreement.  
ADVISORY OPINION 5.3  
TREATMENT OF CA SH DISCOUNTS UNDER THE AGREEMENT  
1. When a cash discount is available to the buyer but payment has not been made at the time 
of valuation what amount should be accepted as a basis for transaction value under Article  1 of the 
Agreement ? 
2. The Tech nical Committee  on Customs Valuati on expressed the following view:  
When a cash discount is available but payment has not yet been made at the time 
of valuation, the amount the importer is to pay for the goods should be taken as the basis for 
transaction value under Article 1. Procedures for determining what is to be paid may vary ; G/VAL/N/1/ECU/3  
- 76 - 
  for example , a statement on the invoice might be accepted as sufficient evidence or a declaration 
by the importer as to the amount he is to pay could be the basis for action, subject to verifica tion 
and to possible application of Articles 13 and 17  of the Agreement.  
ADVISORY OPINION 6.1  
TREATMENT OF BARTER OR COMPENSATION DEALS UNDER THE AGREEMENT  
1. How are barter or compensation deals to be treated with reference to Article  1 of the 
Agreement ? 
2. The Technical Committee on Customs Valuation expressed the following opinion : 
International barter takes various forms.  In its purest form, it consists of an exchange 
of goods or services of approximately equal value, without recourse to a common unit 
of meas urement  (money) to express the transaction.  
Exampl e 
X tons of product A from country E are exchanged for Y units of product B from country I.  
 Disreg arding the question as to whether a sale has occurred in cases of pure barter, where 
the transaction is nei ther expressed nor settled in monetary terms, and there is no transaction 
value or objective and quantifiable data f or determining that value, the c ustoms value should be 
established on the basis of one of the other methods set out in the Agreement, taken in the 
sequence prescribed.  
For a variety of reasons (e.g. bookkeeping, statistics, taxation, etc.), it is hard to dispense 
entirely with reference to money in international trade relations and, hence, pure barter is rarely 
encountered nowadays.  Barter now  usually involves more complex transactions in which the value 
of bartered goods is determined (e.g. on the basis of current world market prices) and expressed 
in monetary terms.  
Example  
Manufacturer  F in the country of importation I has the opportunity of  selling electrical 
equipment in country E provided an equivalent value of goods produced in country E is bought and 
exported from that country.  After an arrangement between F and X trading in plywood in 
country  I, X imports into country I a quantity of pl ywood from country E and F exports electrical 
equipment to country E, the equipment being invoiced at 100,000 c.u.  
The invoice presented on importation of the plywood also shows a value of 100,000 c.u. ; 
no financial settlement is however made between X and  the seller in country E, the payment for 
the goods being covered by exportation of the electrical equipment by F.  
Although many barter deals expressed in monetary terms are concluded without a financial 
settlement being made, there are situations where mo ney does change hands, for example, when 
a balance has to be paid in clearing operations, or in cases of partial barter where part of the 
transaction involves a money payment.  
Example  
Importer  X in country I imports from country E two machines priced at  50,000 c.u. on 
the understanding that only one fifth of this sum is to be the subject of a financial settlement, the 
rest being offset by the delivery of a specified quantity of textile products.  
The invoice presented on importation shows a value of 50,000 c .u.; however, the financial 
settlement between X and the seller in country E involves only 10,000 c.u., the balance being 
covered by the delivery of the textile products.  G/VAL/N/1/ECU/3  
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  Under the legislation of some countries barter transactions expressed in monetary ter ms can 
be regarded as sales, such transactions however will of course be subject to the provisions 
of Article 1(b) of the Agreement.  
Barter or compensation deals should not be confused with certain sales transactions in which 
the supply of the goods, or th eir price, is governed by factors extraneous to the transaction 
concerned.  This would apply in the following cases : 
- The price of the goods is fixed by reference to the price of other goods which the buyer may 
sell to his supplie r. 
Example  
Manufacturer  F in country of exportation E has an agreement with importer  X in country  I 
to supply specialized equipment designed by F, at a unit price of 10,000 c.u., on condition that 
importer X supplies him with relays used in the production of the equipment, at a uni t price 
of 150 c.u. 
- The price of the imported goods depends on the purchaser 's willingness to obtain from the 
same supplier other goods, in a specified quantity or at a specified price.  
Example  
Manufacturer  F in country of exportation  E sells leather goo ds to buyer  X in country  I at 
a unit price of 50 c.u., on condition that X also purchases a consignment of shoes at a unit price 
of 30 c.u. 
It should be pointed out that these transactions too are subject to the condition laid down in 
Article  1(b). 
ADVISOR Y OPINION 7.1  
ACCEPTABILITY OF TEST VALUES UNDER ARTICLE 1.2( b)(i) OF THE AGREEMENT  
1. Can a price below prevailing market prices for identical or similar goods be used as a test 
value for the purposes of Article 1.2(b)(i) of the Agreement?  
2. The Technical  Comm ittee on Customs Valuation expressed the following opinion:  
When a price between unrelated parties has satisfied the conditions prescribed in Article  1 
and, with any necessary adjustments in accordance with the provisions of Article  8, has been 
accepted by  customs as a transaction value, that value can be used as a test value . That is not 
of course the case where a price is still the subject of an enquiry or where the final determination 
of the c ustoms value otherwise remains provisional (see  Article  13 of the Agreement).  
ADVISORY OPINION 8.1  
TREATMENT UNDER THE AGREEMENT OF CREDITS IN RESPECT OF EARLIER 
TRANSACTIONS  
1. How are credits made in respect of earlier transactions to be treated under the Valuation 
Agreement when valuing goods that have received the b enefit of that credit?  
2. The Technical  Committee on Customs Valuation expressed the following view : 
The amount of the credit represents an amount already paid to the seller and accordingly is 
covered by the Interpretative Note to Article  1 on "price actually  paid or payable ", which specifies 
that the price actually paid or payable is the total payment for the imported goods made, or to be 
made, to the seller.  Thus, the credit is part of the price paid and for valuation purposes must be 
included in the transac tion value.  G/VAL/N/1/ECU/3  
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  The treatment to be accorded by c ustoms to the previous transaction which gave rise to the 
credit must be decided separately f rom any decision on the proper c ustoms value of the present 
shipment.  The decision whether adjustment may be made to t he value of the previous shipment 
will depend on national legislation.  
ADVISORY OPINION 9.1  
TREATMENT OF ANTI -DUMPING AND COUNTERVAILING DUTIES WHEN APPLYING 
THE DEDUCTIVE METHOD  
1. When imported goods which are subject to anti -dumping or countervailing dutie s fall to be 
valued by the deductive method under Article  5 of the Agreement, should those duties be 
deducted from the selling price in the country of importation?  
2. The Technical  Committee on Customs Valuation expressed the following opinion:  
In the determi nation of c ustoms value under the deductive method, anti -dumping and 
countervailing duties should be deducted under Article 5.1(a)(iv)  as customs duties and other 
national  levies.  
ADVISORY OPINION 10.1  
TREATMENT OF FRAUDULENT DOCUMENTS  
1. Does the Agreement r equire Customs A dministrations to r ely on fraudulent documentation ? 
2. The Technical Committee  on Customs Valuation expressed the following view : 
Imported goods have to be valued under the Agreement on the basis of actual facts.  
Therefore any documentation wh ich contained false information as to the facts would be contrary 
to the intention of the Agreement.  In this respect it is noted that Article  17 of the Agreement and 
paragraph  6 of Annex  III underline the right of Customs A dministrations to satisfy themsel ves as 
to the truth and accuracy of any statement, document or dec laration presented to them for 
customs valuation purposes.  It follows that an administration cannot be required to rely on 
fraudulent documentation.  Further, should documentation prove to be  fraudulent subsequent t o 
the determination of a c ustoms value, invalidation of that value would be a matter for national 
legislation.  
ADVISORY OPINION 11.1  
TREATMENT OF INADVERTENT ERRORS AND OF INCOMPLETE DOCUMENTATION  
1. Under the Agreement how should the documents which are incomplete or which are found to 
contai n inadvertent errors be treated ? 
2. The Technical  Committee on Customs Valuati on expressed the following view:  
In determining value under the Agreement, Customs A dministrations cannot be required to 
rely on documents which are incomplete in respect of relevant information or which contain 
inadvertent errors which have the effect of distorting the relevant information.  
However, situations do arise when it becomes necessary to use the information contain ed in 
an incomplete document and to make further enquiries so as to obtain information or facts missing 
from such a document.  Similarly , only a part of a document might contain inadvertent error and 
reliance might be placed on other parts of the document w hich do not have any such error.  
Recourse could be taken to provisional clearance as provided by Article  13 of the Agreement 
pending the importer or his agent furnishing complete information or causing the error in the 
document to be rectified.  G/VAL/N/1/ECU/3  
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  Thus, the treatment of documents which are incomplete or which contain inadvertent errors 
can differ from one case to another.  In this regard, it is also recognized that there will be 
differences in the  practices followed by Customs A dministrations and the degree of discretion 
prescribed by them.  
ADVISORY OPINION 12.1  
FLEXIBLE APPLICATION OF ARTICLE 7 OF THE AGREEMENT  
1. In the application of Article  7, can methods other than those set out in Articles  1 to 6 
be used, if they are not prohibited by Article 7 .2(a) to (f) an d are consistent with the principles 
and general provisions of the Agreement and of Article  VII of the GATT 1994?  
2. The Technical  Committee on Customs Valuation expressed the following opinion : 
Paragraph  2 of the Interpretative Note to Article  7 provides tha t the methods to be 
employed under Article  7 should be those laid down in Article  1 to 6 inclusive but applied with 
a reasonable flexibility.  
However, if  a customs value cannot be determined by using these methods even in a flexible  
manner, as a final reso rt the c ustoms value may be determined using other reasonable methods 
provided that such methods are not precluded by Article  7.2. 
In determining the c ustoms value under Article  7, the method used must be consistent with 
the principles and general provisio ns of the Agreement and of Article  VII of the GATT  1994.  
ADVISORY OPINION 12.2  
HIERARCHICAL ORDER IN APPLYING ARTICLE 7  
1. When applying Article  7, is it necessary to follow the hierarchical order with respect to the 
methods of valuation in  Articles  1 to 6 ? 
2. The Technical  Committee on Customs Valuati on expressed the following view:  
There is no provision in the Agreement that specifically provides that the hierarchical order 
of Articles  1 to 6 should be followed when Article  7 is applied.  However, Article  7 requires the use 
of reasonable means consistent with the principles and general provisions of the Agreement and 
this indicates that , where reasonably possible, the hierarchical order should be followed.  
Thus, where several acceptable me thods can be used to det ermine c ustoms value under Article  7, 
the hierarchy should be maintained.  
ADVISORY OPINION 12.3  
USE OF DATA FROM FOREIGN SOURCES IN APPLYING ARTICLE 7  
1. When applying Article  7 can C ustoms use information furnished by the importer but obtai ned 
by him from fo reign sources ? 
2. The Technical Committee  on Customs Valuation expressed the following view : 
It is to be expected, in dealing with transactions which originate outside the country 
of importation, that a certain amount of data would come from foreign sources.  However, Article  7 
is silent as to the original source of information to be used in its application, merely requiring that 
such data be available in the country of importation.  The source of the information would therefore 
not in itself be a bar to its use  for the purposes of Article  7 provided that the information was 
available in the country of importation and Customs were able to be satisfied as to its truth or 
accuracy.  G/VAL/N/1/ECU/3  
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  ADVISORY OPINION 13.1  
SCOPE OF THE WORD "INSURANCE" UNDER ARTICLE 8.2( c) OF THE AGRE EMENT  
1. What interpretation should be given to the word "insurance " in Article 8.2(c) of the 
Agreement ? 
2. The Technical Committee on Customs Valuation expressed the following opinion:  
It is apparent from the context of paragraph 2 of Article  8 that that paragr aph concerns 
charges connected with the shipment of the imported goods (cost of transport and 
transport -related costs).  Hence the word "insurance " used in subparagraph (c) should be 
interpreted as referring solely to insurance costs incurred for the goods during the operations 
specified in Article  8.2(a) and (b)  of the Agreement.  
ADVISORY OPINION 14.1  
MEANING OF THE EXPRESSION "SOLD FOR EXPORT TO THE COUNTRY OF IMPORTATION"  
1. What interpretation should be given to the expression "sold for export to the countr y 
of importation " in Article  1 of the Agreement ? 
2. The Technical  Committee on Customs Valuation expressed the following opinion:  
The Council 's Glossary of International Customs Terms defines the term importation as 
"the act of bringing any goods into a Custo ms territory " and the term exportation as "the act of 
taking any goods out of the Customs territory ". Therefore, the fact that the goods are presented 
for valuation of itself establishes their importation which, in turn, establishes the fact of their 
expor tation.  The only remaining requirement then, is to identify the transaction relating thereto.  
In this respect, there is no need that the sale take place in a specific country of exportation.  
If the importer can demonstrate that the immediate sale under con sideration took place with the 
view to export the goods to the country of importation, then Article  1 can apply . It follows that 
only transactions involving an actual international transfer of goods may be used in valuing 
merchandise under the transaction value method.  
The following examples i llustrate the above principles : 
Example  1 
Seller S in the exporting country X enters into a contract to sell electric appliances to 
importer A in the importing country I at a price of 5.75 c.u. per piece.  S concludes a n agreement 
with manufacturer M also in country X to manufacture the goods.  Manufacturer  M on behalf of S, 
ships the goods to A in country I.  M's selling price to S is 5 c.u. per piece.  
In this case, the transaction between S and A involves an actual inter national transfer 
of goods and constitutes a sale for export to the country of importation ; it would, therefore, be 
a basis for valuation under Article  1 of the Agreement.  
Example  2 
Buyer B  in country of importation I purchases goods from seller  S in the s ame country  I. 
The goods are stocked by S in country  X. Necessary arrangements for shipment and export of the 
goods from country X are completed by S and the goods are imported by B into country I.  
It is not necessary that the sale take place in a specific  country of exportation.  Whether 
seller  S is located in country X or I or a third country is not a relevant factor.  The transaction 
between buyer B and seller S is a sale for export to the country of importation and would be the 
basis for valuation of the goods under Article  1. G/VAL/N/1/ECU/3  
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  Example  3 
Seller S in country X sells goods to buyer B in country I.  The goods are shipped from country 
X in bulk and are subsequently wrapped and put into packages by seller S at a transit port located 
in country T before being impo rted into country I.  
The principle  applicable to Example 2 would apply to this example also.  Whether the country 
of export is X or T is not a material issue in this case and the sale agreement between seller S and 
the buyer B constitutes a sale for export to the country of importation and would be the basis for 
valuation of the goods under Article  1. 
Example  4 
Seller S  in country X sells goods to buyer A in country I and accordingly ships the goods.  
While the goods are on the high sea, buyer A informs selle r S that he is unable to make the 
payment and take delivery of the goods.  The seller is able to locate another buyer B also in 
country I and arranges the sale and delivery of the goods to buyer B.  Accordingly B imports the 
goods into country I.  
In the above example, the sale between seller S and buyer B results in the importation 
of the goods which, in turn, establishes it as being a sale for export.  The transaction constitutes an 
international transfer of goods and would be the basis for valuation of the g oods under Article  1. 
Example 5  
The head office of a multinational hotel chain located in country X purchases supplies for its 
operation.  At the beginning of each year, chain hotels in countries I, I 2 and I 3 submit purchase 
orders to the head office for th eir supplies.  The head office then adds up all the orders from each 
hotel in the chain and issues purchase orders to various suppliers in country X.  The supplies are 
either sent directly by the suppliers to each of the hotels in the chain or are shipped to  the head 
office and subsequently shipped to those hotels.  In either case, the suppliers bill the head office 
in country X which then separately bills each hotel in the chain.  
In the above example, the sale between the head office and the suppliers both lo cated 
in country X does not involve an international transfer of goods but is a domestic sale in the 
country of exportation since the head office purchases the supplies from the suppliers and then 
sells them to each separate hotel in the chain for export t o the country where each separate hotel 
is located.  In this case, the transactions between the head office and each separate hotel would 
constitute sales for export to the country of importation.  Provided that the relationship did not 
influence the price, these sales would be the basis for valuation of the goods under Article  1. 
Example 6  
Buyer  A in country  I purchases 500 chairs from seller  S in country  X at a price of 20  c.u. 
per unit. Buyer  A instructs seller  S to ship 200 chairs to him for his own use i n country  I and 
300 chairs to a warehouse in country  X. Buyer  A subsequently agrees to sell the remaining 
300 chairs to buyer B in country I for 25 c.u. per unit.  Buyer  A then instructs his warehouse in 
country  X to ship the goods directly to buyer  B in co untry  I. 
In this example, there are two cases where the goods must be valued.  In the first instance, 
the transaction between seller S and buyer A at 20 c.u. per unit would constitute a sale for export 
to the country of importation and would be the basis fo r the valuation of the 200 chairs under 
Article  1. In the second instance, the selling price of 20 c.u. of the goods placed in a warehouse is 
not relevant for valuation purposes since the subject goods were not sold for export to country  I. 
The sale betwee n buyer A and buyer B at 25 c.u. per unit, which involves an actual international 
transfer of goods , would constitute the sale for export to the country of importation and would be 
the basis for valuation under Article  1. G/VAL/N/1/ECU/3  
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  ADVISORY OPINION 15.1  
TREATMENT OF  QUANTITY DISCOUNTS  
1. How are quantity discounts to be treated with reference to Article  1 of the Agreement ? 
2. The Technical  Committee on Customs Valuation expressed the following opinion:  
Quantity discounts are deductions from the price of goods allowed by th e seller to customers 
according to the quantities purchased over a given basic period.  
The WTO Valuation Agreement makes no reference to a standard quantity which would need 
to be taken into consideration when deciding whether the price actually paid or pa yable for the 
imported goods is a valid basi s for the determination of the c ustoms value under Article  1. 
It therefore follows that for c ustoms valuation purposes it is the quantity which has 
determined the unit price of the goods being valued when they we re sold for export to the country 
of importation that is relevant.  Thus, quantity discounts arise only when it is shown that a seller 
sets the price for his goods according to a fixed scheme based upon the quantity of the goods sold.  
Such discounts fall in to two broad categories:  
(1) those established prior to the importation of goods ; and 
(2) those established subsequent to the importation of goods.  
These considerations are illustrated by the following examples : 
General Facts  
 There is demonstrated evidence that t he seller offers the following quantity discounts on the 
goods purchased within a given specified period e.g. a calendar year.  
- 1 to 9 units - no discount  
- 10 to 49 units - 5% discount  
- Over 50 units - 8% discount  
In addition to the above discounts a fu rther discount of 3 % is granted at the end of the 
specified period calculated retrospectively by reference to the total quantity purchased in that 
period.  
Example 1  
 First situation : Importer B in country X purchases and imports 27 units in a single shipme nt. 
The invoice price reflects a 5 % discount.  
Second  situation : Importer C in country X purchases 27 units in a single transaction at 
a price which reflects a 5 % discount but imports them in 3 separate shipments each comprising 
9 units.  
Valuation treatment  
 In both situations, the c ustoms value is to be determined on the basis of the price actually 
paid or payable for the imported goods, i.e. those prices reflecting a 5 % discount which 
contributed to the setting of those prices.  
Example 2  
Subsequent to the purchase and importation of the 27 units, importers B and C purchase 
and import within the same calendar year a further 42 units (i.e. a total of 69 units each).  
The price charged to both B and C for the second purchase of 42 units reflects an 8 % discount.  G/VAL/N/1/ECU/3  
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  First situation : Importer B 's first purchase of 27 units and the second purchase of 42  units 
are the subject of two separate contracts which are entered into in the context of an initial 
generatio n agreement which provides for the cumulative progressive d iscounts between the buyer 
and the seller.  
Second situation : The position is as in the first situation above except that importer C 's 
purchases are not the subject of an initial general agreement.  The cumulative progressive 
discounts are however offered by  the seller as a feature of his general terms of sale.  
Valuation  treatment  
With respect to both situations the 8 % discount on the 42 units is a feature of the seller 's 
price; it contributed to the setting of the unit price of the goods when they were sold for export to 
the country of importation.  It therefore follows that it should  be allowed in determining the 
customs value of those goods.  
In this respect , the fact that the quantity discount is granted by the seller taking into 
account quantities purchased  previously by the buyer does not mean that the provisions 
of Article  1.1(b) apply.  
Example  3 
In this example, the position is as in example 2 above except that the discounts are also 
granted retrospectively.  In each case , the importer purchases and import s 27 units and a further 
42 units within the same calendar year.  
For the first shipment of 27 units , B is charged a price which reflects a 5 % discount and for 
the second shipment of 42 units, the price charged reflects an 8 % discount , with an additional 
reduction representing a further discount of 3 % on the first shipment of 27 units.  
Valuation  treatment  
The 8 % discount on the 42 units should  be allowed in determining the c ustoms value of the 
imported goods.  However, the additional 3 % discount granted retro spectively should not be 
allowed for the second importation as it did not contribute to the setting of the unit price 
of 42 units being valued but relates to the previously imported 27 units.  As to the treatment to be 
accorded by Customs to the 27 units, g uidance is already provided in Advisory Opinion 8.1  on 
credits in respect of earlier transactions and Commentary 4.1  on price review clauses.  
Example 4  
After all  importations during the specified period have been completed, an accounting is 
taken.  On the b asis of the total quantity which had been imported during the period, the importer 
qualifies for an additional 3 % discount.  
Valuation treatment  
The discount of 3% granted retrospectively cannot be taken into account for the reasons set 
out in paragraph 16.  However, it should be noted that the Committee has already provided 
guidance in Advisory Opinion 8.1  on credits in respect of earlier transactions and in Commentary  
4.1 on price review clauses.  
ADVISORY OPINION 16.1  
TREATMENT OF A SITUATION WHERE THE SALE  OR PRICE IS SUBJECT TO SOME 
CONDITION OR CONSIDERATION FOR WHICH A VALUE CAN BE DETERMINED 
WITH  RESPECT TO THE GOODS BEING VALUED  
1. What treatment should be given to the situation where the sale or price is subject to some 
condition or consideration for whi ch a value can be determined with respect to the goods being 
valued ? G/VAL/N/1/ECU/3  
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  2. The Technical  Committee on Customs Valuati on expressed the following view:  
According to clause (b) of Article  1.1, the cu stoms value of the imported goods cannot be 
established on the bas is of the transaction value if the sale or price is subject to some condition or 
consideration for which a value cannot be determined with respect to the goods being valued.  
The provision of clause (b) of Article 1.1  should be interpreted to mean that if t he value 
of a condition or consideration can be determined with respect to the goods being valued, the 
customs value of the imported goods should, subject to the other provisions and conditions 
of Article  1, be the transaction value as determined under tha t Article.  Interpretative Notes to 
Article  1 and Annex  III make it very clear that the price actually paid or payable is the total 
payment made by the buyer to or for the benefit of the seller, that the payment may be made 
directly or indirectly and that t he price includes all payments actually made or to be made by the 
buyer to the seller, or by the buyer to a third party.  Thus, the value of the condition, when it is 
known and relates to the imported goods, is a part of the price actually paid or payable.  
It should rest with individual administrations as to what they consider would be sufficient 
information to specifically determine the value of a condition or consideration.  
ADVISORY OPINION 17.1  
SCOPE AND IMPLICATION OF ARTICLE 11 OF THE AGREEMENT  
1. Does the  phrase "without penalty ", which is used in respect of the appeal provisions 
contained in Article  11, prohibit Customs from requiring the full payment, prior to the appeal, 
of any penalties imposed as a result of valuation fraud and other forms of contrave ntion 
of valuation law ? 
The question arises because paragraph 3 of the Interpretative Note to Article  11 refers to 
the full payment, pr ior to the appeal, of assessed c ustoms duties but does not address cases 
involving fines and penalties.  
2. The Technical Com mittee on Customs Valuation concluded that paragraph  2 of the 
Interpretative Note to Article  11 is explicit in its definition of the words "without penalty " which 
"means that the importer shall not be subject to a fine or threat of fine merely because he c hose 
to exercise his right of appeal ". 
Furthermore, the importer 's right of appeal under this Article is in respect of decisions taken 
by the Customs A dministration with regard to the determination of c ustoms value within the 
provisions of the Agreement.  
It follows that cases of fraud fall outside the scope of this Article ; in such cases, appeal 
procedures would be governed by national legislation which could provide for prior payment 
of penalties as well as of the duty.  
ADVISORY OPINION 18.1  
IMPLICATIONS O F ARTICLE 13 OF THE AGREEMENT  
1. The question has been asked whether the guarantee to be provided by the importer for the 
withdrawal of goods under Article  13 covers only the c ustoms duties, leaving the Customs without 
adequate security to recover fines and p enalties that may be leviable on the goods and persons.  
2. The Technical  Committee on Customs Valuation concluded that Article  13 comes into 
operation only in those cases where , in the course of determining the c ustoms value of imported 
goods, it becomes nece ssary to delay t he final determination of such c ustoms value.  An example 
of this situation is where adjustments are necessary under Article  8 but the relevant information is 
not available at the time of importation.  Numerous cases of this nature could, in fact, aris e in the 
course of determining c ustoms value under the Agreement.  In these circumstances, the terms 
of this Article provide for the release of the goods if a guarantee or security sufficient to cover the 
ultimate pa yment of the c ustoms duties is furnished.  G/VAL/N/1/ECU/3  
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  Article  13 is not intended to cover cas es which involve violations of c ustoms laws or fraud ; 
in such situations, the release of the goods or the provision of guarantee in relation to fines or 
penalties should be governed by national legislation.  
ADVISORY OPINION 19.1  
APPLICATION OF ARTICLE 17 OF THE AGREEMENT AND PARAGRAPH 6 OF ANNEX III  
1. The question has been asked whether Article  17 read with paragraph 6 of Annex III  gives 
sufficient powers to the Customs Adm inistration to detect and establish v aluation offences 
including fraud, and whether the burden of proof in the course of determination of the c ustoms 
value is on the importer ? 
2. The Technical Committee on Customs Valuation concluded that , in examining this matter, 
it has to be noted that Article 17 states that t he Agreement does not restrict or call into ques tion 
the rights of the Customs A dministration.  Paragraph 6 of Annex  III elaborates on those rights, 
referring specifically to the right of national administra tions to expect the full co opera tion 
of importers in enquiries concerning the truth or accuracy of any statement, document or 
declaration . This position is reiterated in Advisory Opinion 10.1.  
It would be incorrect to suggest that any other rights of the Customs A dministrations which 
are not mentioned in Article  17 or paragraph 6 of Annex III  are, by implication, excluded.  
Other than those which are specifically mentioned in the Agreement, the rights and 
obligations of importers and Customs in the determin ation of the c ustoms value would depend on 
national laws and regulations.  
ADVISORY OPINION 20.1  
CONVERSION OF CURRENCY IN CASES WHERE THE CONTRACT PROVIDES FOR A FIXED 
RATE OF EXCHANGE  
1. The question has been asked whether conversion of currency is necessary in cases in which 
the contract o f sale of the imported goods provides for a fixed rate of exchange.  
1. The Technical Committee on Customs Valuation considered this question and advised 
that the conversion of currency is not necessary if the settlement of the price is made 
in the currency of  the country of importation.  
2. Therefore, what is important in this matter is the currency in which the price is settled 
and the amount of the payment.  
Example 1  
The commercial invoice shows an amount in the currency of the country of exportation (MX).  
It sp ecifies that the settlement is to be made however in the currency of the country 
of importation (MY).  The amount to be paid is arrived at by conversion of the amount invoiced at 
a fixed rate of exchange.  This rate is 1 MX (export currency) = 2 MY (import c urrency).  
Question  
Should the invoiced amount be converted to the currency of the country of importation on 
the basis of the contracted rate of exchange or that in effect (in the country of importation) at the 
time of exportation or the time of importation  of the goods (see Article  9.2 of the Agreement) ? 
Answer  
The conversion of currency, as provided for in Article  9, is not necessary.  The contract 
of sale provides for the payment of a fixed amount in the currency of the country of importation.  
The amount t o be paid in the currency of the country of importation is determined by multiplying 
the amount invoiced by two, i.e. the rate agreed upon by the buyer and the seller.  G/VAL/N/1/ECU/3  
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  Example 2  
The commercial invoice shows an amount in the currency of the country of impor tation (MY) 
but it specifies that the settlement is to be made in the currency of the country of exportation 
(MX).  The amount to be paid is arrived at by conversion of the amount invoiced at a fixed rate of 
1 MX = 2 MY.  
Question  
Is the amount invoiced (in the currency of the country of importation) to be acce pted 
without further conversion ? 
Answer  
The amount invoiced cannot be accepted as the c ustoms value.  The contract of sale provides 
for the payment of a fixed amount in the currency of the country of exp ortation.  It is this amount 
which must be converted.  The amount contracted to be paid in MX should first be arrived at by 
dividing the invoiced amount by two.  The resultant sum should then be converted to MY in 
accordance with Article  9 at the appropriate rate published by the competent authority in the 
country of importation.  
Example 3  
The commercial invoice shows an amount in the currency of the country of exportation (MX) 
but it specifies that the settlement is to be made in the currency of a third count ry (MZ).  
The amount to be paid is arrived at by conversion of the amount inv oiced at a fixed rate 
of 1 MX = 6 MZ. 
Question  
The foreign currency amount ( i.e. M X or MZ) is to be converted to the currency of t he 
country of importation ? 
Answer  
The currency of the third country is to be converted.  The amount in that currency is to be 
arrived at by calculation of the invoiced amount at the contracted fixed rate of exchange 
(i.e. invoiced amount x 6 = amount actually payable in currency of third country).  The resu ltant 
sum should then be converted to the currency of the country of importation in accordance with 
Article  9 at the appropriate rate published by the competent authority in the country 
of importation.  
Example 4  
The commercial invoice shows an amount in th e currency of the country of importation (MY) 
but it specifies that the settlement is to be made in the currency of a third country (MZ) . 
The amount to be paid is arrived at by conversion of the invoiced a mount at a fixed rate 
of 1 MY = 3 MZ. 
Question  
Is the invoiced amount (in the currency of the country of importation) to be acce pted 
without further conversion ? 
Answer  
The invoiced amount cannot be accepted without conversion.  The invoiced amount should be 
determined in the currency of the third country at  the fixed rate of exchange (i.e.  invoiced 
amount  x 3 = amount to be paid in the currency of the third country).  The resultant sum should G/VAL/N/1/ECU/3  
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  then be converted to the currency of the country of importation in accordance with Article  9 at the 
appropriate rate o f exchange published by the competent authority in the country of importation.  
ADVISORY OPINION 21.1  
INTERPRETATION  OF THE EXPRESSION "PARTNERS IN BUSINESS"  IN ARTICLE 15.4 (b) 
1. Are sole agents, sole distributors and sole concessionaires "legally recognized partners in 
business " in terms of Article  15.4(b) of the Agreement ? 
2. The Technical  Committee on Customs Valuation expressed the f ollowing view:  
The pos ition in regard to sole agents, sole distributors and sole concessionaires is set out in 
Article 15.5  of the Agreement, which provides that persons associated in business as sole agents, 
sole distributors or sole concessionaires are only deemed to be related persons under the 
Agreement if they fall within the criteria of Article 15.4.  
Article 15.4(b) deems per sons to be related if "they are legally recognized partners in 
business ". The Webster 's Dictionar y defines the word "partner " as: 
- "One who is associated with one or more persons in the same business and shares with 
them its profits and risks ; a member of  a partnership ". 
The word "partnership " is in turn defined as : 
- "An association of two or more people who contribute money or property to carry on a  joint 
business and who share profits and losses in certain proportions ". 
In commercial law, the simple def initions set out above are usually backed up by a complex 
set of legal provisions and principles intended to define, interpret and codify through contract, tax 
and other laws the legal relationship implied in the term "partner ". 
An association would be a p artnership only where the national legal requirements for the 
creation of a partnership are satisfied.  Thus, persons are not related under the Agreement simply 
because one person is the sole agent, sole distributor or sole concessionaire of the other.  
While it is true that sole agents, sole distributors, etc. may have a close association with 
their suppliers, this fact alone would provide no reason to treat them differently from any other 
unrelated party.  
For the purpose of clarification, a Member may choos e to incorporate or refer to its national 
law of partnership in t he valuation provisions of its c ustoms law.  However, it would not be 
appropriate for a Member to devise a different definition of partnership specifically for the 
interpretation of t he valuat ion provisions of its c ustoms law.  
COMMENTARIES  
LIST OF COMMENTARIES  
1.1 Identical or similar goods for the purpose of the Agreement.  
2.1 Goods subject to export subsidies or bounties.  
3.1 Goods sold at dumping prices.  
4.1 Price review clauses.  
5.1 Treatme nt of goods returned after temporary exportation for manufacturing, processing 
or repair  
6.1 Treatment of split shipments under Article  1 of the Agreement.  
7.1 Treatment of storage and related expenses under the provisions of Article  1. 
8.1 Treatment of pa ckage deals.  
9.1 Treatment of costs of activities taking place in the country of importation.  
10.1 Adjustment for difference in commercial level and in quantity under Article  1.2 (b) and 
Articles 2 and 3 of the Agreement.  G/VAL/N/1/ECU/3  
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  11.1 Treatment of tie -in sales.  
12.1 Meaning of the term "restrictions " in Article 1.1(a)(iii).  
13.1  Application of the decision on the valuation of carrier media bearing software for data 
processing equipment.  
14.1 Application of Article 1, paragraph 2.  
15.1 Application of deductive valu e method.  
16.1 Activities undertaken by the buyer on his own account after purchase of the goods but 
before importation.  
17.1 Buying commissions.  
18.1 Relationship between Articles 8.1(b)(ii) and 8.1(b)(iv).  
19.1 Meaning of the expression "Right to reprodu ce the imported goods " within the meaning 
of the Interpretative Note to Article 8.1(c).  
20.1 Warranty charges.  
21.1 Cost of transportation : Free-on-board system of valuation.  
COMMENTARY 1.1  
IDENTICAL OR SIMILAR GOODS FOR THE PURPOSE OF THE AGREEMENT  
1. This c ommentary examines the question of identical and similar goods in the general context 
of the application of Articles  2 and 3 . 
2. The principles  in question are set out in Article  15; they provide that "identical goods " are 
those goods that are the same in all  respects, including : 
(a) Physical characteristics;  
(b) quality ; and 
(c) reputation.  
 Minor differences in appearance do not preclude goods otherwise conforming to the 
definition from being regarded as identical.  
3. "Similar  goods " are goods which, although not alike in all respects, have : 
(a) Like characteri stics and 
(b) like componental materials;  
(c) perform the same function;  
(d) are commercially interchangeable.  
When determining whether goods are similar, consideration is to be given, among other 
factors, to the quality of the goods , their reputation and the  existence of a trademark.  
4. Article  15 also provides that only goods produced in the same country as the goods being 
valued can be considered identical or similar to those goods, and it specifies that goods produced 
by persons othe r than the producer of the goods being valued be taken into account only when 
there are no identical or similar goods made by producers of the goods being valued.  It further 
provides that goods incorporating or reflecting engineering, development, artwork,  design work, 
and plans and sketches undertaken in the country of importation are not covered by the term 
"identical goods " or "similar goods ". 
5. Before considering  the application of those principles, it would be useful to examine the 
determination of ident ical and similar goods in the general context of the application 
of Articles  2 and 3 . Those two Articles are not expected to come into question frequently 
since Article  1 will be applied to the vast majority of importations.  In those instances in which 
Article 2 or 3 are applied, there may have to be consultations between Customs and the importer 
with a  view to arriving at a value under one of those Articles.  These consultations, together with 
information from other sources, should enable Customs to determi ne what, if any, goods might be 
considered identical or similar for purposes of the Agreement.  Obviously, there will be many 
instances where the answer is self -evident and no market enquiries or consultations with importers 
are necessary.  G/VAL/N/1/ECU/3  
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  6. The principles  in Article  15 must be applied on the basis of the particular facts in the market 
in question with respect to the goods being compared.  The questions that might arise in making 
such determinations will vary because of the nature of the goods being compared an d because 
of differences in market conditions.  A careful analysis of the facts in each case, in the light of the 
principles set out in Article  15, will be necessary to arrive at sound decisions.  
7. The following examples  are intended to illustrate application  of the principles for determining 
whether goods are identical or similar in accordance with Article  15; they are not meant to form 
part of a series of decisions on specific cases.  Each e xample is limited in its  
scope : in addition to the conditions set out  in each of them , any remaining requirements of Article  
15 would of course have to be fulfilled before goods could be considered as identical or similar.  
Example No. 1 
 Steel sheets of identical chemical composition, finish and size imported for different 
purposes . 
Although the importer is to use some of the sheets for automobile bodies, and others for 
furnace liners, the goods are nevertheless identical.  
Example No. 2 
Wallpaper imported by interior decorators and by wholesale distributors . 
Wallpaper which is identical in all respects remains identical for the purposes of Article  2 
of the Agreement even if it is imported at different prices by interior decorators on the one hand 
and by wholesale distributors on the other.  
Although differences in price might indicate differences in quality or reputation , which are 
factors to be taken into account in considering whether goods are identical or similar, price itself is 
not such a factor . Adjustment for commercial level and/or quantity may of course be necessary i n 
applying  Article  2. 
Example No. 3 
Garden insecticide sprayers which are unassembled and goods of identical design already 
assembled . 
The sprayer consists of two dismountable parts : (1) a pump and nozzle affixed to a lid and 
(2) a container for the insect icide.  In order to use the sprayer , it is disassembled, the container is 
filled with insecticide and the lid is screwed on ; the sprayer is then ready for use.  The sprayers 
being compared are identical in all respects , including physical characteristics, qu ality and 
reputation, except that in one case they are assembled and in the other unassembled.  
An assembly operation will normally preclude treating assembled and unassembled goods as 
identical or similar, but when, as in this case, the goods are designed to be assembled and 
disassembled in the ordinary course of their use, the nature of the assembly operation would not 
preclude them from being considered identical.  
Example No. 4 
Tulip bulbs of the same size but of different varieties, producing flowers of approximately 
the same shape and size and of the same colour . 
Since the bulbs are not of the same variety, they are not identical goods ; however, because 
they produce flowers of approximately the same size and shape and of the same colour, and they 
are com mercially interchangeable, they are therefore similar goods.  G/VAL/N/1/ECU/3  
- 90 - 
  Example No. 5 
Inner tubes imported from two different manufacturers . 
Rubber inner tubes in the same range of sizes are imported from two different producers, 
both located in the same country.  While each producer uses a different trademark, the inner tubes 
made by both are to the same standard, are of the same quality, enjoy equivalent reputations and 
are used by motor vehicle manufacturers in the country of importation.  
As the inner tubes bear dif ferent trademarks , they are not the same in all respects and 
should not be regarded as identical in terms of Article  15.2(a).  
Although not alike in all respects, the inner tubes do have like characteristics and 
component materials which enable them to perf orm the same functions.  As the goods are made to 
the same standard, are of the same quality, have equivalent reputations and carry trademarks, 
they should be considered similar, even though the trademarks are different.  
Example No. 6 
Normal grade sodium pe roxide for bleaching purposes compared with a special grade 
of sodium peroxide used for analytical purposes , 
The special grade of sodium peroxide is manufactured by a process using very pure raw 
material in dust form ; it is thus much more expensive than th e normal grade.  The normal grade 
sodium peroxide cannot be used in place of the special grade because the normal grade is not pure 
enough to meet analytical specifications and neither is it clearly soluble nor in dust form.  Since the 
goods are not the same  in all respects they are not identical;  With respect to similarity, the special 
grade would not be used for bleaching purposes, or for the large scale production of chemicals, as 
the price of the special grade is prohibitive for these applications.  While both kinds of sodium 
peroxide certainly have like characteristics and like component materials, they are not 
commercially interchangeable since the normal grade could not be used for analytical purposes.  
Example No. 7 
Ink of paper quality and ink of paper and textile quality . 
To be similar for the purposes of Articles 3 and 15.2(b)  of the Agreement, goods must 
inter alia be commercially interchangeable with each other.  Ink of a quality suitable only for paper 
printing would not be similar to ink of a qualit y for paper and textile printing, even though the 
latter would be commercially acceptable in the paper printing trade.  
COMMENTARY 2.1  
GOODS SUBJECT TO EXPORT SUBSIDIES OR BOUNTIES . 
1. Broadly speaking, export subsidies and bounties are instruments of trade po licy which take 
the form of economic aid granted by governments to natural or legal persons or to administrative 
bodies, either directly or indirectly ; they are intended to promote the production, manufacture or 
exportation of a product.  In this respect th e Agreement on Subsidies and Countervailing Measures 
in Annex 1 A to the Agreement establishing the WTO is noted.  
2. In Article  32 of the above -mentioned Agreement , it is stated that "no specific action against 
a subsidy of another Member can be taken except in accordance with the provisions of GATT 1994, 
as interpreted by this Agreement ". However, a footnote qualifies that this paragraph is not 
intended to preclude action under other relevant provisions of GATT 1994, where questions may 
arise in respect of tr eatment of subsidies under the Agreement on Implementation of Article  VII. 
3. The first point to decide is whether a subsidized price can in fact be accepted for the 
purposes of establishing a transaction value under Article  1. In the case of subsidized goods , as in 
any other case, to reject the transaction value there must be non -fulfilment of one of the 
conditions set out in Article  1.1. The question here is whether a subsidy could be regarded as G/VAL/N/1/ECU/3  
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  a condition or consideration to which the sale or price is sub ject and for which a value cannot be 
determined.  However, since the basic concept of the Agreement relates to the transaction between 
the buyer and the seller and what takes place directly or indirectly between them, a condition or 
consideration in this co ntext must be interpreted as an obligation between the buyer and the 
seller.  Accordingly, Article  1.1(b)  cannot apply merely because a sale is subsidized.  
4. Another question  is whether the amount of the subsidy could be regarded as forming part 
of the total payment.  The Interpretative Note to Article  1 of the Agreement states that the price 
actually paid or payable is the total payment made or to be made by the buyer to or for the benefit 
of the seller for the imported goods.  A subsidy received by the seller from his government is 
clearly not a payment by the buyer and does not therefore form part of the price paid or payable.  
5. A further question to be answered in considering the treatment of subsidies is whether the 
price paid or payable by the buyer can be in creased by the amount of the subsidy to determine the 
transaction value.  Article  8.4 of the Agreement states that no additions shall be made to the price 
actually paid  or payable in determining the c ustoms value except as provided in that  Article ; since 
a subsidy cannot be regarded as equivalent to any of the elements mentioned in Article  8, there is 
no possibility of making an adjustment under this head.  
6. It follows from the above that the treatment to be applied for the valuation of subsidized 
goods is the  same as that applied to other goods.  
COMMENTARY 3.1  
GOODS SOLD AT DUMPING PRICES  
1. Article VI of the General Agreement on Tariffs and Trade 1994 defines dumping as the 
introduction of products of one country into the commerce of another country at less than  the 
normal value of the products ; it also provides that dumping is to be condemned and may be offset 
or prevented by anti -dumping duties if it causes or threatens material injury to an established 
industry in the territory of a Member or materially retard s the establishment of a domestic 
industry.  
2. According to  the general introductory commentary to the Valuation Agreement , 
the Members recognize "that valuation procedures should not be used to combat dumping ". 
Therefore, where the existence of dumping of an y description is suspected or established, 
the correct procedure for combating it is by means of the anti -dumping rules in effect in the 
country of importation as they may be applicable . There can thus be no question of : 
(a) Rejecting  the transaction value as a basis for valuing the dumped goods, unless one of  the 
conditions laid down in Article  1.1 is not fulfilled;  
(b) adding to the  transaction value an amount to take account of the margin of dumping.  
3. It follows from the above that the treatment to be applied for  the valuation of dumped 
goods is the same as that applied to goods imported at a price below prevailing market prices for 
identical goods.  
COMMENTARY 4.1  
PRICE REVIEW CLAUSES . 
1. In commercial practice some contracts may include a price review clause whereby  the price 
is only provisionally fixed, the final determination of the price payable being subject to certain 
factors which are set forth in the provisions of the contract itself.  
2. The situation  can occur in a variety of ways . The first is where the goods a re delivered some 
considerable time after the placing of the original order (e.g. plant and capital equipment made 
specially to order) ; the contract specifies that the final price will be determined on the basis of an 
agreed formula which recognizes increa ses or decreases elements such as cost of labour, 
raw materials, overhead costs and other inputs incurred in the production of the goods.  G/VAL/N/1/ECU/3  
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  3. The second situation  is where the quantity of goods ordered is manufactured and delivered 
over a period of time ; given the same type of contract specifications described in paragraph  2 
above, the final price of the first unit is different from that of the last unit and all other units, 
notwithstanding that each price was derived from the same formula specified in the orig inal 
contract.  
4. Another situation  is where the goods are provisionally priced but, again in accordance with 
the provisions of the sales contract, final settlement is predicated on examination or analysis 
at the time of delivery (e.g. the acidity level of ve getable oils, the metal content of ores, or the 
clean content of wool).  
5. The transaction  value of imported goods, defined in Article  1 of the Agreement, is based on 
the price actually paid or payable for the goods.  In the Interpretative Note to that Article , the price 
actually paid or payable is the total payment made or to be made by the buyer to the seller for 
the imported goods.  Hence, in contracts containing a price review clause, the transaction value of 
the imported goods must be based on the total fin al price paid or payable in accordance with 
the contractual stipulations.  Since the price actually payable for the imported goods can be 
established on the basis of data specified in the contract, price review clauses of the type 
described in this commenta ry should not be regarded as constituting a condition or consideration 
for which a value cannot be determined (see Article  1.1(b) of the Agreement).  
6. As to  the practical aspects of the matter, where the price review clauses have already 
produced their full effect by the time of valuation, no problems arise since the price actually paid 
or payable is known.  The situation differs where price review clauses are linked to variables which 
come into play some time after the goods have been imported.  
7. However, given  that the Agreement recommends that, as far as possible, the transaction 
value of the goods being valu ed should serve as a basis for c ustoms valuation, and given that 
Article  13 provides for the possibility of delay ing the final determination of c ustoms va lue, even 
though it is not always possible to determine the price payable at the time of importation, price 
review clauses should not, of themselves, preclude valuation under Article  1 of the Agreement.  
COMMENTARY 5.1  
TREATMENT OF GOODS RETURNED AFTER TEMP ORARY EXPORTATION FOR 
MANUFACTURING, PROCESSING OR REPAIR  
1. When goods which are reimported after manufacturing, processing or repair abroad are 
declared for home use national legislations may or may not provide for total or partial exemption 
from import dut ies and taxes.  In either instance however the determination of the value of the 
goods as reimported must of course be made in accordance with the applicable provisions of the 
Agreement.  
2. Those situations where total or partial exemptions are granted are enc ompassed by the term 
"Temporary exportation for outward processing ", which is def ined in Annex E.8. of the 
Kyoto  Convention as:  
"Customs procedure under which goods whic h are in free circulation in a C ustoms territory may be 
temporarily exported for manufa cturing, processing or repair abroad and then reimported with 
total or partial exemption from import duties and taxes. ". 
3. Where such exemptions apply, the question that arises is whether, at importation, the 
products may be regarded as a separate category o f importation whose treatment is a matter 
of customs technique involving no question of valuation or whether they can and should be valued 
at importation like any other goods.  
4. In this regard , it is noted that under provisions for exemption the assessment o f import 
duties and taxes may sometimes be made by deducting from the amount of the import duties and 
taxes applicable on the full value of the reimported goods the amount of the import duties and 
taxes that would be charged on importation of the goods tem porarily exported.  The assessment 
may alternatively be based on the value added by the processing of the goods abroad, and this G/VAL/N/1/ECU/3  
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  may involve apportioning the full value of the reimported goods between the goods temporarily 
exported and the process abroad.  In some instances moreover the rate of duty will depend on 
the value of the reimported goods, which must then be established for this purpose.  
5. In all these cases it will be necessary to determine the full value of the goods as reimported 
in accordance with the applicable provisions of the Agreement (as for the importations referred to 
in paragraph 1 above).  The method used for this purpose as well as the result should be uniform 
for all administrations.  The treatment under any provisions for relief is a matt er separate from 
valuation.  
6. The following examples illustrate the range of situations which can arise.  
Examples  
(i) Importer  X of machine -tools in country  I imports certain specialized machines manufactured 
abroad.  As imported these machines have been equipped  with electric motors supplied by  X 
to exporter  E. 
(ii) importer X  in country  I imports men 's shirts.  The fabric for the shirts is supplied by  X to 
exporter  E, who is responsible only for the making up and the provision of accessories 
(buttons, thread and label s). 
(iii) importer  X imports into country I plastic gear wheels.  These products have been 
manufactured abroad by exporter E using polyamide moulding material supplied by  X. 
(iv) company  X in country  I imports a machine -tool after having sent it abroad for repair ; on 
reimportation company X pays only the repair charges to exporter E.  
7. Clearly, in the cases envisaged, both the transaction giving rise to the importation of the 
goods in question and the price made relate not to the goods in the state in which they are 
imported, but to the materials used and the services supplied by the foreign manufacturer, and in 
some cases to the services alone.  
8. However the following points should be borne in mind.  
9. Article  8.1(b) of the Agreement stipulates that in determining the transac tion value of the 
imported goods there shall be included the value, apportioned as appropriate, of certain goods and 
services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use 
in connection with the production and  sale for export of the imported goods.  
10. It is thus possible to establish the transaction value under Articles  1 and 8 , taken together, 
in cases of the kind illustrated by examples (i) to (iii) where it could be said that a sale has taken 
place, and whereve r the conditions of Article  1 are fulfilled the transaction value so e stablished will 
constitute the c ustoms value of the goods in the state in which they are imported.  
11. Situations of the kind illustrated by example (iv), where it is more a matter of the su pply 
of services, at first glance appear to constitute a different case.  However, the following 
considerations should be borne in mind : 
- As far as possible , all reimported goods should be treated in the same way for valuation 
purposes, particularly in the  light of the s tatement in the Preamble "that customs value 
should be based on simple and equitable criteria consistent with commercial practices and 
that valuation procedures should be of general application without distinction between 
sources of supply ". 
- the basic intention of the Agreement is that the transaction value established under  
Articles  1 and 8 should be used to the greatest extent possible for customs valuation 
purposes.  
- Advisory Opinion 1.1  on the concept of "sale" in the Agreement states that uniformity 
of interpretation and application can be achieved by taking the term "sale" in the widest 
sense, to be determined only under the provisions of Articles  1 and 8 read together.  G/VAL/N/1/ECU/3  
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  12.  On the basis of the above argumentation it could be concluded th at goods imported after 
repair abroad should, for valuation purposes, be treated in the same way as those obtained as 
a result of manufacturing or processing.  Otherwise, the hierarchical sequence of the Agreement 
will have to be followed.  Since in the spec ific instance of repair it is unlikely that one of the other 
methods laid down by the Agreement would be applicable, Article  7 would apply for example by 
means of a flexible interpretation of the provisions of Articles  1 and 8  taken together.  
13. Adminis tratio ns applying the rules of c ustoms valuation in this context are, of course, free to 
grant exemption from duty under national legislation.  
COMMENTARY 6.1  
TREATMENT OF SPLIT SHIPMENTS U NDER ARTICLE 1 OF THE AGREEMENT  
General  remarks  
1. For the purposes of this c ommentary the term "split shipments " means consignments 
of goods which, though forming the subject of one transaction between a buyer and a seller, are 
not presented for clearance in a single shipment for reasons connected with delivery, 
transportation, pa yment or the like and are consequently imported in partial or successive 
shipments, either through the same Customs office or through different Customs offices.  
Specific situations  
2. Most cases of goods being imported in split shipments will fall into one of  the following 
three  categories : 
A. The goods  constitute a complete industrial installation or plant and are split up because they 
come from different sources, or because it would be physically impossible to import them in 
a single shipment, or because of the necessity o r convenience of staggering the shipments 
to conform to a plant assembly schedule.  
B. The shipments are split because the quantity is such that it would be impossible or 
inconvenient for the parties to import all the goods in one shipment.  
C The shipments are split for reasons of geographical distribution.  
A. Splitting up of industrial installations or plants  
1. This type of case concerns the importation of certain groups of goods and whole installations 
which, on account of their size, have to be imported in several shipments.  The treatment of these 
split shipments for tariff and c ustoms technique purposes will of course depend on national 
legislation in the country of importation.  
2. The c ustoms value of each shipment will be based on the price ac tually paid or payable, that 
is, an appropriate proportion of the total payment made or to be made by the buyer to or for the 
benefit of the seller for the imported goods, as reflected in the transaction concluded by the 
parties.  
3. If the partial shipment ha s been the subject of a separate invoice it will be necessary to add 
to the amount of the invoice the adjustments determined under Article  8 (where appropriate 
making an apportionment for the total transaction) and to treat deductions similarly.  
4. If the par tial shipment has not been the subject of a separa te invoice, in determining its 
customs value, an apportionment of the total value of the transaction could be made in 
a reasonable manner appropriate to the circumstances and in accordance with generally ac cepted 
accounting principles.  
5. In gen eral in these cases the c ustoms value of each consignment cannot be finally 
determined at the time of importation since such importations often involve elements such as 
engineering costs or price review clauses (see Comm entary 4.1 ). If it becomes necessary to delay 
the final determination of the c ustoms value, the importer will nevertheless be able to withdraw 
his goods from Customs by virtue of Article  13 of the Agreement.  The provisional duty assessed by G/VAL/N/1/ECU/3  
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  the Customs in cases where goods are imported in split shipments may  of course be amended 
when the c ustoms value is finally determined.  
B. Shipments split for reasons of quantity  
6. In this case it is assumed that the transaction involves a quantity of goods consisting 
of identical units or sets sold at an agreed unit price.  The delivery dates may have been fixed in 
advance or left to the convenience of the parties.  
7. Since for the purposes of Article  1 neither the time at which the sale contract was concluded 
nor market fluct uations after the date when the contract was concluded have to be taken into 
account (see  Explanatory Note 1.1 ), the determination of the c ustoms value of the goods is to be 
based on the price actually paid or payable.  
8. However, if importations in split shi pments are not effected within a reasonable time 
reflecting the normal commercial practice in th e trade concerned, the Customs A dministration may 
consider it necessary to make enquiries concerning the price actually paid or payable, verifying 
especially wh ether there is a complementary agreement which modifies the original price.  
This action could be taken under the provisions of Articles  13 and 17 of the Agreement.  
9. The unit price may well depend on the total number of units involved in the transaction, but  
Article  1.1(b) is nevertheless not applicable.  When the Interpretative Note to paragraph 1(b) 
of Article  1 quotes as an example of such a condition the case where the seller establishes the 
price of the imported goods on condition that the buyer also acqu ires a certain quantity of other 
goods, it lays down a principle relating to other goods, not to the same goods involved in a single 
transaction.  
C. Shipments split for reasons of geographical distribution  
10. This situation is in fact a usual practice in inte rnational trade.  The buyer agrees to buy from 
a seller in a single transaction a quantity of goods to be sent in separate shipments to two or more 
ports or Customs offices of one country of importation or two or more countries of importation.  
The c ustoms v alue of the fraction of the goods imported through each Customs office or each 
Customs territory has to be determined under Article  1 of the Agreement on the basis of the price 
actually paid or payable for this fraction.  
Conclusion  
11. In the light of the abov e considerations concerning the treatment of the various types 
of split shipments, it will be seen that the valuation method envisaged in Article  1 can be applied 
to split shipments provided the requirements of Article  1 can be met.  
COMMENTARY 7.1  
TREATMEN T OF STORAGE AND RELATED EXPENSES UNDER THE PROVISIONS  
OF ARTICLE  1 
I. General  
1. The treatment of storage expenses for c ustoms valuation purposes requires the 
determination of the exact nature of the expenses as well as where and by whom they are 
incurred.  
2. This commentary  is based on the assumption that the transactions in question meet the 
requirements of Article  1 of the Agreement.  If this is not the case, Article  1 would not be applicable 
and one of the other methods in the Agreement, selected in the presc ribed sequence, would have 
to be used.  
3. The commentary  covers only the aspect of storage and the expenses related to moving the 
goods into and out of storage.  It does not encompass other activities such as cleaning, sorting or 
repacking which may take place  in a warehouse.  G/VAL/N/1/ECU/3  
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  4. No distinction  is to be made between o rdinary storage warehouses and c ustoms warehouse s 
where goods are stored under c ustoms control in a designated place without payment of import 
duties and taxes.  The valuation treatment of storage expen ses would be the same in either case.  
5. The situations  regarding storage in which a valuation question may arise include the 
following : 
- The goods are in storage abroad at the time of the sale for export to the country 
of importation;  
- the goods are put in to storage abroad subsequent to their purchase but prior to their export 
to the country of importation;  
- the goods are put into storage in the country of importation prior to their clearance for home 
use; 
- the goods are temporarily stored incidental to t heir transport.  
6. The treatment of expenses incurred in these situations is examined in Parts II to V below.  
7. While this  list of situations is not exhaustive, the examples serve to illustrate the general 
principles involved in the treatment of storage and rel ated expenses.  Obviously , ach case must be 
considered individually having regard to the relevant circumstances.  
II. The goods are in storage abroad at the time of the sale for export to the country 
of importation  
8. Examples  
(a) Buyer A  in country of importation I purchases from seller B in country of exportation  X 
goods warehoused by B in country X.  The ex -warehouse price paid by A to B includes the 
warehousing expenses incurred.  
(b) Buyer A  in country of importation I purchases at an ex -factory price from seller B i n country 
of exportation X goods which, at the time of the transaction, are warehoused by B in 
country  X. In addition to the price for the goods, buyer A pays seller B the warehousing 
expenses on the basis of a separate invoice.  
(c) Buyer A  in country of impor tation I purchases at an ex -factory price from seller B in country 
of exportation X goods which, at the time of the transaction, are warehoused by B in 
country  X. In addition to the price for the goods, buyer A is required to pay the warehouse 
proprietor t he storage expenses incurred by seller B.  
9. The Interpretative Note to Article  1 specifies that the price actually paid or payable is the 
total payment made or to be made by the buyer to or for the benefit of the seller for the imported 
goods.  
10. It can be assu med that the warehousing expenses will be recovered by the seller as part 
of the price actually paid or payable by the buyer . If not, these expenses should be included in this 
price if they constitute a payment made directly or indirectly to the seller or for his benefit.  
11. Thus, in  the case of the examples above, the warehousing expenses will be part of the price 
actually paid or payable for the goods.  
III. The goods are put into storage abroad subsequent to their purchase but prior to their export 
to the co untry of importation  
12. Example  
Buyer A  in country of importation I purchases goods from seller B.  Upon arrival at the port 
of importation, buyer A stores the  goods on his own account in a c ustoms warehouse pending the 
starting of his production schedule in w hich the imported goods are to be manufactured into other 
products.  Three months later , buyer A presents the declaration for home use and pays the storage 
charges.  G/VAL/N/1/ECU/3  
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  13. Expenses  incurred by the buyer after purchase cannot be considered as a payment made 
directl y or indirectly to the seller or for his benefit ; hence they are not part of the price actually 
paid or payable.  On the other hand, these expenses do represent activities undertaken by the 
buyer on his own account ; the costs of these activities are to be a dded to the price actually paid or 
payable for the imported goods only if Article  8 provides for adjustment in respect of them.  In this 
example no such provisions exist and the storage expenses would not b e part of the c ustoms 
value.  
IV. The goods are put into storage in the country of importation prior to their clearance for 
home use  
14. Example  
Buyer A in  country of importation I purchases goods from seller B.  Upon arrival at the port 
of importation, buyer A stores the  goods on his own account in a c ustoms wa rehouse pending the 
starting of his production schedule in which the imported goods are to be manufactured into other 
products.  Three months later , buyer A presents the declaration for home use and pays the storage 
charges.  
15. The Interpretative Note to Artic le 1 specifies that the price actually paid or payable is the 
total payment made or to be made by the buyer to or for the benefit of the seller for the imported 
goods.  In that respect , it is also stated that the costs of activities undertaken by the buyer on his 
own account, other than those for which an adjustment is provided in Article  8, shall not be added 
to the price actually paid or payable.  
16. Expenses  incurred by the buyer after purchase cannot be considered as a payment made 
directly or indirectly to the seller or for his benefit ; hence they are not part of the price actually 
paid or payable.  On the other hand, these expenses do represent activities undertaken by the 
buyer on his own account ; the costs of these activities are to be added to the price a ctually paid or 
payable for the imported goods only if Article  8 provides for adjustment in respect of them.  In this 
example, no such provision exists and the storage exp enses would not be part of the c ustoms 
value.  
V. The goods are temporarily stored inci dental to their transport.  
17. Examples  
(a) Importer I purchases goods ex -factory in the country of exportation.  Storage expenses are 
incurred at the port of export pending the arrival of the exporting vessel.  
(b) At importation , a period of time elapses between the u nloading of the goods and the 
lodgeme nt of the c ustoms declaration . During this peri od, the goods are stored under 
customs control thus incurring storage expenses.  
18. Expenses of this kind, arising out of incidental storage of goods during transport, should b e 
regarded as charges associated with the transport of goods.  They are, therefore, to be treated in 
accordance with the provisions of Article 8.2(b)  of the Agreement ; if the expenses are incurred 
after importation, they must be treated in accordance with t he Interpretative Note to Article  1 
which provides that the cost of transport after importatio n shall not be included in the c ustoms 
value provided it is distinguished from the price actually paid or payable for the imported goods.  
COMMENTARY 8.1  
TREATMENT  OF PACKAGE DEALS  
1. For the purpose of this commentary , a package deal is taken to be an agreement to pay 
a lump sum for a correlated group of goods, or a group of goods sold together, the price of the 
goods sold constituting the only consideration.  G/VAL/N/1/ECU/3  
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  2. Examples  of package deal transactions involvi ng potential valuation problems : 
(A) Different goods are sold and invoiced at a single overall price;  
(B) Goods of different quality sold and invoiced at a single overall price are only partially 
declared for home use i n the country of importation;  
(C) Different goods, included in the same transaction, are invoiced at individual prices 
established solely for tariff or other reasons.  
 Valuation treatment  
(A) Different goods are sold and invoiced at a single overall price  
3. Presuming  that the other conditions of Article  1 have been met, the fact of a single overall 
price for different goods does not constitute an impediment to establishing transaction value.  
In those instances where the goods are classifiable under separate t ariff headings at different rates 
of duty, the overall price which has been negotiated as part of a package deal which meets the 
requirements of Article  1 of the Agreement should not be rejected when applying that Article, 
solely for the purposes of tariff  classification.  
4. In addition,  there is the practical problem of the proper apportionment of the overall price 
among the goods which are classifiable in different headings.  Several methods are possible 
including, for example, the use of prices or values of identical or similar goods in previous 
importations, if such methods can provide a valid indication of the price of the various goods 
covered by the package deal.  Suitable price breakdowns, based on generally accepted accounting 
principles, could also be s upplied by the importer.  
(B) Goods of different quality sold and invoiced at a single overall price are only partially 
declared for home use in the country of importation  
5. In this  situation, the nature of the problem is different and can be illustr ated by t he following 
example:  
- A consignment comprising goods of three different qualities (top quality A, average quality  B 
and low quality C) is purchased at an overall unit price of 100 currency units per kilo.  In the 
country of importation, the buyer declares  quality A for home use at 100 currency units per 
kilo but assigns the other qualities to some other procedure.  
6. Since the  overall price actually paid or payable has been agreed for a set of goods of various 
qualities there is no selling price for the goods  declared for home use and Article  1 of the 
Agreement is therefore not applicable in this instance.  
7. Article  1 of the Agreement is applicable however if , in the above example, instead of only 
one of the different qualities of goods being declared for home u se, a specified and equal 
proportion (one third or a half, for example) of each of the products contained in the total package 
making up the consignment were declared for home use.  It would then be possible to retain as a 
basis for transaction value, under  the terms of Article  1, the price represented by the proportion of 
the total price which the quantity of goods declared for home use bears to the total quantity 
purchased.  
(C) Different  goods, included in the same transaction, are invoiced at individual p rices 
established solely for tariff or other reasons as illustrated in the following example.  
 Products A  and B, which have been purchased in a package deal at a price of 100  c.u. are 
invoiced at 35 and 65 in order to reduce the total lia bility of the impo rter for the c ustoms duty 
(the rates being 15 % for product A and 6 % for product B), without altering the overall price of the 
transaction payable to the seller.  
8. In the above  example the prices have been set or modified (some upwards and some 
downwards) to inappropriately reduce liability for customs duties . This type of practice may also be 
used to circumvent anti -dumping measures or quotas.  G/VAL/N/1/ECU/3  
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  9. Noting  the fact that a case of price manipulation of the kind descr ibed above is a matter for 
the c ustoms enforcement  authorities, the imported goods neve rtheless need to be valued for 
customs purposes.  
10. In this  connection it should be noted that the off setting arrangement in the example in 
question represents a condition or consideration for which value cannot be determi ned with 
respect to the goods being valued.  Therefore, the provisions of Article  1.1.(b)  apply and valuation 
cannot be based on the transaction value of the imported goods.  
COMMENTARY 9.1  
TREATMENT OF COSTS OF ACTIVITIES TAKING PLACE IN THE COUNTRY 
OF IMPO RTATION  
1. This commentary examines the treatment of costs of activities taking place in the country 
of importation within the context of Article  1 and its Interpretative Note.  
2. In dealing with this question, a listing of activities in the country of importati on and their 
treatment for valuation purposes would not be a useful approach.  Such a listing could not be 
exhaustive and , moreover, in many instances, the valuation treatment of any given activity would 
differ depending on the circumstances of the transact ion. On the other hand, a brief statement of 
principle would cover a wide range of possibilities.  
3. In this  respec t, in the determination of the c ustoms value under Article  1 of the  Agreement, 
when the costs of activities occurring after importation are not included in the price actually paid 
or payable, they are not to be  included in the c ustoms value unless it is specifically provided for by 
virtue of Article  8. This includes those which might be regarded of benefit to the seller but 
undertaken by the buyer  on his own account.  
4. Conversely, when such costs are included in the price actually paid or payable for the 
imported goods, they are not to be deducted from that price unless there is compliance with the 
relevant provisions of the Interpretative Note to Ar ticle 1 1 of the Agreement which states that : 
- "The c ustoms value shall not include the following charges or costs, provided that they are  
distinguished from the price actually paid or  payable for the imported goods : 
(a) Charges  for construction, erection, as sembly, maintenance or technical assistance, 
undertaken after importation on imported goods such as industria l plant, machinery or 
equipment;  
(b) the cost of transport after importation;  
(c) duties and  taxes of the country of importation " (considered to be by thei r nature 
distinguishable, see Advisory Opinion 3.1) . 
5. The meaning of  the term "importation " needs to be clearly established.  In the Customs 
Co-operation Council 's Glossary of International Customs Terms, the term importation is defined 
as "the act of bringi ng or causing any goods to be brought into a Customs territory ". It is noted 
however that various national legislations provide more specific definitions to the term than the 
one above.  Therefore , any reference to that term must be within the context of th e national 
legislation of the country in question.  
6. With respect to subparagraph (a) of the Interpretative Note to Article  1, the phrase 
"undertaken after importation " should be flexibly interpreted as covering activity carried out in the 
country of importa tion. In that context, the cost of activities covered in subparagraph  (a) w ould 
also be excluded from the c ustoms value even if they take place prior to importation so long as 
they are carried out as part of the installation of the imported goods.  An examp le of this would be 
a charge for the laying of a concrete foundation undertaken prior to the importation of the 
machinery which is subsequently erected on that foundation.  
7. On the specific  question regarding transport, it is worth noting that , while subpara graph  (b) 
of the Interpretative Note to Article  1 refers to the cost of transport after importation, it would be 
consistent with the overall thrust of the Interpretative Note as it relates to post -importation G/VAL/N/1/ECU/3  
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  charges and costs to encompass within this expr ession loading, unloading and handling costs 
taking place after importation.  The same rationale would also apply to post -importation insurance 
charges.  
COMMENTARY 10.1  
ADJUSTMENT FOR DIFFERENCE IN COMMERCIAL LEVEL AND IN QUANTITY UNDER 
ARTICLE 1.2( b) AND A RTICLES 2 AND 3 OF THE AGREEMENT.  
General  
1. When applying the Agreement, it may be necessary to make an adjustment to take account 
of demonstrated differences in commercial level and quantity in respect of Articles 1.2(b)  (test 
values), 2.1(b) (identical goo ds) and 3.1(b) (similar goods) . Although the wording in Article  1.2(b)  
is somewhat different from that found in Articles 2.1(b) and 3.1(b) , it is clear that the principles 
involved are the same : account has to be taken of differences attributable to commer cial level or 
quantity and it must be possible to make the necessary adjustment on the basis of demonstrated 
evidence which clearly establishes its reasonableness and accuracy.  
2. When Customs  is made aware of a transaction which may be used to establish a te st value 
under Article  1.2(b)  or the transaction value of identical or similar goods under Articles 2 and 3 , it 
must be established whether that transaction was made at the same commercial level and in 
substantially the same quantities as that of the goods  being valued . If the commercial level and 
quantities are comparable in terms of the transaction no adjustment for these factors is necessary.  
3. However, if  there are differences in commercial level and quantity it will then be necessary 
to determine whether  the price or value is affected by those differences . It is important to bear in 
mind that the mere existence of a difference in commercial level or quantity would not of itself 
require that an adjustment be made ; an adjustment will be necessary only if a difference in the 
price or value results from a difference in commercial level or quantity and then the adjustment 
must be made on the basis of demonstrated evidence which clearly establishes its reasonableness 
and accuracy . If this requirement cannot be m et, the adjustment cannot be made.  
4. The following examples  illustrate situations involving questions of adjustments only for 
different commercial levels and quantities and do not include other adjustments such as for 
differences in distances and modes of tr ansport . For the purpose of the examples on Articles  2 and 
3, it is presumed that the c ustoms value of the imported goods cannot be determined under the 
provisions of Article  1 and is to be determined on the basis of the previously accepted transaction 
value of identical or similar goods.  
5. The following examples which deal with identical goods have equal application to similar 
goods.  
Application of Articles  and 3 
Same commercial level and quantity - No adjustment  
6. Example No. 1 
There is the following transact ion value involving a sale of identical goods : 
Seller Quantity Price Importer Level Commercial Unit  
R 1,700 6 c.u . Wholesaler c.i.f.  
 In this case , no adjustments are necessary and the transaction value  of 6 c.u. c.i.f. would be 
the customs value under Article 2 . 
 Same commercial level, different quantity - No adjustment  G/VAL/N/1/ECU/3  
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  7. Situations can  also arise where there are differences in either level or quantity but in which 
those differences have no commercial relevance because the seller does not take either level o r 
quantity into account when selling his goods . In such cases also no adjustment is required.  
8. Example No. 2 
Supplier Quantity Price Importer Individual Commercial L evel 
- E 2,000 5 c.u . Wholesaler articles c.i.f.  
There is the following transaction value in volving a sale of identical goods:  
Seller  Quantity Price Importer Individual Commercial L evel 
- R 1,700 6 c.u . Wholesaler articles c.i.f.  
 Customs have determined that R sells his goods at a price of 6 c.u. to all purchasers who 
buy at least 1,000 units of  his goods but does not otherwise vary his price according to the 
quantity purchased . In this case, although there is a difference in quantities, that difference has 
not affected the price because the seller of the identical goods does not vary his price w ithin the 
quantity range in which both sales were made ; therefore, no adjustment for quantity is required . 
The transaction value of 6 c.u. c.i.f. would be the Customs value under Article  2. 
Different commercial level, different quantity - No adjustment  
9. Example No. 3 
Supplier Quan tity Price Importer Individual C omme rcial L evel 
- E 1,500 5 c.u. 1 wholesaler articles c.i.f.  
There is the following transaction value invo lving a sale of identical goods : 
Seller Quantity Price Importer Individual Commercial Level 
- R 1,200 6 c.u . Retailer articles c.i.f.  
 R does not vary his price according to level of purchase but will sell to anyone who 
purchases at least 1,000 units at 6 c.u. each . In this example, although there is a difference in 
commercial level, no difference  in price is attributable to level because the seller of the identical 
goods sells to all purchasers without regard to commercial level . Also, since both transactions are 
comparable with respect to the quantity in that they are both in excess of 1,000 unit s, 
no adjustment for quantity is required . In this case , the transaction value  of 6 c.u. c.i.f. would be 
the customs value under Article  2. 
Different commercial level or different quantity - Adjustment  
10. In those  instances where a difference in price is attr ibutable to commercial level or quantity, 
an adjustment must be made in order to arrive at a value at the same commercial level and for 
substantially the same quantities as the goods being valued . When making such adjustment, the 
sales practices of the sel ler of the identical or similar goods is the governing factor.  
11. If an adjustment  is necessary because of differences in quantity, the amount of the 
adjustment should be readily determinable.  With respect to commercial level, however, the criteria 
used may n ot be that evident . Customs will have to examine the sales practices of the seller of the 
identical or similar goods . Once the seller 's practice is clear, an examination of the activities of the 
importer of the goods to be valued should provide a basis for  determining what commercial level 
the seller of the identical or similar goods would accord to the importer . Development of this 
information, as noted in the general introductory commentary, will require consultation with the 
parties concerned.  G/VAL/N/1/ECU/3  
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  12. Example No. 4 
There is the following transaction value of identical goods:  
Seller Quan tity Price Importer Individual Commercial L evel 
- F 2,300 4.75 c.u . R Wholesaler articles c.i.f.  
Customs have established that a price list from which F sells is bona fide and that  he sells 
his goods to all purchasers at a price which varies acco rding to the quantity purchased : for 
purchasers who buy less than 2,000 articles , the price is 5 c.u. c.i.f., while for those who buy 
2,000 or more articles , the unit price is 4.75 c.u. c.i. f. 
The difference in quantities purchased is a commercially relevant factor which affects the 
price at which the goods are sold and an adjustment must be made for the difference attributable 
to quantity . The amount of the adjustment for quantity in this ca se would be 0.25  c.u., i .e. 5 c.u. 
c.i.f. would be the c ustoms value under Article  2. 
13. As previously  noted Articles  2 and 3  require that an adjustment must be made on the basis 
of demonstrated evidence which clearly establishes the reasonableness and accura cy of the 
adjustment.  
14. The Interpretative Notes to Articles  2 and 3  provide as an example of such evidence that of 
price lists which contain prices referring to different levels or different quantities . 
The determination as to the bona fides of price lists will have to be made on a case -by-case basis . 
In the absence of such an objective measure, the determination of c ustoms value under the 
provisions of Articles  2 and 3 , as the case may be, would not be appropriate.  
15. Example No. 5 
Supplier Quan tity Price Impo rter Individual Commercial L evel 
- D 2,800 1. 05 c.u. K Wholesaler articles c.i.f.  
There is the following transaction value for identical goods:   
Seller Quantity Price Importer Individual Commercial Level  
- E 2,800 2.50 c.u. c.i.f. R  Retailer articles less  15% 
 Customs has ascertained that E adheres to a published price list from which he allows a 20 % 
discount to wholesalers and a 15 % discount to retailers . In the foregoing transaction , the sale to R 
is in accord with this price list . Accordingly, this evid ence would permit an adjustment of the 
transaction value of the identical goods by using the price list unit price of 2.50 c.u. c.i.f. and the 
20% discount to the wholesale level . Thus, 2.50 c.u. less 20 % would be the c ustoms value under 
Article  2. 
Applica tion of Article 1.2(b)  
Different commercial level, same quantity - Comparable test value  
16. In a sale  between related parties, Article  1.2(b)  provides the importer the opportunity to 
demonstrate that his value closely approximates one of the test values set o ut in the 
subparagraphs of that provision ; it follows that the test value must b e demonstrated in all its 
aspects, including where appropriate, level and quantity . The principles involved in Article  1.2(b)  
for adjustments for these factors are the same as those for Articles  2 and 3 , except that the 
adjustments to the transaction value of identical or similar goods are for t he purpose 
of establishing the c ustoms value of the imported goods , while under Article  1.2(b)  the 
adjustments are made to the test valu e only for comparison purposes.  G/VAL/N/1/ECU/3  
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  17. Example No. 6 
 I provides Customs with the following test value which is a transaction value of identical 
goods to an unrelated buyer.  
 Customs ascertains that F sells his goods to wholesalers at a price of 5 c.u. c.i.f. and  that 
I is a wholesaler.  
 The amount of the adjustment in this case would be 1 c.u . The test value, after taking 
account of the difference attributable to level, would be 5 c.u . Since the related -party price equals 
the test value as determined above, that price can be accepted as transaction value under 
Article  1. 
 Lack of demonstrated evidence - Test value rejected  
18. Example No. 7 
Supplier Quan tity Price Importer Individual Commercial L evel 
- E 20,050 1.50 c.u . F Wholesaler articles c.i.f.  
 I provides the fo llowing test value which is a transaction value of identical goods to 
an unrelated purchaser : 
Seller Quan tity Price Importer Individual Commercial L evel 
- E 1,020 2.10 c.u . F Retailer articles c.i.f.  
 E states that he only occasionally sells to independent  retailers ; he further states that he 
has made no sales to independent wholesalers but that , if he were to do so, his price would be 
1.50 c.u. each c.i.f.  
 Since E  has made no sales to unrelated wholesalers, but merely indicates a willingness to do 
so at t he indicated price, there is a lack of demonstrated evidence which would establish the 
reasonableness of the adjustment . Because no adjustment can be made for the difference in level, 
the test value presented by I is not acceptable for comparison purposes.  
19. In order to  value the goods under Article  1 when there is a question of relationship, or under 
Article  2 or 3 , there should normally be consultations between the importer and Customs . These 
consultations, and information from other sources, should enable Customs to determine whether 
an adjustment need be made and whether it can be made on the basis of demonstrated evidence.  
COMMENTARY 11.1  
TREATMENT OF TIE -IN SALES  
1. There  are two broad categories of tie -in sales . In one , the condition or consideration relat es 
to the price of the goods, in the other, it relates to the sale of the goods . Situations where the 
conditions or considerations relate to the price as well as the sale are to be treated as tie -in sales 
of the first category.  
2. In tie-in sales of the first  category the price of one transaction is conditioned by terms 
of other transactions between the seller and the buyer.  It follows that in such sales the price is not 
the sole consideration.  Such tie -in sales represent a situation wherein the price is subje ct to 
a condition or consideration for which a value cannot be determined with respect to the goods 
being valued and, accordingly, the price must be rejected for the purpose of establishing the 
transaction value in accordance with the provision of Article  1.1(b) . The Interpretative Note to that 
Article lists three examples which include : (1) the seller establishes the price of the imported 
goods on condition that the buyer will also buy other goods in specified quantities ; (2) the price of 
the imported good s is dependent upon the price or prices at which the buyer of the imported G/VAL/N/1/ECU/3  
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  goods sells other goods to the seller of the imported goods ; and (3) the price is established on the 
basis of a form of payment extraneous to the imported goods, such as where the i mported goods 
are semi -finished goods which have been provided by the seller on condition that he will receive 
a specified quantity of the finished goods.  
3. In this  respect, however, caution must be exercised to ensure that the application 
of Article  1.1(b) is not extended beyond the intended purposes.  
4. For example, if  a seller grants a quantity discount calculated on the quantity or the 
monetary value of a single order, the fact that a buyer qualified for the discount by placing an 
order consisting of a numbe r of different items, none of which of themselves would have qualified 
for the discount, does not represent a situation where Article  1.1(b)  would apply.  
5. The second category of tie -in sales, where condition or consideration relates to the sale 
of the goods , includes what has commonly been termed as "countertrade ". Countertrade is taken 
to mean transactions in which sales to a country are intimately linked to sales from that country 
although in some instances, sales from yet another country can be involved.  Countertrade is 
essentially a mechanism of paying for goods in international trade through the exchange 
of products for products.  In some instances, countertrade can involve the exchange of services for 
products and vice versa.  
6. Countertrade  provides a mean s by which a country can obtain required goods from foreign 
sources and at the same time maintain balanced trade flows by ensuring export sales of its own 
products - counterproducts.  Countertrade may involve the full or partial payment for an imported 
product in the form of products produced in and exported from the importing country, rather than 
payment in currency.  Frequently, however, payment for both transactions will be in currency.  
7. A listing  of the more common counte rtrade practices are as follows : 
(a) Barter: a single exchange of goods for goods, no payment in currency made (note  Advisory 
Opinion 6.1);  
(b) counterpurchase : an exchange of goods for goods and money, or an exchange of goods for 
services and money;  
(c) evidence account : counterpurchase is often expre ssed in the form of an evidence account.  
For the purpose of payment, the evidence account is established with the foreign trade bank 
or a central bank and the exporter 's counterpurchases are credited against current or future 
counterpurchase obligations.  Such deals provide a degree of flexibility to the exporter, since 
instead of facing an immediate demand, the evidence account allows the exporter more time 
to leisurely "shop around " to effect the counterpurchase;  
(d) compensation or buyback : the sale of machin ery, equipment, technology or a  manufacturing 
or processing plant in exchange for a specified amount of the final pro duct as full or partial 
payment;  
(e) clearing agreement : a bilateral arrangement between two countries to purchase designated 
amounts of each o ther's products over a specified period of time, with the use of a freely 
convertible clearing currency of a third country, i.e. a "hard" currency;  
(f) switch or triangular trade : an arrangement whereby one of the parties to a bilateral trade 
agreement (such a s a clearing agreement in subparagraph (e) above) transfers its credit 
balance to a third party.  For example, countries A and B have a clearing agreement and  A 
buys a product from country C and payment is effected by having country B transfer its 
payment u nder the clearing agreement to co untry C instead of to country A;  
(g) swap: the exchange of identical or similar goods from different locations in order to save 
transportation costs.  This type of transaction differs from barter in (a) above, in that an 
identic al or similar product is exchanged solely for the purpose of gaining the advantage 
of a closer source of supply such as where a Japanese buyer purchases a  quantity 
of Venezuelan made oil and swaps it for an equal amount of Alaskan crude which had been 
purchased by  an East Coast American buyer;  
(h) offset arrangement : the sale of a product, usually of a high technology nature, is possible  on 
the condition that the exporter incorporates in his final product specified materials, parts or 
components which he has ac quired from the country of importation.  G/VAL/N/1/ECU/3  
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  8. There does not appear to be a single reliable estimate of how much international trade 
involves the use of countertrade.  Estimates which do exist vary widely, ranging from one percent  
of world trade to one quarter of  the world 's international commerce.  This diversity of opinion is 
primarily due to the fact that, as opposed to the usual methods of measuring world trade, there 
are no means of reporting and analysing countertrade transactions as such.  In fact countertrad e is 
not always easy to identify especially in those cases where transactions are expressed in monetary 
terms and are paid for separately.  However, while there is no agreement as to the magnitude 
of countertrade, there is general agreement that it is becom ing a larger factor in world trade.  
9. As to the effect of countertrade on the price or cost of the goods, again there does not 
appear to be a single opinion.  It can be said, however, that the exporter considering 
a counterpurchase must price his goods in the  knowledge that not only must he sell his own goods 
but also those of his customer.  It can be expected that the exporter may increase his price 
because of this factor.  Hence, the price of goods exported to a country requiring or practising 
countertrade can  be expected to be equal to or higher than the price of the goods had there been 
no countertrade.  
10. By the same  token, either in lieu of or in addition to the foregoing, the exporter may be able 
to command a lower price for the goods which he has to purchase . Hence , the price for the 
counterpurchased goods can be expected to be equal to or lower than the price had there been no 
countertrade.  These goods, of course, may be imported into the exporter 's own country or they 
may be sent to any other country.  
11. With respect  to customs valuation, the first consideration would necessarily be one 
of whether the conditions of Article  1 would or would not preclude the application of that Article to 
any transaction involving countertrade.  In view of the number of different forms countertrade can 
take, it would be unlikely that any single conclusion in this regard could be made and it would be 
necessary to take a decision on the basis of the facts of each transaction, including the type 
of countertrade involved.  
COMMENTARY 12 .1 
MEANING OF THE TERM "RESTRICTIONS" IN ARTICLE 1.1(a)(iii)  
1. Under the provisions of Article  1 of the Agreement , the c ustoms value of imported goods 
shall be the transaction value provided, inter alia, there are no restrictions as to the disposition or 
use of the goods by t he buyer other than those which : 
(i) Are imposed or required by law or by the public authorities in the country of importation;  
(ii) limit the geographical area in which the goods may be resold ; or 
(iii) do not  substantially affect the value of the good s. 
2. Due to  their nature, identification of the first two exceptions noted above would not normally 
create problems.  In the case of the third exception, however, a number of factors may have to be 
taken into consideration to determine whether the restriction  has substantially affected the value 
or not.  These factors include the nature of the restriction, the nature of the imported goods, the 
nature of the industry and its commercial practices, and whether the effect on the value is 
commercially significant.  Since these factors may vary from case to case, it would not be proper to 
apply a fixed criterion in this respect.  For example, a small effect on the value in a case involving 
one type of goods may be treated as substantial while a much greater change in th e value of 
goods of another type may not be treated as substantial.  
3. An example of restrictions as to the disposition or use of the goods which do not 
substantially affect the value of the goods is mentioned in the Interpretative Notes to Article  1, 
i.e. where a seller requires a buyer of automobiles not to sell or exhibit them prior to a fixed date 
which represents the beginning of a model year.  Another such example would be where 
a manufacturing firm of cosmetics imposes through contractual provisions a re quirement on all 
importers that its product be sold to consumers exclusively through individual sales 
representatives undertaking house -to-house sales since its whole distribution system and 
advertising approach is based on this kind of sales effort.  G/VAL/N/1/ECU/3  
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  4. On th e other hand, a restriction which could have a substantial effect on the value of the 
imported goods is one that is not usual in the trade concerned.  An example of such a restriction 
would be the case where a machine is sold at a nominal price on condition  that the buyer uses it 
only for charitable purposes.  
COMMENTARY 13.1  
APPLICATION OF THE DECISION ON THE VALUATION OF CARRIER MEDIA BEARING 
SOFTWARE FOR DATA PROCESSING EQUIPMENT  
1. This commentary examines the question of the valuation of carrier media beari ng software 
for data processing equipment in the specific context of the application of paragraph 2 of the 
decision adopted by the Committee on Customs Valuation.  
2. The principle  to be taken into consideration in this resp ect is that in determining the c ustoms 
value of imported carrier media bearing data or instructions, only the cost or value of the carrier 
medium itself sh all be taken into account . The customs value shall not, therefore include the cost 
or value of the data or instructions, provided that th is is distinguished from the cost or the value of 
the carrier medium.  
3. A problem encountered in applying this decision relates to the provision to distinguish the 
cost or value of the data or instructions from the cost or value of the carrier medium ; someti mes, 
only one price of the software and the carrier medium is available ; at other times, only the price 
of the carrier medium is invoiced or only cost or value of the data or instructions is known.  
4. As there  is an option to apply or not to apply paragraph 2  of the decision, countries which 
choose to apply that decision should interpret this paragraph in the widest possible terms so as not 
to negate the intention of the decision . Therefore, the expression "distinguish " should be 
interpreted in such a manner t hat, if only the cost or value of the carrier medium is known , the 
cost or value of the data or instructions should be considered as distinguished.  
5. If for any reason an administration considers that a separate declaration of the two costs or 
values is nece ssary and only one of the two is available, the second one could be determined by 
estimation, using reasonable means consistent with the principles and general provisions of the 
Agreement and of Article  VII of the General Agreement . Similar estimation for arriving at separate 
values could be done in cases where only the total price of the two elements is available . Customs 
administrations which choose to follow the practice of estimation may find that consultation with 
the importer is necessary in arriving at a reasonable solution.  
6. When at the time of importation the importer is not in a position to furnish sufficient 
information for this purpose, the provisions of Article  13 may apply.  
7. The practice  recommended in this C ommentary is a pplicable to the valuati on for c ustoms 
purposes of carrier media bearing software and does not take into account other requirements 
such as the collection of statistics.  
COMMENTARY 14.1  
APPLICATION OF ARTICLE 1, PARAGRAPH 2  
1. This commentary examines the rig hts and obligations of C ustoms A dministrations and 
importers under the Agreement with respect to the treatment to be accorded to related party 
transactions in the application of Article  1.2. 
2. The General  Introductory Commentary to the Agreement recognizes that the ba sis for 
valuat ion of goods for c ustoms purposes should, to the greatest extent possible, be their 
transaction value.  The transaction value is, however, pursuant to Article  1, only acceptable as the 
customs value if all of the four limitations set out in subparagrahs 1(a ) to 1(d) of Article  1 are 
satisfied . The fourth limitation, 1(d), requires that the buyer and the seller not be related, 
although it does provide that where they are related the transaction value is acceptable subject to 
the provisions of paragraph 2 of Article 1 being satisfied.  This textual construction means that the G/VAL/N/1/ECU/3  
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  existence of a relationship between buyer and seller raises a question which serves to alert the 
importer and Customs as to the acceptability of the price as the basis of the transaction va lue. 
3. However,  in cases where it can be shown that the provisions of paragraph 2(b) of Article  1 
can be met (i.e., transaction value closely approximates to one of the three "test" values provided 
therein), this would establish the acceptability of the pric e as the basis of transaction value and 
preclude the need for any enquiry under paragraph 2(a) of Article  1 into the circumstances 
surrounding the sale of those goods being imported.  
4. In the absence of such a test value, the following questions and answe rs provide guidance to 
Customs A dministrations and to importers vis -à-vis the application of subparagraph  2(a) 
of Article  1. 
Question No. 1 
5. Does the existence of a relationship, as defined in paragraph 4 of  Article 15 between the 
buyer and the seller give Cus toms the right to reject the transaction value ? 
Answer  
6. No. R elationship, in itself, is not grounds to reject transaction value . Subparagraph 2(a) 
of Article  1 is clear on this point . The existence of a relationship does, though, serve to alert 
Customs to t he fact that there may be a need to enquire as to the circumstances surrounding the 
sale. 
Question No. 2 
7. Does Customs need to have grounds to enquire into the circumstances surrounding the sale ? 
Answer  
8. No. S ubparagraph 2(a) of Article  1 directs that the ci rcumstances surrounding a sale 
between related persons shall be examined.  However, the Interpretative Notes to Article  1, 
paragraph 2 , provide, in paragraph 2 thereof, that an examination of the circumstances will not be 
required in every case but only in those where Customs has doubts about the acceptability of the 
price.  
Question No. 3 
9. Does the Agreement provide detailed guidance as to the doubts about the acceptability 
of a price that would cause Customs to enquire into the cir cumstances surrounding the sale? 
Answer  
10. No. H owever, the very structure of the Agreement is such that the existence of 
a relationship itself gives cause to question whether the price between the seller and the buyer is 
or is not influenced by the relationship as the price can only b e used as the basis of transaction 
value in circumstances where the relationship has not influenced that price.  In addition , Article  17 
provides that nothing in the Agreement shall prevent Customs from satisfying itself as to the truth 
or accuracy of any s tatement, document or declaration.  Such a declaration would include that 
made by the related buyer, explicitly or implicitly depending upon the documentation and 
declaration requirements of the importing country, when the transaction value method is used, 
i.e., "the price is not influenced because of my relationship with the seller ". 
Question No. 4 
11. Does Customs have to communicate its "doubts " to the importer when seeking information 
on the circumstances surrounding the sale or on whether the price has been  influenced by the 
relationship between the buyer and the seller?  G/VAL/N/1/ECU/3  
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  Answer  
12. No. N othing in the Agreement requires Customs to justify the reasons for it requesting 
information from an importer with regard to an import transaction.  Indeed, paragraph  6 
of Annex  III and Article  17 recognize that Customs may need to make enquiries concerning the 
truth or accuracy of any statement, document or declaration pres ented to them for c ustoms 
valuation purposes and ha s the right to expect the full cooperation of importers i n those enquiries.  
There is no pre -condition placed upon Customs to the effect that it must justify its reasons for 
enquiring into a transaction.  There is, however, nothing to prevent Customs from informing an 
importer of the reasons for its doubts.  This w ould be desirable if it is able to do so.  
Question No. 5 
13. If Customs has grounds for believing that the price of goods in a transaction has been 
influenced by the relationship, does it have to advise the importer of  the reasons why it so 
believes ? 
Answer  
14. Yes. Subparagraph 2(a) of Article  1 provides that, where Customs has grounds for 
considering the transaction value is unacceptable because the relationship has influenced the price 
and that Article  1 does not therefore apply to the transaction, Customs shall  communicate its 
grounds to the importer.  Moreover, the importer must be given a reasonable opportunity to 
respond and is entitled to be advised in writing of the grounds for Customs ' beliefs.  
Question No. 6 
15. Is the importer responsible for ensuring that th e price has not been influenced by the 
relationship before declaring the goods to be valued under the provisions of Article  1? 
Answer  
16. Yes. When declaring the c ustoms value under the transaction value method , the importer 
has an obligation to ensure to the greatest extent possible that the price is not influenced.  This is 
placed upon the importer by virtue of Article  1, which stipulates that the transaction value shall be 
used provided that the buyer and seller are not related or, where the buyer and seller are related, 
it can be shown that the relationship did not influence the price.  
Question No. 7 
17. If Customs has previously examined the circumstances surrounding a sale and the 
relationship between the buyer and seller in general and has found that the relat ionship had not 
influenced the price, is Customs precluded from requesting the same or further information at 
a later date ? 
Answer  
18. No. Although it is not intended that Customs examine the circumstances surrounding each 
and every sale, whenever Customs has a doubt about the acceptability of a price it may direct 
a new enquiry to the importer.  
COMMENTARY 15.1  
APPLICATION OF DEDUCTIVE VALUE METHOD . 
1. This commentary addresses questions of a general nature that may arise in administering 
the provisions of Article  5.1. In this regard, it is recognized that the Interpretative Notes to that 
Article already provide considerable guidance.  G/VAL/N/1/ECU/3  
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  2. In general, the application of the deductive value method under Article  5 of the Agreement 
may differ in one set of circumstances fr om another.  Therefore, the practical application 
of Article  5 requires a flexible approach, having regard to the circumstances in each case.  
3. In determining the sales in the greatest aggregate quantity, the first question that may arise 
is whether the appli cation of Article  5.1 is restricted to sales of the imported goods or identical or 
similar imported goods made by the importer of the imported goods or would the Article permit 
taking into consideration sales of identical or similar goods imported by other  importers?  
4. While paragraph 1 (a) of Article  5 and its Interpretative Notes do not appear to prohibit 
taking into consideration sales of identical or similar goods imported by other importers, 
as a practical measure, if sales of the imported goods or identi cal or similar goods have been made 
by the importer, it may not be necessary to look for sales of identical and/or similar goods made 
by other importers.  
5. Customs would have to decide, having regard to the circumstances of each individual case, 
whether sale s made by other importers need to be taken into consideration when there are sales 
of the imported goods or sales of identical or similar imported goods by the importer of the 
imported goods being valued.  
6. Another question, closely related to the first one,  is whether , in applying Article  5.1, there is 
any hierarchy in using sales of the imported or identical or similar imported goods in determining 
the price per unit.  
7. A practical application of paragraph 1(a) of Article  5 would require that , if sales of the  
imported goods are available, it may not be necessary to take into consideration sales of identical 
or similar imported goods for the purpose of arriving at the price per unit of the sales in the 
greatest aggregate quantity.  When sales of the imported goo ds are not available, sales of identical 
or similar goods may be taken in sequential order.  
8. After determining the price per unit under Article  5.1, it is necessary to deduct the elements 
provided for in the said Article.  
9. In the practical administration of this provision, several factors need to be considered.  
One relates to the criteria necessary to determine the amount of commission or profit and general 
expenses that could be considered as "usually paid or agreed to be paid ". 
10. The wording of Article  5 and its Interpretative Notes makes it clear that the deduction to be 
made is for the amount of commission or profit and general expenses that is usually obtained in 
sales in the country of importation of imported goods of the same class or kind.  This deduction  
should be based on figures supplied by or on behalf of the importer unless these figures are 
inconsistent with the usual.  
11. The usual amount for commission or profit and general expenses could constitute a range 
of amounts which probably would vary accordin g to the class or kind of the goods being valued.  
In order for a range to be acceptable, it should be neither too wide nor too deficient in population.  
The range should be obvious and easily discernible in order for it to be the "usual " amount.  
Other  appro aches might also be possible, e.g. the use of a preponderant amount (where such 
an amount exists) or an amount derived by simple - or weighted - averaging.  
12. Another consideration is that Article  5 merely stipulates that the deduction will be for either 
comm ission or profit and general expenses but it does not establish the criteria for determining 
which of those is to be deducted.  In dealing with this issue and having regard to the General 
Introductory Commentary of the Agreement , which recognizes that c ustoms value should be based 
on simple and equitable criteria consistent with commercial practices, a deduction for commission 
would normally occur where the sale in the country of importation of the goods being valued was 
or is to be made on an agency/commiss ion basis.  The deduction for profit and general expenses 
would normally be resorted to in transactions which do not involve commissions.  
13. Another question has to do with collecting and maintaining up -to-date data on the usual 
amounts of commission and profi t and general expenses.  G/VAL/N/1/ECU/3  
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  14. As a practical matter, it would not appear useful that data necessary for ascertaining the 
usual amounts for commission or profit and general expenses be obtained and maintained on 
an ongoing basis.  Where need arose, such data could  be generated only to meet specific 
requirements.  In many instances, practical application will require Customs to consider situations 
involving multi -product companies, small industries with a limited number of importers, industries 
with a large number of  related party transactions, etc. on a case -by-case basis.  In this context, 
Customs could have recourse to its own records.  The data could also be obtained from trade 
organizations, other importers, accounting firms, government agencies responsible for com merce 
and fiscal affairs or any other reliable source.  
15. The methodology for obtaining the data may vary according to national considerations but 
may include, inter alia , surveys of known importers of goods of the same class or kind, who, upon 
request, may s upply that data on a courtesy basis and valuation reviews involving known 
importers . Considering that companies may not maintain information on profit and general 
expenses by specific product, administrations may have to follow the principle of examining p rofits 
and general expenses from the narrowest group or range of goods for which sufficient information 
can be obtained.  
COMMENTARY 16.1  
ACTIVITIES UNDERTAKEN BY THE BUYER ON HIS OWN ACCOUNT AFTER PURCHASE 
OF THE GOODS BUT BEFORE IMPORTATION  
1. This commentar y examines the circumstances under which the cost of the activities 
undertaken by the buyer on his own account after purchase of the goods but before importation 
would or would not be considered as part of the customs value determined under the provisions 
of Article  1. 
2. The second paragraph of the Interpretative Note to Article  1, "Price actually paid or 
payable ", establishes the principle in the Agreement with respect to activities that are undertaken 
by the buyer on his own account.  The cost of these activ ities shall not be added to the price 
actually paid or payable unless an adjustment is provided under Article  8. 
3. An example which illustrates such a situation would be as follows : 
Importer  I of country of importation  Y purchases a machine from seller  S of country 
of exportation  X for an amount of 30,000 c.u.  In order to confirm that the machine meets the 
specifications in the sales contract, buyer I, after purchasing the machine, entrusts an additional 
testing of it to expert  T, also in country  X, and pays T 500 c.u. for this test.  Additional testing in 
this context means testing which is not considered as part of the manufacturing process of the 
goods.  The additional testing is not a condition of the sale between I and S.  
The payment for testing the machine  by I to T, who is unrelated to S, is not made, either 
directly or indirectly, to or for the benefit of S.  It is not therefore part of the price actually paid or 
payable.  Furthermore, this activity undertaken by the buyer is not one of those for which 
an adjustment is provided in Article  8. If the other conditions of Article  1 are fulfilled, the machine 
would be valued on the basis of Article  1, provided that the goods have not been altered, adjusted, 
improved or in any way changed in nature.  
4. In commercial practice, the activities that a buyer could undertake after the purchase of the 
goods but before importation can vary.  In the context of Article s 1 and 8 and their Interpretative 
Notes, these may include activities undertaken with the aim of promoting the sale and distribution 
of the goods in the country of importation.  The cost of these activities when they are undertaken 
by the buyer on his own account should not be considered an indirect payment to the seller, even 
though they might be regarded as for th e benefit of the seller.  The following exa mple illustrates 
this principle : 
Firm A is a dealer in electrical goods in country I.  He markets these goods through 
a network of dealers (retail outlets and service centres) operating under franchise agreements wi th 
him. Firm A concludes a long -term contract with foreign manufacturer S for the supply of a new 
type of electrical appliance.  Under the terms of the contract, the appliance is to be marketed under G/VAL/N/1/ECU/3  
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  S's trademark and A undertakes to bear on his own account  the cost of all marketing in the 
country of importation.  Firm A places an order for an initial stock of the appliances and, prior to 
importation, conducts an advertising campaign.  
5. In the above example, the cost of the advertising  campaign is not a part of  the c ustoms 
value nor shall it result in rejection of the transaction value, as these activities are those related to 
marketing the imported goods as stated in the final sentence of paragraph 1(b) of the 
Interpretative Note to Article  1. 
COMMENTARY 17.1  
BUYING COMMISSIONS  
1.  The valuation treatment and the definition of buying commissions are stated in 
paragraph  1(a)(i) of Article  6 of the Agreement and in its relevant Interpretative Note.  
2. While  the provisions of the Agreement are clear and raise no particul ar question of principle, 
the treatment of commissions for c ustoms valuation purposes depends upon the exact nature 
of services rendered by the intermediaries.  
3. Explanatory Note 2.1 of the Technical Committee on Customs Valuation examines 
commissions and br okerage in the context of Article  8, identifying the common characteristics of 
intermediaries, and concludes that, since the nature of the services rendered by the intermediaries 
is often not apparent from the commercial documents, national administrations  will need to take 
necessary reasonable measures to ensure the proper application of this provision of the 
Agreement.  
4. This commentary provides guidelines on the question of the evidence necessary to establish 
under what circumstances fees paid by a buyer t o an intermediary can be considered as a buying 
commission.  
5. In this context, all relevant documents necessary to ascertain the existence and precise 
nature of the services in question should be made available to Customs.  
6. Among such documents, one would be the agency contract between the agent and the 
buyer, stating the formalities and the activities which the agent may have to perform in the 
discharge of his duties up to the time that he puts the goods at the disposal of the buyer.  
The agency contracts shou ld accurately reflect the terms of the agreement between the buyer and 
the agent and other documentary evidence such as purchase orders, telexes, letters of credit, 
correspondence, etc. which clearly supports the bona fides of the agency contract are to be  
produced should Customs so request.  
7. In cases where written agency contracts do not exist , alternative documentary evidence, 
such as mentioned in paragraph 6 above, which clearly establishes the existence of an agency 
relationship , is to be produced should  Customs so request.  
8. In cases where sufficient evidence establishing an agency relationship is not produced, 
Customs may conclude that no buying agency relationship exists.  
9. Sometimes, the contracts or documents do not clearly represent or reflect the natur e of the 
activities of the so -called agent.  In such circumstances, it is essential that the actual facts of the 
case be determined and various factors, as explained below, be examined.  
10. One of the questions which could be the subject of an enquiry is whethe r the so -called 
buying agent assumes any risk or performs additional services other than those which are 
indicated in paragraph 9 of Explanatory Note 2.1  and would normally be carried out by a buying 
agent.  The extent of these additional services could aff ect the treatment of the buying 
commission.  An example could be where the agent uses his own funds for the payment of the  
imported goods.  This opens the possibility of the so -called buying agent sustaining a loss or 
gaining a profit arising from ownership of the goods rather than receiving an agreed fee from G/VAL/N/1/ECU/3  
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  acting as a buying agent.  In this situation, the totality of the circumstances which apparently 
establishes a buying agency arrangement may be examined.  
11. The result of this enquiry could indicate that th e agent is acting on his own account and/or 
that he has proprietary interest in the goods.  In this respect, attention is drawn to export houses 
or so -called independent agents who carry out similar activities but, unlike buying agents, have 
proprietary int erest in the goods and exercise control over the transaction or over the price paid by 
the importer . In these cases, the so -called intermediary in question cannot be considered as 
a buying agent.  
12. Another factor to be examined is the relationship, within th e meaning of Article  15.4, of the 
parties involved in the transaction.  For instance, the relationship of the agent with the seller or 
with a person related to the seller has a bearing on the ability of the alleged agent to represent the 
buyer 's interest.  Despite the existence of an agency contract, the Customs is entitled to examine 
the totality of the circumstances to determine whether the so -called agent is, in fact, acting on 
behalf of the buyer and not on the account of the seller, or even on his own ac count.  
13. In certain transactions, the agent concludes the contract, reinvoices the importer 
distinguishing the price of the goods and his fee.  The mere act of reinvoicing does not make him 
the seller of the goods.  However, since the price paid to the supplie r is the basis for the 
transaction value under the Agreement, the Customs may require the declarant to produce the 
invoice issued by the supplier and other documents to substantiate the declared value.  
14. Failure  by the importer to supply Customs with the com mercial invoice from the supplier to 
the agent, or other satisfactory evidence of sale, may prevent Customs from verifying the price 
actually paid or payable in the purported sale for export to the country of importation and could 
preclude Customs from con sidering that sale as the bona fide sale for export.  
15. The compat ibility of fees charged in relation to services rendered could also be the subject 
of scrutiny.  At times, a buying agent may perform other services which are outside of the scope 
of the usual f unctions of a buying agent.  These additional services would affect the fees charged to 
the buyer.  For example, a buying agent instead of arranging the transport of the goods from the 
factory to the port or place of exportation, transports the goods himself  and his charge s include 
the cost of transport (*). In the above example, the total fee charged cannot be considered as 
buying commission ; however, the identifiable portion of the fee that relates to the buying agency 
services may be considered as a buying commission.  
16. On the basis of the above considerations , it could be concluded that various avenues are 
available to Customs to verify the nature of the services in question.  During this process 
administrations expect the full cooperation of the importers to establish the truth and accuracy 
of any statement, document or declaration as provided for in Article  17 of the Agreement and 
paragraph  6 of Annex III . In this respect , it is recognized that some of the information required by 
the Customs may be considered  commercially confidential by the parties involved.  In such cases 
Customs would be governed by the provisions of Article  10 of the Agreement and by the legislation 
of the importing country.  
(*) It should be noted that the ultimate dutiability of the charge s set forth in paragraph 15 could be 
impacted by the transport option selected by Signatories under Article  8.2. 
COMMENTARY 18.1  
RELATIONSHIP BETWEEN ARTICLES 8.1 (b)(ii) AND 8.1(b)(iv)  
1. Article  8.1(b) of the Agreement pro vides that, in determining the c ustoms value under 
Article  1, there shall be added to the price actually paid or payable, certain goods and services 
which are supplied directly or indirectly by the buyer free of charge or at a reduced cost for use in 
connection with the production and sale f or export of the imported goods, to the extent that such 
value has not been included in the price actually paid or payable.  
2. Under Article 8.1(b)(ii), the value of tools, dies, moulds and similar items used in the 
production of imported goods is to be added  to the price actually paid or payable for the imp orted G/VAL/N/1/ECU/3  
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  goods in determining the c ustoms value . Under Article  8.1(b)(iv) , the value of engineering, 
development, artwork, design work, etc. undertaken elsewhere than in the country of importation 
and necessar y for the production of the imported goods is to be added to the price actually paid or 
payable for the imported goods.  Often, however, engineering, development and design work, etc. 
are included in the value of tools, dies or moulds.  
3. The question which th en arises is whether such design work when it is undertaken in the 
country of importation should be excluded from the value of the assists specified in 
Article  8.1(b)(ii)  when these assists are used to produce the imported goods.  
4. Neither t he Agreement nor its Interpretative Notes specifically addresses the question 
raised.  Paragraph 2 of the Interpretative Note to Article  8.1(b)(ii)  though provides clear instruction 
as to how the value of the elements mentioned in paragraph 1(b) (ii) is to be determined : 
"If the importer acquires the element from a seller not related to him at a given cost, 
the value of the element is that cost.  If the element was produced by the importer or 
by a person related to him, its value would be the cost of producing it. ". 
5. In other w ords, the value of the assists mentioned in Article  8.1(b)(ii)  is either the total cost 
of their acquisition or the cost of producing the assist as reflected in the records of the producer of 
the assist, in accordance with generally accepted accounting pri nciples.  In that regard, the 
General  Note relating to "Use of generally accepted accounting principles " states that the 
determination of the value of an element provided for in Article  8.1(b)(ii)  undertaken in 
the country of importation would be carried ou t utilizing information in a manner consistent with 
the generally accepted accounting principles of that country.  
6. The structure of the assist provisions suggests that each category stands on its own and this 
provides further weight in support of the conclu sion that no exclusion should be made for costs 
associated with elements of the type listed in Article  8.1(b)(iv).  
7. In view of the above, the value of the elements mentioned in Article  8.1(b)(ii)  would include 
the value of the design work incorporated (even  if that work has been undertaken in the country of 
importation) as part of the cost of acquisition or of production.  
COMMENTARY 19.1  
MEANING OF THE EXPRESSION "RIGHT TO REPRODUCE THE IMPORTED GOODS"  
WITHIN  THE MEANING OF THE INTERPRETATIVE NOTE TO ARTICLE  8.1(c) 
1. This commentary seeks to provide guidance on the types of activities intended to be covered 
by the phrase "right to reproduce ". The Int erpretative Note to paragraph 1 (c) of Article  8 provides 
that t he terms "royalties " and "licenc e fees " appearing in Article  8.1(c) include, among other 
things, "payments in respect to patents, trademarks and copyrights ". The Interpretative Note goes 
on to say that "the charges for the right to reproduce the imported goods in the country of 
importation shall not be ad ded to the price actually paid or payable for the imp orted goods in 
determining the c ustoms value ". 
2. As it appears in the Interpretative Notes to Article  8.1(c) , the term "right to reproduce " 
would seem to refer not only to the physical reproduction of the imported goods (e.g.,  a sample 
article is imported and a mould is produced by the importer which is used to manufacture exact 
copies of the original imported article) , but also to the right to reproduce an invention, creation, 
thought or idea incorporated in the imported goods.  Examples of the latter would include an 
importation of a schematic diagram containing newly developed circuitry to be etched onto circuit 
boards (invention), an importation of a sculpture by a museum to be reproduced into miniature 
versions for resale (creation) and an importation of a transparency embodying a drawing 
of a cartoon character to be reproduced on to greeting cards (thought or idea).  
3. It would also refer to originals and copies of scientific works (such as the importation 
of a new strain of bacterium which will be reproduced into a form necessary for the production 
of a vaccine), originals of literary works (such as an importation of a manuscript for the purpose 
of reproduction into a book), models (importation of a scaled down model of a new type G/VAL/N/1/ECU/3  
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  of automobile to be reproduced into other identical models), prototypes (a prototype of a new toy 
which will be reproduced into exact copies of the new toy) and animal or plant species 
(a genetically altered insect which will be re produced to combat the spread of the original species).  
4. With respect to the right of reproduction, an analysis of the following elements may provide 
some direction : 
(a) Whether an idea or original work is incorporated in the imported goods;  
(b) whether the  reprodu ction of the idea or work is the subject of a reserved right;  
(c) whether  the right of reproduction has been assigned to the buyer in the contract of  sale or 
through a separate agreement;  
(d) whether the holder of the reserved right has required a remuneration for  the assignment 
of the right of reproduction.  
5. The acquisition of goods covered by a reserved right usually does not, of itself, confer the 
right to reproduce those goods.  In many cases, that right is obtained through a special agreement.  
6. In conclusion, eac h situation involving the right of reproduction should be considered on 
a case-by-case basis.  
COMMENTARY 20.1  
WARRANTY CHARGES  
1. The application of "warranty " to commercial transactions and the varied nature of the 
assoc iated charges, present Customs A dminis trations with many questions . This Commentary is 
intended to provide a response to those questions on the treatment of warranty charges.  
2. The q uestion of warranty related to imported goods has been raised in two other Technica l 
Committee instruments, namely : 
(a) Case study 6.1  "Insurance premiums for warranty "; and 
(b) the Explanatory Note on the distinction between the term "maintenance " in the 
Interpretative Note to Article  1 and the term "warranty ". 
3. Case Study 6.1, through the examination of a specific case, conv eys the general principle 
that, regardless of how an amount is invoiced, a payment falls within the definition of price 
actually paid or payable and thus is an element of the transaction value.  Moreover, even though 
the term "warranty " appears in the case study, this case study deals above all with insurance, 
the relationship between the two concepts of warranty and insurance as well as their impact on the 
price actually paid or payable.  
4. The Explanatory Note mentioned in paragraph 2 (b) above defines  the te rm "warranty" 
as follows : 
"Warranty is a form of guarantee on goods, such as motor vehicles and electrical 
appliances, which covers costs of correcting defects (parts and labour) or replacement 
subject to certain conditions being met by the warranty holder . If those conditions are 
not met, warranty can be voided.  Warranty covers hidden defects in the goods, 
i.e. defects which should not exist and which prevent the use of the goods or reduce 
their usefulness."  
5. Basically, two situations arise : 
(a) The seller dire ctly or indirectly bears the cost and undertakes the risk of warranty, the 
provision of which is reflected in the price for the goods;  
(b) the buyer directly or indirectly bears the cost and undertakes the risk of warranty and the 
price for the goods takes thi s into account.  
Warranty undertaken by the seller  G/VAL/N/1/ECU/3  
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  6. Difficulties in the treatment of warranty charges under the Agreement should not arise if the 
warranty is included in the unit price of goods.  When the seller provides a warranty to a customer, 
the seller w ill take this into account when pricing the goods.  Any extra cost attributable to the 
warranty will be part of the price and will be paid as a condition of the sale.  In this case, 
the Agreement does not allow any deduction, and the cost of the warranty is part of the 
transaction value even if it is distinguished from the price actually paid or payable for the goods.  
7. Where the seller imposes warranty on the buyer, the seller may choose to invoice the 
warranty separately from the goods.  In such a case, the wa rranty cost nevertheless remains 
a condition of the sale for exportation and is considered part of the price actually paid or payable, 
i.e. the total payment.  
8. If the seller contracts to transfer warranty risk to a third party , it may appear that the 
transa ction has been split.  That the seller has entered into a contract with the third party indicates 
that any warranty risk undertaken by the third party is at the behest of the seller and therefore to 
his benefit.  The price actually paid or payable is defined  in the Interpretative Note to Article  1 as 
the total payment made or to be made by the buyer to or for the benefit of the seller for the 
imported goods.  This definition is further amplified in paragraph 7 of Annex  III, which states that 
the price actually  paid or payable includes all payments actually made or to be made as 
a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third 
party to satisfy an obligation of the seller.  Consequently, where the seller requires th e buyer to 
make a payment to a third party with whom the seller has contracted to provide warranty cover, 
the payment must be included in the transaction value of the imported goods.  The same would 
also be true where warranty cover is provided by other par ties related to the seller.  
Warranty undertaken by the buyer  
9. As stated in paragraph 5 (b), there may be cases where the buyer may decide to bear the 
cost of warranty on his own account.  In these circumstances, any payments, or other costs 
incurred by the bu yer for warranty, are not part of the price actually paid or payable by application 
of the Interpretati ve Note to Article  1, since this is an activity undertaken by the buyer on his own 
account.  
Warranty agreements  
10. Situations can also arise whereby the tra nsaction is the subject of two separate contracts, 
one for the goods and one for the warranty.  Sellers/buyers sometimes separate warranty 
payments by having "separate " legal agreements drawn up.  In these instances, all the 
circumstances surrounding the "sale" of the goods and "warranty" should be carefully examined.  
The warranty agreement will be linked to the contract of sale of the goods by the fact that the 
warranty is a guarantee for the goods.  Even though a separate warranty agreement may exist, 
where the seller has placed an obligation on the buyer, as a condition of the sale of the goods, 
this simply becomes just another variation on the situations outlined above.  
Other questions related to warranty  
11. Where parts are delivered free of charge to the buye r in accordance with the initial contract 
some days or months after the goods were imported, in fulfilment of a warranty contract, they 
must be valued using the methods provided for in Articles  2 to 7 of the Agreement.  
12. Buyers may claim that duties were alr eady paid at the time of importation, since the price 
of the imported goods covered any potential warranty charges and, therefore, should not be 
assessed again on "free" replacement goods.  Questions in this regard should properly be 
addressed through the a pplication of appropriate national c ustoms procedures and techniques.  
COMMENTARY 21.1  
COST OF TRANSPORTATION: FREE -ON-BOARD SYSTEM OF VALUATION  
1. Article  8.2 of the Agreement provides that "... each Member shall provide for the inclusion in 
or exclusion from  the customs value, in whole or in part, of  ... : G/VAL/N/1/ECU/3  
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  (a) The cost of transport of the imported goods to the port or place of importation;  
(b) ...". 
2. Some Members have opted to exclude the transportation costs referred to in the previous 
paragraph and adopt what is gen erally d escribed as an f.o.b. system of c ustoms valuation.  
Members choosing to do so, nevertheless, encounter imported goods sold on  c. & f. and 
c.i.f. terms.  Where the price actually paid or payable for the goods includes a charge for 
transportation beyon d the point of export, questions may arise about the amount to be deducted 
for such transportation to derive the f.o.b. valuation.  
3. The WTO Valuation Agreement establishes a system of valuation based on actual values, 
as opposed to notional or estimated val ues. Article  8.3 provides that adjustments under Article  8 
should be "made only on the basis of objective and quantifiable data ". It follows that the deduction 
to take account of transport cost s included in c. & f. and c.i.f. prices should be made on the b asis 
of the actual costs.  The actual costs would be those amounts ultimately paid to, for example, the 
international carrier or freight forwarder for the movement of those goods subject to the 
transaction.  
4. The following example illustrates the principle ex pressed in paragraph 3: 
- Price actually paid or payable (c & f);  
- actual overseas freight paid to the carrier : 100; 
- f.o.b. customs value *: 95 
* it is assumed that no other adjustments under Article  8 are required.  
EXPLANATORY NOTES  
1. Time element in rela tion to Articles  1, 2 and 3 of the  Agreement.  
2. Commissions and brokerage in the context of Article 8 of the Agreement.  
3. Goods not in accordance with contract.  
4. Consideration of relationship under Article  15.5, read in conjunction with Article  15.4. 
5. Confirming  commissions.  
6. Distinction between the term "maintenance " in the Note to Article  1 and the term 
"warranty ". 
EXPLANATORY NOTE 1.1  
TIME ELEMENT IN RELATION TO ARTICLES 1, 2 AND 3 OF THE AGREEMENT  
Article 1  
1. Article  1 of the Agreement on Customs  Valuation stipu lates that the c ustoms value of the 
imported goods shall be the transaction value, that is, the price actually paid or payable for the 
goods when sold for export to the country of importation, subject to any necessary adjustments 
and provided that certain conditions are satisfied.  
2. Neither in this Article nor in the corresponding Interpretative Notes is there any reference to 
a time standard external to the actual transaction, which would need to be taken into 
consideration when deciding whether the price ac tually paid or payable is a valid ba sis for the 
calculation of the c ustoms value.  G/VAL/N/1/ECU/3  
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  3. Under the valuation method in Article  1 of the Agreeme nt, the basis for establishing c ustoms 
value is the actual price made in the sale giving rise to the importation, the ti me at which the 
transaction took place being immaterial.  In this connection the expression "when sold  ..." 
in paragraph 1 of Article  1 is not to be regarded as giving any indication of the time to be taken 
into consideration when deciding whether a price i s valid for the purposes of Article  1; it merely 
indicates the type of transaction involved, namely , one in which the goods were sold for export to 
the country of importation.  
4. Consequently, provided that the conditions prescribed in Article  1 are fulfilled , 
the transaction value of imported goods should be accepted irrespective of the time at which the 
sale contract was concluded, and hence, irrespective of any market fluctuations after the date 
when the contract was concluded.  
5. Article  1 does make a subsidi ary reference to  a time standard in paragraph  2(b); this relates 
only to "test" values and thus does not influence the situation that there is no time element 
involved in determining transaction value under Article  1. 
6. Paragraph  2(b) provides that in a sale  between related persons, the transaction value shall 
be accepted and the goods valued in accordance with the provisions of paragraph  1 whenever the 
importer demonstrates that such value closely approximates to one of three alternatives occurring 
at or abo ut the same time.  But if the term "occurring at or about the same time " were the only 
reference to be taken into consideration, there could in some cases be a substantial difference 
between the conditions affecting the goods being valued and those affectin g the goods furnishing 
the test value, and an inappropriate comparison could result.  
7. The application of paragraph  2(b) must be in a manner consistent with the principles of the 
Agreement.  The time of export, which is the standard of comparison for the purp oses of Articles  2 
and 3 would be one  approach.  
8. Other measures within the framework of the Agreement would also be possible, in particular 
time standards adapted to the principles underlying the test values in question, namely : for 
subparagraph  1.2(b)(i) the time of export to the country of importation of the goods being valued, 
for subparagraph  1.2(b)(ii)  the time of sale in the country of importation of the goods being 
valued, and for subparagraph  1.2(b)(iii)  the time of import of the goods being valued.  
Articles 2 and 3  
9. The time element is treated differently in Articles  2 and 3  of the Agreement.  Unlike Article  1, 
in which the valuation of imported goods is based on an autonomous element, namely , the price 
actually paid or payable for the goods, Articles  2 and  3 refer to values previously established in 
accordance with Article  1, namely , transaction values of identical or similar imported goods.  
10. To provide uniformity of application , Articles  2 and 3  state that the c ustoms value 
determined under the provisi ons of these Articles is the transaction value of identical or similar 
goods exported at or about the same time as the goods being valued.  Thus, these  Articles 
establish an external time standard to be taken into consideration for their application.  
11. It sho uld be noted that the external time standard applicable under Articles  2 and 3  is the 
time when the goods to be valued are exported, and not the time when they are sold.  
12. This external time standard must allow for practical application of the Article in que stion.  
Hence, the words "or about " should be regarded as intended simply to make the terms "at the 
same time " somewhat less rigid.  In addition, it should be noted that according to its 
General  Introductory Commentar y, the Agreement seeks to base c ustoms va lue on simple and 
equitable criteria consistent with commercial practice.  Starting from these principles , "at or about 
the same time " should be taken to cover a period of time as close to the date of exportation as 
possible within which commercial practice s and market conditions which affect price remain the 
same.  In the final analysis, the question must be decided on a case -by-case basis within the 
overall context of the application of Articles  2 and 3 . G/VAL/N/1/ECU/3  
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  13. The requirements in respect of time of course cannot alter the strict hierarchical order of the 
Agreement , which requires that Article  2 must be exhausted before Article  3 can be invoked.  
Thus,  the fact that the time of exportation of similar goods (as opposed to identical goods) 
is closer to that of the goo ds to be valued can never reverse the order of application of Articles  2 
and 3 . 
The material time for c ustoms valuation  
14. The foregoing remarks on the role of the time element in the application of Articles  1, 2 
and 3 of the Agreement do not, of course, have  any bearing o n the material time for c ustoms 
valuation.  Article  9 makes provision for the time to be taken into consideration for conversion of 
currency only.  
EXPLANATORY NOTE 2.1  
COMMISSIONS AND BROKERAGE IN THE CONTEXT OF ARTICLE 8 OF THE AGREEMENT  
Introduction  
1. Article  8, paragraph 1(a)(i) of the Agreeme nt states that, in determining c ustoms value 
under the provisions of Article  1, commissions and brokerage, except buying commissions, shall be 
added to the price actually paid or payable to the extent tha t they are incurred by the buyer but 
are not included in the price.  According to the Interpretative Note to Article  8, the term "buying 
commissions " means fees paid by an importer to his agent for the service of representing him 
abroad in the purchase of t he goods being valued.  
2. Commissions and brokerage are payments made to intermediaries for their participation in 
the conclusion of a contract of sale.  
3. Although the legal position may differ between countries with regard to the designation and 
precise defini tion of the functions of these intermediaries, the following common characteristics 
can be identified.  
Buying and selling agents  
4. The agent (also referred to as an "intermediary ") is a person who buys or sells goods, 
possibly in his own name, but always for  the account of a principal.  He participates in the 
conclusion of a contract of sale, representing either the seller or the buyer.  
5. The agent 's remuneration takes the form of a commission, generally expressed as 
a percentage of the price of the goods.  
6. A distinction can be made between selling agents and buying agents.  
7. A selling agent is a person who acts for the account of a seller ; he seeks customers and 
collects orders, and in some cases he may arrange for storage and delivery of the goods.  
The remuneratio n he receives for services rendered in the conclusion of a contract is usually 
termed "selling commission ". Goods sold through the seller 's agent cannot usually be purchased 
without payment of the selling agent 's commission.  These payments can be made in t he ways set 
out below.  
8. Foreign suppliers who deliver their goods in pursuance of orders placed through a selling 
agent usually pay for the latter 's services themselves, and quote inclusive prices to their 
customers.  In such cases, there is no need for the invoice price to be adjusted to take account 
of these services.  If the terms of the sale require the buyer to pay, usually direct to the 
intermediary, a commission that is additional to the price invoiced for the goods, this commission 
must be added to the  price when determining transaction value under Article  1 of the Agreement.  
9. A buying agent is a person who acts for the account of a buyer, rendering him services in 
connection with finding suppliers, informing the seller of the desires of the importer, co llecting G/VAL/N/1/ECU/3  
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  samples, inspecting goods and, in some cases, arranging the insurance, transport, storage and 
delivery of the goods.  
10. The buying agent 's remuneration which is usually termed "buying commission " is paid by the 
importer, apart from the payment for th e goods.  
11. In this case, under the terms of paragraph 1(a)(i) of Article  8, the commission paid by the 
buyer of the imported goods must not be added to the price actually paid or payable.  
Brokers (and brokerage)  
12. There is a somewhat theoretical difference bet ween the terms "brokers " and "brokerage " 
on the one hand and the terms "buying/selling agent " and "commissions " on the other ; in practice 
there is no clear -cut distinction between the two categories.  Moreover, in some countries 
the terms "broker " and "brokerage " are seldom, if ever, employed.  
13. Where the term "broker " is in use, it generally refers to an intermediary who does not act 
for his own account ; he acts for both buyer and seller and usually has no role other than to put 
both parties to the transactio n in touch with each other.  The broker 's remuneration is known as 
brokerage which is usually a percentage on the business concluded as a result of his activities.  
The percentage received by a broker is commensurate with his rather limited responsibilities.  
14. Where the broker is paid by the supplier of the goods, the total brokerage will normally be 
included in the invoice price ; in such cases, no problem arises with regard to valuation.  In case it 
is not so included, and yet incurred by the buyer, it should b e added to the price paid or payable.  
On the other hand, the broker may be paid by the buyer, or each of the parties to the transaction 
may pay part of the brokerage ; in these cases, the brokerage should be added to the price actually 
paid or payable insof ar as it is incurred by the buyer, is not already included in that price and does 
not constitute a buying commission.  
Conclusion  
15. To sum up, when determining the transaction value of imported goods it will be necessary to 
include in that value commissions a nd brokerage incurred by the buyer, except buying 
commissions.  Accordingly, the question of whether or not payments made to intermediaries by the 
buyer and not included in the price actually paid or payable should be added to that price will 
depend, in the  final analysis, on the role played by the intermediary and not on the term 
("agent " or "broker ") by which he is known.  It is also clear from the provisions of Article  8 that 
commissions or brokerage payable by the seller but which are not charged to the b uyer could not 
be added to the price actually paid or payable.  
16. It may also be worth pointing out that the existence and the nature of services rendered by 
intermediaries in connection with a sale are often not apparent from the commercial  documents 
present ed with the c ustoms declaration.  In view of the importance of the interests at stake, 
national administrations will need to take whatever reasonable measures they consider necessary 
to ascertain the existence and precise nature of the services in question.  
EXPLANATORY NOTE 3.1  
GOODS NOT IN ACCORDANCE WITH CONTRACT  
GENERAL  
1. The treatment of goods not in accordance with contract poses a preliminary question, 
namely whether some or all of the situations are to be dealt with as matters of c ustoms valuation 
or, alternatively, a re to be handled as matters of c ustoms technique (see Annex F.6. to the 
Kyoto  Convention).  
2. Although it seems that some situations involve questions that, in most countries, depend on 
nation al legislation not relating to c ustoms valuation, ot her situations may demand the application 
of valuation standards . This explanatory note therefore aims at the formulation of valuation rules G/VAL/N/1/ECU/3  
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  for all foreseeable normal situations for the guidance of administrations which wish to treat those 
situations by v aluation methods.  
TYPES OF CASES  
3. The term "goods not in accordance with contract " can have different meanings under various 
national legislations . For example, some administrations consider damaged goods as falling under 
this term while others limit the te rm to sound goods which do not meet contractual specifications, 
the question of damaged goods being handled under separate procedures or other provisions 
of law. Therefore , the present document has been subdivided to identify situations to facilitate 
arriving at a uniform approach  under the Agreement . These are : 
I. Damaged goods : 
(A) Upon importation, the shipment is found to be totally damaged, having no value.  
(B) Upon importation , the shipment is found to be partially damaged, or having scrap value 
only. 
II. Goods not in accordance with specification, i.e. goods which are not damaged but which are 
not in accordance with the original contract or order.  
III. Importation of goods replacing goods under I or II abo ve: 
(A) In a subsequent shipment.  
(B) In the same shipment.  
4. Since the nature of the damage and the type of goods can create an unlimited number 
of individual circumstance s, it is not intended in this explanatory note to go into detail with respect 
to the differences between "totally damaged " and "partially damaged " for valuation purposes.  
VALUATION TREATMENT  
I. Damaged goods  
(A) The goods are totally damaged  
5. On the presumption of the existence of national procedures for the re -exportation, 
abandonment or destruction of the goods, there is no liability to duty (see also St andard  6 
of Annex  F.6 to the Kyoto  Convention).  
(B) The goods are partially damaged or have scrap value only  
6. Where the goods are re -exported, abandoned or des troyed, as in subparagraph (A) above, 
there is no liability to duty.  
7. If, however, the importer takes d elivery of the goods , the Agreement woul d apply in the 
following manner : 
Article 1 : The price actually paid or payable was not for the damaged goods actually imported, 
and therefore Article  1 is not applicable.  However, if only a portion of the shipment is  found to be 
damage d, one could accept as transaction value the price represented by the proportion of the 
total price which the undamaged quantity bears to the total quantity purchased.  The damaged 
portion of the shipment will be valued under one of the s ubsequent provisions of the Agreement, 
in the prescribed order, as set out below.  
Article  2: In the majority of instances it would be improbable that a damaged shipment could be 
valued on the basis of the transaction value of identical goods, i.e. damaged goods being sold for 
export to the country of importation.  That is not to say, however, that this standard can be 
completely ignored since certain products might lend themselves to such an approach.  G/VAL/N/1/ECU/3  
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  Article 3 : The comments under Article  2 would have applic ation under Article  3. 
Article 5: If the damaged goods or identical or similar goods are sold in the country of importation 
in the condition as imported and all other requirements of the provision are met, th e customs 
value of the damaged goods could be pr operly determined under the deductive method.  If the 
goods are repaired prior to sale, and if the importer so requests, the value could be determined 
under the provisions of Article  5.2.2 with an allowance for the cost of repairs.  
Article 6 : Not applicable  inasmuch as damaged goods are not manufactured or produced as such.  
Article 7 : While, as noted above, there are distinct possibilities of arriving at a c ustoms value for 
damaged goods under one of the preceding standards of the hierarchy, it could be anti cipated that 
the majority of instances would be dealt with under the provisions of Article  7. In this event, the 
value must be determined using reasonable means consistent with the principles and general 
provisions of the Agreement and of Article  VII of the General  Agreement , and on the basis of data 
available in the country of importation.  
8. The method of valuation to be employed under Article 7 could be a flexible application 
of Article  1, that is, in the example cited : 
(a) A renego tiated price (bearing in mind  that this price may reflect either an element of 
compensation by the seller, or the fact that the seller wishes to avoid the expense of having 
the goods returned to him, or both);  
(b) the full price originally paid or payable, reduced by an amount equal to an y one of the 
following:  
(i) the estimate of a surveyor independent of the buyer and seller;  
(ii) the cost of repairs or refurbishing;  
(iii) the insurance settlement.  
Attention is drawn to the fact that an insurance settlement may not be an accurate measure 
of the reducti on of value due to damage, because it can be affected by extraneous circumstances 
such as over -insurance, under -insurance or negotiations.  Nevertheless , payment of an insurance 
settlement to the buyer does not affect acceptance by Customs of a price reduce d by reason 
of damage at importation.  In other words, even though the price actually paid or payable to the 
seller remains unchanged, with the compensation for the damage being handled as a separate 
matter between the insurance carrier and the importer, th e value of the goods must be established 
on the basis of their condition as imported.  
II. Goods not in accordance with specification  
(A) Re-exportation, abandonment or destruction  
9. On the presumption of the existence of national procedures for the re -exportatio n, 
abandonment or destruction of the goods, there is no liability to duty (see also Standard  8 
of Annex  F.6 to the Kyoto  Convention).  
(B) Retained  
10. If, despite the non -conformity to specifications found upon delivery, the goods are kept by 
the impo rter, the det ermination of the c ustoms value would be influenced by the nature of the 
non-conformity.  Goods of this type would fall into two categories : those which involve a shipment 
of the wrong goods (e.g. a shipment of woollen gloves against an order of sweaters) a nd those 
which are, in fact, the goods actually ordered but which fail to conform to the specifications in the 
original order to such an extent that the buyer seeks some form of reimbursement from the seller.  
11.(i)  Wrong goods  
Article 1 : If there is no sa le for export, transaction value is not applicable.  
Article 2 : Applicable, on the basis of the transaction value of identical goods if available.  G/VAL/N/1/ECU/3  
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  Article 3 : In the absence of a transaction value for identical goods, the transaction value 
of similar merchan dise could apply.  
Article 5 : In the absence of a c ustoms value determined under Article  2 or 3 , the value could 
properly be determined under the deductive method, either if the goods are sold in the condition 
as imported or, if the importer so requests, un der the provisions of Article  5.2. 
Article 6 : Computed value would have application in the context of the hierarchical order.  
However, a judgement would have to be made, in view of the relative origins of the situation, as to 
whether this Article could be applied, particularly noting the provisions of the first sentence 
of Article  6.2. 
Article 7 : In the abs ence of a determination of the c ustoms value under the preceding standards, 
Article  7 would apply.  In the example cited, a price agreed to and paid by th e importer for the 
gloves, even though after actual importation, might be accepted under a flexible application 
of Article  1 (but see the caveat in paragraph 8(a)).  
II. Goods not conforming to specification  
A number of situations may arise depending on the  level of agreement, or disagreement, 
between the buyer and the seller.  For example, the seller may take steps to bring the goods into 
conformity, either directly or through other parties, or he may render some form of compensation 
to the buyer which is ex traneous to the goods themselves.  On the other hand, the seller may not 
agree that there is, in fact, a non -conformity to specifications or, alternatively, the buyer may be 
seeking an amount of redress from the seller which is predicted on damages resultin g from the 
non-specification rather than on a measure of the non -specification itself.  From the c ustoms 
valuation aspect, however, the price actually paid or payable still exists and since the Agreement 
does not make specific provision for this situation, if all other conditions are met, the value will be 
determined on the basis of transaction value under Article  1. Nothing in this section precludes 
"goods not conforming to specification " being considered as "wrong goods " and dealt with as in 
(i) above.  
III. Replacement goods  
12.(A) In a subsequent shipment  
There are two possibilities.  The replacement may be sent : 
(a) invoiced at the original price, separate arrangements having been made as regards credit for 
the original goods ; or 
(b) invoiced free of charge.  
 In the case of (a), other conditions being met, the price would form the basis for 
determination of the c ustoms value under Article  1. 
Where replacement goods are sent free of charge, as in (b), they should be regarded as 
goods imported in fulfilment of the or iginal transaction ; in these circumstances it would be 
therefore appropriate to accept the price in that transa ction for determination of the c ustoms value 
under Article  1, the treatment of the first shipment being a matter for separate  consideration.  
(B) In the same shipment  
With certain types of goods it is trade practice for the sellers to include in their shipments 
a quantity of articles "free of charge " as replacements for articles which experience shows are 
likely to be defective or damaged in transit : similarly materials somewhat in excess of the ordered 
measurements may be sent, for example because the edges are known to be liable to damage in 
transit.  In these cases , the sale price should be regarded as covering the total quantity shipped, 
no attemp t being made to value separately the "free replacements " or to take account of the 
additional quantity for valuation purposes.  
 G/VAL/N/1/ECU/3  
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  EXPLANATORY NOTE 4.1  
CONSIDERATION OF RELATIONSHIP UNDER ARTICLE 15.5, READ IN CONJUNCTION 
WITH ARTICLE 15.4.  
1. Article  15.4 of the Agreement sets out eight situations only where, for the purposes of the 
Agreement, persons shall be deemed to be related.  
2. In Article  15.5 the Agreement further provides that persons who are associated in business 
with one another in that one is the sole agent, sole distributor or sole concessionaire (hereinafter 
referred to for brevity as sole agent), however described, of the other shall be deemed to be 
related for the purposes of the Agreement only if they fall within the criteria of paragraph  4 
of Article 15. 
3. The wording of Article  15.5 of the Agreement has two objectives.  The first is to provide a 
clear departure from the concept held in certain valuation systems that sole agents are by their 
nature related to their suppliers.  
4. On the other hand , it is recognized that parties who have been established as being sole 
agents should not on that basis alone be considered as being unrelated if, in fact, they meet one 
of the criteria in Article  15.4. Therefore, the second objective of Article  15.5 is to direct 
consideration of the relationship of parties solely within the provisions of Article  15.4. 
5. The persons who wish to become associated in business in that one will become the sole 
agent of the other, will contact each other through a variety of means such as  notices in business 
and trade journals and other avenues available in trade circles.  Negotiations will be undertaken 
and, in most cases, written contracts will result which specify the terms and conditions of the sole 
agency agreement.  
6. It can be expected that three situations will be encountered.  The first involves 
an established and reputable manufacturer/seller whose products are much sought after in the 
markets of the importing country.  Obviously, in these circumstances, the manufacturer/seller will 
be in the stronger negotiating position and the terms of the contract will weigh more heavily in his 
favour in terms of the conditions and requirements placed upon the sole agent.  Parenthetically, 
however, this inevitably is accompanied by a higher price for the goods.  
7. The second situation is the reverse, wherein the importer is a large enterprise with many 
distribution, sales and service locations in a lucrative market.  In this instance , the importer would 
have more influence in the negotiating process in ter ms of the conditions and requirements placed 
upon the supplier.  The supplier, moreover, would be likely to accept a somewhat lower price to 
gain access to the advantages of the importer 's large distribution and sales structure.  The third 
situation is betwe en these two extremes where the parties open and conclude their negotiations on 
a more equal footing.  
8. In such cases , the resulting contract becomes critical, recognizing that such contracts are 
freely entered into, usually have termination or renewal provi sions, and are enforceable under the 
civil laws of the countries concerned in the event of a breach of a condition by one of the parties.  
9. The question which must be considered is whether the terms or conditions of the contract 
are such as to meet one of th e provisions of Article  15.4. There will be instances where the 
contract establishing a sole agency does establish a relationship, such as when the contract 
includes a provision relating to persons appointed as officers or directors of one another 's 
busine sses under Article  15.4(a) , or where there is an exchange of stock (5 % or more) under 
Article  15.4(d) . It could be envisaged that some contracts could create a third entity which might 
bring in the provisions of Articles  15.4(f) and (g) , while others could  create a partnership under 
15.4(b) . On the other hand, it is reasonable to assume that such contracts would not usually 
create an employer/employee relationship under Article  15.4(c)  nor a family relationship under 
Article  15.4(h).  G/VAL/N/1/ECU/3  
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  10. It can therefore be con cluded with some assurance that the specific provisions of the 
contract can be expected to give a clear indication of the applicability or non -applicability of the 
provisions of the Agreement in question.  
11. The remaining provision of Article  15.4 defining re lationships is that of 15.4 (e) wherein one 
person directly or indirectly controls the other.  The Interpretative Note to Article  15.4(e) p rovides 
that "for the purposes of this Agreement, one person shall be deemed to control another when the 
former is lega lly or operationally in a position to exercise restraint or direction over the latter ". 
12. Obviously, caution must be exercised in this respect to ensure that unintended results do 
not occur through improper interpretations of this provision when considering the terms and 
conditions of contracts which have been freely entered into by otherwise unrelated parties.  
The examples given in paragraphs 6 and 7 above represent situations wherein the terms and 
conditions of the contracts are weighted in favour of one pa rty over the other and the former 
would be legally in a position to enforce its contractual rights over the latter.  However, in any 
contract, verbal or written, even of the most simple type, one party is always in a position to 
specify certain rights, obli gations and other expectations which are legally enforceable on the 
other.  
13. For example, in a basic contract to deliver at a given price, both parties have an expectation 
that their legal rights and obligations will be honoured, that is, one must deliver an d one must pay 
a certain price.  This, however, would not create a relationship under Article  15.4(e) . Even in 
a more complex contractual arrangement where the seller, because of royalty payments on the 
imported goods, has the right to establish and audit t he accounting systems the importer must use 
to account for the royalties, the exercise of this right would not in itself create a relationship under 
Article  15.4(e).  
14. It can be concluded that it is not the intent of the Agreement to create a  relationship ou t 
of every contract or agreement which of their very nature establish legal rights or obligations 
enforceable under national laws.  Therefore, the wording of the Interpretative Note to 
Article  15.4(e) must normally be taken to apply to situations which go b eyond usual buyer/seller 
or distribution arrangements and involve a position to  exercise restraint or direction in respect 
of essential aspects relating to the management of the activities of the other person.  
15. The consideration of control and the existence  of a position to exercise restraint or direction 
requires the determination of questions of fact and degree which must be based on the particulars 
of each individual situation.  
EXPLANATORY NOTE 5.1  
CONFIRMING COMMISSIONS  
General remarks  
1. Exporters protect themselves against the financial risk of non -payment for goods and 
services supplied in international trade, through the use of financial services, including those which 
provide confirmation to guarantee payment.  Various forms of financial services are ava ilable to 
exporters to guarantee against the risk of non -payment or insolvency on the part of a buyer.  
While  these services can vary from country to country, they generally give rise to a payment to an 
intermediary (often a bank), which, for a fee, will ac cept the risk on behalf of the exporter.  
The payments made for such services are often known as "confirming commissions ". They may, 
however, be denoted by other names in various countries.  
Confirming commissions  
2. The confirmation or the guarantee of the pay ment for the goods by the buyer can be 
undertaken through normal banking channels, government agencies, insurance companies or 
specialized commercial companies dealing with such matters.  
3. The sit uation is frequently as follows : a buyer opens a letter of cre dit with his own bank.  
However, the seller may lack confidence in the status and reliability of the letter of credit raised by G/VAL/N/1/ECU/3  
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  the buyer 's bank.  He seeks to confirm the letter of credit through another bank (usually in his own 
country) which guarantees the  seller against the commercial risk of non -payment by the buyer 's 
bank.  The fee charged by the bank for this service is a confirming commission.  
4. There are specialized commercial companies called confirming houses, which act either for 
buyers or for sellers . Among the variety of services performed by them is the guarantee 
of payment.  The commission charged for the service is often called a confirming commission.  
Determination of the valuation treatment  
5. The determination of the valuation treatment to be given  to confirming commissions is 
a complex question inasmuch as the issue relates to a variety of financial practices which may not 
be defined uniformly among countries.  
6. It would be normal practice that a seller, incurring this expense, would seek to recover his 
confirming commission costs from a buyer.  In the great majority of cases, he would do this by 
including the commission cost directly in his price for the goods.  In such cases, the confirming 
commission would be included in the price actually paid or pa yable for the goods and there is no 
provision under the Agreement which would allow for its deduction in determining the transaction 
value.  
7. Situations will occur where the charge for confirming commissions is separately identified, 
either by the seller in the invoice of sale for the goods, or in a separate invoice sent to the buyer 
by the seller or by the confirming institution.  
8. In examining the above situations, it seems that the type of activity giving rise to the 
payment of a confirming commission is not  one envisaged under the provisions of Article  8 of the 
Agreement , either as a "commission " under Article  8.1(a) or as "insurance " under Article  8.2(c) . 
Confirming commissions are more in the nature of premiums for insurance against the risk 
of non-payment  for the goods, rather than commissions in the strict sense of the word.  Similarly, 
the insurance referred to under Article  8.2(c)  would be that incurred for the transport of the 
imported goods only, as noted in Advisory Opinion  13.1. Therefore, the questi on which needs to be 
addressed is whether the payments for confirming commissions are part of the price actually paid 
or payable for the imported goods.  
9. The Interpretative Note to Article  1 and paragraph 7 of Annex  III make it clear that the price 
actually  paid or payable is the total payment made or to be made directly or indirectly by the 
buyer to or for the benefit of the seller for the imported goods.  That price includes all payments 
actually made or to be made as a condition of sale of the imported goo ds by the buyer to the seller 
or by the buyer to a third party to satisfy an obligation of the seller.  Subject to paragraph  10 
of this Explanatory Note, if a confirmation of the instrument of payment for the imported goods is 
considered to be for the benef it of the seller because it insures the seller against the risk 
of non-payment by the buyer 's bank, and if confirming commissions are paid by the buyer to the 
seller or to a third party as a condition of the sale of the imported goods, the price actually p aid or 
payable would include any confirming commission.  
10. There may be cases where a buyer undertakes on his own initiative to provide a seller with 
an irrevocable and confirmed letter of credit, the primary purpose being to ensure the conclusion 
of the cont ract of sale.  Any commission charges arising in those cases could be paid by the buyer 
directly to the confirming institution.  In these circumstances, there being no condition imposed in 
the sale contract and the benefit being realized by the buyer rather than the seller, the amount 
paid for the confirming commission would not be part of the price actually paid or payable.  
EXPLANATORY NOTE 6.1  
DISTINCTION BETWEEN THE TERM "MAINTENANCE" IN THE NOTE TO ARTICLE 1 AND 
THE TERM "WARRANTY"  
1. The Interpretative Note to Article  1, in the paragraphs related to "price actually paid or 
payable ", stipulates inter alia  that the c ustoms value shall not include charges for maintenance, 
undertaken after importation on imported goods such as industrial plant, machinery or equi pment, G/VAL/N/1/ECU/3  
- 126 - 
  provided that they are distinguished from the price actually paid or payable for the imported 
goods.  
2. Since the concept of "maintenance " is not specifically defined in the Agreement, that term 
has to be given its ordinary meaning.  
3. Reference works def ine "maintenance " in general terms as, for example : 
- "The upkeep or preservation of condition of property, including the cost of ordinary repairs 
necessary and proper from time to time for that purpose " (Black 's Law Dictionary, 
Sixth Edition, 1990, page 9 53); or 
- in respect of assets, the term maintenance is defined as "expenditures undertaken to 
preserve an asset 's service potential for its originally -intended life ; these expenditures are 
treated as periodic expenses or product costs " (Black 's, page 954) ; or 
- the "action of keeping something in good condition, of providing what is necessary for that 
purpose "; the "service in a company responsible for maintaining the performance 
of equipment and materials " (French dictionary Petit Larousse Illustré, 1987 - translation).  
4. The question has arisen as to whether the scope of the term "maintenance ", referred to in 
the Interpretative Note to Article  1, includes warranty.  This question is examined below.  
5. The difference between "warranty " and "maintenance " is as fo llows: 
- Maintenance is a form of preventative care on goods such as industrial facilities and 
equipment to ensure the upkeep of those facilities and equipment to a standard which 
enables them to perform the function for which they were acquired;  
- warrant y is a form of guarantee on goods, such as motor vehicles and electrical appliances, 
which covers costs of correcting defects (parts and labour) or replacement subject to certain 
conditions being met by the warranty holder.  If those conditions are not met,  warranty can 
be voided.  Warranty covers hidden defects in the goods, i.e.  defects which should not exist 
and which prevent the use of the goods or reduce their usefulness;  
- maintenance must always be performed, whereas warranty is only a contingency meas ure 
which might be invoked in the case of failure or under -performance of goods.  
6.  There is, therefore, a fundamental difference between the two concepts, and the term 
"maintenance " in the Interpretative Note to Article  1 cannot be applied to warranties.  
CASE STUDIES  
LIST OF CASE STUDIES  
1. Report on a case study with speci al reference to Article 8.1(b) : engineering, development, 
artwork, etc.  
2. Applic ation of Article 8.1 (d) of the Agreement.  
2.2 Treatment of proceeds under Article 8.1(d).  
1. Restrictions and conditions in Article 1.  
2. Treatment of rented or leased goods.  
3. Application of Article 8.1(b) . 
1. Ditto.  
2. Insurance premiums.  
3. Application of the price actually paid or payable.  
4. Application of Article 8.1 . 
1. Ditto.  
2. Sole agents, sole distributors a nd sole concessionaires  
3. Application of Article 1.2.  
4. Application of Article 15.4 - related party transactions.  G/VAL/N/1/ECU/3  
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  CASE STUDY 1.1  
REPORT ON A CASE STUDY WITH SPECIAL REFERENCE TO ARTICLE 8.1( b): 
ENGINEERING, DEVELOPMENT, ARTWORK, ETC . 
Facts of  the transa ction */ 
1. The NAVAL company, domiciled in country of importation I,  signs a contract with the 
BORG  company, domiciled in country of exportation E, for the construction and sale by BORG or 
a processing plant for the production of liquid methane gas . The selli ng price of the plant to be 
paid by NAVAL to BORG, is 2,000  million  currency units (c.u.) . However, a clause in the contract 
provides for a further 500  million  c.u. to be paid by NAVAL to BORG in respect of the engineering 
and development necessary for the  plant's construction.  
2. In addition, since the production of liquid gas requires a specific technology that BORG does 
not possess, the contract also stipulates that NAVAL will undertake to make available to BORG the 
materials and engineering services requir ed for the design, construction and installation 
of aluminium liquid gas tanks . NAVAL also agrees in the contract to provide the technical studies 
and design work needed for the plant 's pipeline system and for certain auxiliary equipment.  
*/ The names used  in this study are fictitious.  
The pipeline system will be supplied free of charge by NAVAL.  
3. For this purpose, acting on the advice of BORG (who prepared tender specifications an d 
studied bids received), NAVAL : 
(a) Engages AMERICA, a company located in a forei gn count ry, to supply from that country : 
(i) the special materials required by BORG for the construction of the aluminium liquid 
gas tanks, at a selling price of 400  million  c.u.; 
(ii) plans, sketches and drawings, at a total price of 200  million  c.u., for the cons truction 
of those tanks not only for the plant to be built by BORG, but also for three other 
plants to be built for NAVAL by the VIKING company in the country of importation;  
(iii) technical assistance in respect of the construction of the tanks for each of the plants 
at a total price of 100  million  c.u.; 
(iv) 10 special machines for welding the aluminium tanks in BORG 's factory, at  a hire 
charge per unit of 1  million  c.u.; 
(v) 500 cylinders of gas employed by the machines for welding the tanks in BORG 's 
factory,  at a uni t price of 10,000 c.u.  
(b) engages VESPUCIO, a company located in a foreign country, to supply from that country  
(i) the steam system for the four plants ordered by  NAVAL, at a total price 
of 1,200 million c.u.;  
(ii) technical collaboration through the provision of pla ns, drawings and technical 
documentation for the construction of the steam system, at a total price of  180 million  
c.u.; 
(c) commissions CARTAGO, its foreign subsidiary, to execute the design work and supply plans 
and sketches for the auxiliary equipment commo n to the four plants at a total price 
of 600 million  c.u., and orders it to send one set of them to BORG;  
(d) commissions its foreign -based CRIMEA design centre to prepare drawings of the furnace 
system for the four plants and to send one set of them to BORG.  The design cent re's records 
show that this work involves 8,000 man -hours, and its accounts indicate an hourly cost 
of 2,000 c.u.;  G/VAL/N/1/ECU/3  
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  (e) commissions its engineering division to prepare a list of all the materials required for the 
plant's construction and to carry  out pressure and temperature studies for a  variety 
of production conditions . The graphs and drawings reflecting the results of these studies are 
prepared by the SERVO company, which has its headquarters in the country of importation 
and receives payment o f 12 million  c.u. from NAVAL.  NAVAL sends BORG one set of these 
engineering studies, graphs and drawings for use in the plant 's construction.  
4. All post -importation construction etc. work is undertaken by NAVAL on its own account.  
Determination of c ustoms va lue 
5. NAVAL, the importing company, presents to the Customs of the country of importation 
a declaration of value based on the transaction value, together with all the commercial 
documentation and accounts relating to the construction and sale of the plant by  BORG and to the 
contracts with the other companies for materials and services.  
6. After considering the question , the Customs arrive at the conclusion that the goods should 
be valued under Article  1. 
7. The transaction value is calculated by adding the followin g amounts to the selling price 
of the plant, fixed in the contract with BORG at 2,000  million  c.u.: 
(a) 500 million  c.u., payable to BORG in respect of the engineering and development necessary 
for the plant 's construction (see paragraph 1 above).  
This additio n does not constitute an adjustment under Article  8 but is in fact part of the total 
price actually paid or payable under the contract . Very often the engineering supplied by the seller 
of the goods himself is invoiced separately . In some countries , this d istinction is due to the 
different kind of authorization for payments abroad (Trade Department for goods, Industry 
Department for technical assistance) . The price actually paid or payable is the total payment made 
or to be made by the buyer to the seller f or the imported goods.  
(b) 400 million  c.u., payable to AMERICA for supplying BORG with the special materials required 
for the construction of the alu minium tanks (see paragraph (a) (i) above).  
This adjustment is not added under subparagraph  (iv) of Article  8.1(b), but under 
subparagraph  (i), because it involves materials and components which are incorporated in the 
imported plant at the time of valuation.  The buyer of the plant supplied them free of charge to the 
seller for use in connection with the production  and sale for export of the plant and their value is 
not included in the amount of 2,000  million  c.u. fixed as the selling price of the plant.  
(c) 50 million  c.u., corresponding to one quarter of the 200  million  c.u. payable to AMERICA for 
the plans, sketches and drawings for the construction of the tanks in f our plants 
(see paragraph 3(a) (ii) above).  
This is an adjustment under Article  8.1(b)(iv) . It covers design work, plans and sketches 
undertaken outside the country of importation necessary for the producti on of the plant and 
supplied free of charge by the buyer.  According to subparagraph (b) of Article  8.1, the value 
of this assistance, fixed at 200  million  c.u., must be apportioned between the four plants which 
incorporate identical aluminium tanks.  
(d) 25 million c.u., representing one quarter of the 100  million  c.u. payable to AMERICA  for 
technical assistance in respect of the construction of the tanks (see  paragraph  3(a)(iii)  
above).  
The value of the technical assistance furnished by the staff of the firm AM ERICA to BORG 's 
factory and supplied free of charge by the importer, must be added to the price payable for the 
plant by virtue of Article  8.1(b)(iv) , which covers such engineering services.  It must also be 
apportioned between the four plants.  G/VAL/N/1/ECU/3  
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  (e) 10 million  c.u., payable to AMERICA for supplying BORG with 10 special we lding machines 
(see paragraph 3(a) (iv) above).  
This adjustment is not added under Item  (iv) of Article  8.1(b) , but under Item  (ii), because 
it involves tools used in the construction of the impor ted plant.  The buyer supplied them free 
of charge to the seller solely for use in connection with the production and sale for export of the 
plant. The value of the tools is the cost of acquisition, which in this instance is represented by the 
hire charge.  
(f) 5 million  c.u., payable to AMERICA for the supply to BORG of the 500 cy linders of gas 
(see paragraph 3(a) (v) above).  
This adjustment is also not added under subparagraph  (iv) of Article  8.1(b) , but under  
subparagraph  (iii), because it involves materials co nsumed in the production of the plant, supplied 
free of charge by the buyer of the plant and the value of the materials is not included in the selling 
price of the plant.  
(g) 300 million  c.u., representing one quarter of the 1,200  million  c.u. payable to VESPU CIO for 
supplying the steam system for t he four plants (see paragraph 3(b) (i) above).  
In this case the addition is in accordance with the provisions of Article  8.1(b)(i),  because it 
involves materials, components and parts which are incorporated in the imp orted plant.  The buyer 
of the plant supplies them free of charge to the seller for use in connection with the production and 
sale for export of the plant and their value is not included in the amount of 2,000  million  c.u. fixed 
as the selling price of the plant.  
(h) 45 million  c.u., representing one quarter of the 180  million  c.u. payable to VESPUCIO for the 
provision of plans, drawings and technical documentation for the steam system in t he four 
plants (see paragraph 3(b) (ii) above).  
This is another adjustment  under Article  8.1(b)(iv) . It applies to design work, plans and 
drawings for use in connection with the construction of the plant and to charges and costs for 
technical assistance undertaken before importation of the imported plant ; these services are 
supplied indirectly by the buyer free of charge to the seller, and their value is not included in the 
selling price.  
(i) 150 million  c.u., representing one quarter of the amount payable to the CARTAGO subsidiary 
for design work, plans and sketches for the auxiliar y equipment common to t he four plants 
(see paragraph 3 (c) above).  
This assistance is also covered by Article  8.1(b)(iv) . The buyer supplies these plans and 
sketches and pays for the design work undertaken outside the country of importation.  
The adjustment corresponds to one quarter of the amount paid by the importer to the foreign 
subsidiary.  
(j) 4 million  c.u., representing one quarter of the cost of preparing the plans for the furnace 
system of the four plants, calculated by multiplying 8,000 man -hours by the  cost per hour  of 
2,000 c.u. (see paragraph 3 (d) above).  
This adjustment under Article  8.1(b)(iv)  covers the value of the design work for the furnace 
system of the imported plant  
8. The 12  million  c.u. paid by NAVAL to SERVO in respect of graphs and drawings are not 
added to the selling price, since this service is provided within the country of importation ; on the 
same grounds, the cost of the engineering services furnished by the specialist division of NAVAL 
itself should not be taken  into account when deter mining c ustoms value, both exclusions being in 
accordance with the provisions of the Interpr etative Note to Article  8.1(b)(iv) , subparagraph 7.  G/VAL/N/1/ECU/3  
- 130 - 
  9. To summarize (and ignoring for the purposes of this case study the question of transport 
costs), the transaction  value of the imported plant is made up as follows : 
- CUSTOMS VALUE OF THE IMPORTED PLANT 3,489  million  c.u. 
CASE STUDY 2.1  
APPLICATION OF ARTICLE 8.1( d) OF THE AGREEMENT  
Facts of  the transaction  
1. Importer M purchases and imports a shipment of lamb carcasse s from unrelated exporter  X. 
The shipment is invoiced at an f.o.b. port of exportation price . Under the terms of the contract , 
M pays, in addition to the invoice price, all costs and charges of transport and insurance to the 
port of importation and c ustoms  duties and taxes, and also remits to X  40% of the net profit 
realized on the resale of the meat in the country of importation . The contract does not specify the 
resale price, but it provides that the net profit shall be determined by deducting from the re sale 
price all direct expenses but not administrative overheads.  
2. At the time of importation , M has arranged to sell a quantity of the lamb carcasses at one 
price to R1, a wholesale firm.  He has also arranged to sell the remaining carcasses at a higher 
price to R2, a frozen food chain, after he has cut them into smaller joints and packed them.  
3. The country of importation applies the Valuation Agreement on a c.i.f. basis.  
Determination of c ustoms value  
4. In the circumstances set out above , there is a sale for ex port and, provided that the other 
requirements of Article  1 are satisfied, Article  1 can be applied for determining the c ustoms value 
of the imported goods.  An addition must be made to the invoice price, under Article  8.1(d) , to take 
into account that part  of the net profit which accrues to the exporter . The actual determination of 
transaction value is demonstrated in the following example. ( N.B. Where the necessary 
documentation is not available at the time of importation it will be necessary to delay for 
a reasonable period of time the fi nal determination of the c ustoms value under Article  13 of the 
Agreement.)  
Example  
5. In the calculation of the transaction value , the following symbols and figures are adopted : 
- P = Invoice price  2,000,000 c.u.  
- T = Freigh t and insurance from the country of exportation  to the port or place of importation  
200,000 c.u.  
- D = Customs duties and importation charges  (representing in all 20% of customs value)  
- Ti = Internal transport  100,000 c.u.  
- C = Marketing expenses  150,000  c.u. 
- G = Expenses for cutting and packing the quantity resold to R 2 300,000 c.u.  
- Pr1 = Resale price to R1  2,700,000 c.u.  
- Pr2 = Resale price to R2  1,250,000 c.u.  
- B = Net profit of resales  
- V = Transaction value  
6. Obviously, the net profit B has to b e determined on the basis of th e amount of c ustoms 
duties and importation charges D, and thi s amount, which depends on the c ustoms value of the 
goods, has to be determined in the light of the net profit . There is thus an interdependence 
between elements B and V.  G/VAL/N/1/ECU/3  
- 131 - 
  7. The calculation of transaction value would be made as follows : 
- V = P + T + 40B  100 
- V = 2,000,000 + 200,000 + 40B ; that is to say  100 
- (1)  V = 2,200,000 + 0.4 B  
The amount of t he net profit of the resales is : 
- B = (PR1 + P R2) - (P +T +Ti + C +  G + D) ; that is to say  
- B = (2,700,000 + 1,250,000) - (2,000,000 + 200,000 + 100,000 + 150,000 + 300,000 + 
20V); 100 
- B = 1,200,000 - 0.2 V  
Replacing this value of B in (1) : 
- V = 2,200,000 + 0.4 (1,200,000 - 0.2 V)  = 2,200,000 + 480,000 - 0.08 V ; that is to say 
1.08 V = 2,680,000 ; V = 2,680,000  1.08 
- V = 2,481,481 c.u.  
 - B = 703,704 c.u.  
Thus, the transaction value on a c.i.f. basis is 2,481,481 currency units.  
CASE STUDY 2.2  
TREATMENT OF PROCEEDS UNDER ARTICLE 8.1 (d) 
1. Article  8.1(d) provides that, in determining the c ustoms value under the provisions 
of Article  1, there shall be added to the price actually paid or payable for the imported goods the 
value of any part of the proceeds of any subsequent sale, disposal or use of the imported goods 
that accr ues directly or indirectly to the seller.  
2. This subparagraph is directly connected with Article  1.1(c), which permits the use 
of transaction value in the valuation of imported merchandise provided that no part of the 
proceeds of any subsequent resale, dispo sal, or use of the goods by the buyer will accrue directly 
or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the 
provisions of Article  8. Accordingly, the condition in Article  1.1(c) may become inapplicable 
throug h an adjustment made under Article  8. 
3. Article  8.1(d) sets out the principles for the addition of any such payments and the 
Agreement contains no Interpretative Note clarifying its scope and application.  It must also be 
noted that there is no mention in the  Agreement stipulating that such payments must be 
a condition of sale ; the mere existence of such proceeds requires an adjustment under Article  8. 
4. Another important factor that should be taken into account is Article  8.3, which states that 
additions to the  price paid or payable shall be made only on the basis of objective and quantifiable 
data; if not, transaction value cannot be determined.  
5. In applying Article  8.1(d) , proceeds of any subsequent resale, disposal or use of the 
imported goods should not be co nfused with the flow of dividends or other payments from the 
buyer to the seller that do not relate to the imported goods (see Articles  1 and 8 , and the relevant 
Interpretative Notes thereto).  
6. Where an adjustment for proceeds is required and the relevant i nformation is not available 
at the time of importation, it will be necessary to delay for a reasonable period of t ime the final 
determination of c ustoms value under Article  13 of the Agreement.  
7. Taking into consideration the foregoing principles , the follow ing illustrates the application 
of Article  8.1(d)  with an assumption that other requirements of Article  1 have been met.  G/VAL/N/1/ECU/3  
- 132 - 
  General facts of transaction  
8. Corporation C of country X owns a number of subsidiaries in different countries, all of which 
operate in a ccordance with corporate policies established by C . Some of these subsidiaries are 
manufacturing enterprises, others are wholesalers and still others are service -oriented enterprises.  
9. Importer I in the country of importation Y, a subsidiary of C , is a whol esaler of men 's, 
women 's and children 's garments ; he buys men 's garments from manufacturer M, another 
subsidiary of corporation C also located in country X, and women 's and children 's garments from 
unrelated manufacturers of third countries as well as from  local manufacturers.  
Situation 1  
10. In accordance with C 's corporate policy concerning sales between subsidiaries, goods are 
sold at a price negotiated between the subsidiaries.  However, at the end of the year, importer  I 
will pay to manufacturer M 5 % of the  total annual resale of the men 's garments which he buys 
from him during that year as a further payment for the goods.  
11. In this case, the payment in question is a proceed of a subsequent resale of the imported 
goods which accrues directly to the seller and the amount is to be added to the price paid or 
payable as an adjustment under the provisions of Article  8.1(d) . 
Situation 2  
12. It has been established that importer  I pays to service company  A, another subsidiary of 
corporation  C, 1% of his gross profit reali zed over the annual total sales of men 's, women 's and 
children 's garments purchased from all sources . Importer I produces evidence that this payment is 
not related to the resale, use or disposal of the imported goods but is a payment made in 
accordance wit h corporate policy to reimburse A for low interest loans and other financial services 
A provides for all the subsidiaries of corporation C.  
13. Service company A is related to the seller of the imported goods and thus the payment could 
be considered as an indi rect payment to the seller.  It is, however, payment for a financial service 
which is unrelated to the imported goods.  Therefore, the payment would not be considered as 
proceeds in the meaning of Article  8.1(d) . 
Situation 3  
14. It has been established that at t he end of the financial year, importer I remits to corporation 
C 75% of his net profit realized over that year.  
15. In this case , the remittance by I to corporation C cannot be considered as proceeds since it 
represents a flow of dividends or other payments fr om the buyer to the seller which do not relate 
to the imported goods . Therefore, in accordance with the Interpretative Note to Article  1 
(price  paid or pa yable) it is not a part of the c ustoms value.  
CASE STUDY 3.1  
RESTRICTIONS AND CONDITIONS IN ARTICLE 1*  
Facts of the transaction  
1. M, a foreign manufacturer of motor vehicles, has concluded a contract with wholesaler  D in 
the country of importation I wherein D will act as his sole distributor.  
2. The specific provisions of the sole distribution agreement between  manufacturer  M and 
distributor  D are as follows:  
(a) D's selling right shall not extend to countries outside the distributor 's territory, i.e.,  country 
of importation I;  G/VAL/N/1/ECU/3  
- 133 - 
  (b) D shall fix his retail prices and the discount rate for dealers in his territory;  
(c) D shall  maintain two to three months vehicle stock and a corresponding stock of spare 
parts;  
(d) D shall spare no effort to import and sell the maximum quantities of motor vehicles from  M. 
In the event of the minimum turnover not being reached, M reserves the right t o terminate 
the agreement.  The minimum turnover of different brands and models of vehicles is fixed by 
M. However, the quantity fixed for each brand and model is flexible and negotiable even 
though the quantity is not reached.  D also reserves the right to terminate the agreement by 
giving adequate notice to M;  
(e) D shall maintain showrooms, employ adequate staff of trained salesmen and establish 
a chain of dealers with workshops;  
(f) D shall carry on advertising for the vehicles within the territory;  
(g) D shall provi de after -sale servicing to all M 's vehicles used in the territory;  
(h) M shall not sell vehicles to any firm in D 's territory ; and 
(i) D shall not be given any quantity discount on motor vehicles imported by him.  
*/ This case study deals only with restrictions and  conditions in Article  1 and not with other issues, such as 
any relationship between the parties in terms of Article  15. 
Specific facts  
3. M's selling price to D of the most popular model is 12,000 c.u. per car irrespective 
of quantity and owing to the fact t hat M does not normally sell his cars to third parties, there is 
no evidence that M varies his selling price according to commercial level in respect of sales 
to country  I. 
4. R, a car rental agency in country I , wishes to purchase 10 units of the same make o f motor 
car from M . R then enters into negotiations with M for the direct purchase of 10 units because he is 
not prepared to pay D 's minimum tax exclusive price of 21,000 c.u . M indicates readiness to sell 
10 of the same model cars to R at 12,600 c.u. each  but M is precluded from doing so by the sole 
distributor agreement between him and D who fears that R, who is not subject to the obligations 
undertaken by him (D), could resell the cars in country I below D 's selling price and so 
substantially affect his (D) business . At D's insistence, the sale between M and R is to be made 
subject to the following conditions : 
(a) The cars shall be registered for use as rental cars by R ; and 
(b) they shall not be resold by R within one year of registration.  
5. A few tourists who vis it M's country purchase from him identical motor cars at a tax free 
export price of 13,900 c.u. each for export to country I . Such sales to tourists are not prohibited 
by the sole distributorship agreement.  
Determination of c ustoms value  
Importations by so le distributor  
6. An examination of the sole distribution agreem ent gives the following results : 
(a) D's selling right shall not extend to countries outside the distributor 's territory, i.e.,  country 
of importation I.  
This is a provision which limits the geograph ical area in which the goods may be resold, 
a restriction that is permissible under subparagraph 1 (a)(ii) of Article  1. 
(b) D shall fix his retail prices and the discount rate for dealers in his territory.  
This provision is not a restriction or condition withi n the meaning of Article  1. 
(c) D shall maintain two to three months vehicle stock and a corresponding stock of spare parts.  G/VAL/N/1/ECU/3  
- 134 - 
  This provision corresponds to a usual business practice which requires the maintenance 
of an adequate stock for anticipated sales and r epairs ; it is not a  condition of sale that implies that 
other goods have to be bought, but rather is a  condition or consideration relating to the marketing 
of the imported goods, governed by the provisions of the second paragraph of the Interpretative 
Note to paragraph  1(b) of Article 1.  
(d) D shall spare no effort to import and sell the maximum quantities of motor vehicles from  M. 
In the event of the minimum turnover not being reached, M reserves the right to terminate 
the agreement.  The minimum turnover of di fferent brands and models of vehicles is fixed by 
M. However, the quantity fixed for each brand and model is flexible and negotiable even 
though the quantity is not reached.  D also reserves the right to terminate the agreement by  
giving adequate notice to M. 
This provision is not a restriction or condition within the meaning of Article  1. 
(e) D shall maintain showrooms, employ adequate staff of trained salesmen and establish 
a chain of dealers with workshops.  
This provision corresponds to usual business practic es and would be treated as a  condition 
or consideration relating to the marketing of the imported goods.  
(f) D shall carry on advertising for the vehicles within the territory.  
This provision corresponds to usual business practices and would be treated as a  condition 
or consideration relating to the marketing of the imported goods.  
(g) D shall provide after -sale servicing to all M 's vehicles used in the territory.  
This provision corresponds to usual business practices and would be treated as a  condition 
or consider ation relating to the marketing of the imported goods.  
(h) M shall not sell vehicles to any firm in D 's territory.  
This provision is not a restriction or condition within the meaning of Article  1. 
(i) D shall not be given any quantity discount on mo tor vehicles im ported by him.  
This provision is not a restriction or condition within the meaning of Article  1. 
Importations by the car rental agency  
7. Before arriving at a conclusion as to what Article is to be used for determining the c ustoms 
value of the imported cars, it is necessary to examine M 's selling procedure to R.  
8. By examining the agreement between M and R, it appears that there are two restrictions as 
to the disposition and use of the goods by the buyer, i.e. : 
(i) the cars shall be registered for use as rental cars by R;  
(ii) they shall not be resold by R within one year of registration.  
9. Since M is prepared to sell the cars to R at 12,600 c.u., if D permits him to do so, the 
restrictions imposed on R solely for safeguarding D 's business do not affect the value o f the cars.  
Consequently the value can be established under the provision of Article  1. 
Importations by tourists  
10. With respect to importations by tourists of identical cars into country I, account should be 
taken of the fact that though the transaction is e xecuted in the market of the country of export, 
the facts of the transaction characterize the price as of "sale for export " to the country G/VAL/N/1/ECU/3  
- 135 - 
  of importation.  Customs value for this category should therefore be based on the transaction 
value, i.e. 13,900 c.u. adjusted as necessary (see Study  1.1 - Treatment of used motor vehicles).  
CASE STUDY 4.1  
TREATMENT OF RENTED OR LEASED GOODS  
Facts of the transaction  
1. Firm I of country X, engaged in the catering business , enters into a mid -term catering 
contract with the n ational airlines to supply prepared food in special individual pack aging  ready for 
serving to passengers.  
2. Whereas the previous pack aging for such purposes used to be imported by another firm, 
in view of the duration of the contract and on the basis of prel iminary cost effective studies , firm I 
decides to lease the necessary packing machinery.  It therefore concludes a contract with leasing 
firm A of country  Y. On the basis of the specifications given by firm  I, the leasing firm  A buys the 
machinery from a lo cal manufacturer  B in country  Y on its own account and firm  I takes the 
delivery ex -works . The price paid by A to manufacturer  B is the price of the goods on the domestic 
market of country Y.  
3. At the time of clearance firm I furnishes the Customs with a cop y of the leasing agreement.  
4. The terms of the leasing agreement are as follows : 
(a) All the costs for delivery of the machinery, its assembly in situ , as well as its dismantling 
and return to an address to be named by the lessor shall be borne by the lessee.  
(b) engineering personnel for assembling and putting the machinery into operation shall be 
provided by firm B.  Costs of these activities shall be borne by the lessee.  
(c) the lessee shall insure the machinery for the full period (delivery ex -works up to the return 
to the lessor).  
(d) any fees, duties and taxes payable in connection with the leasing and the importation shall 
be paid by the lessee.  
(e) the period of lease is 36 months, renewable.  
(f) the monthly rental payment is 5,300 c.u . In case of extension the rental payment is reduced 
by 15 % per month.  
5. In addition to the leasing contract, the lessee provides to the Customs the following 
information and documents : 
- The lessor is a subsidiary of a bank;  
- documentary evidence indicating that the lessor includes in the rental p ayments of contracts 
of this nature an interest of 9 % (a rate which is applicable to medium -term loans in 
country  Y); 
- a document showing that monthly rental charges also include the lessor 's commission 
of 1.5% calculated over the total amount payable for  the basic contract period;  
- a copy of the invoice indicating the price for the machinery paid by the lessor to 
manufacturer  B. 
Determination of c ustoms value  
6.  Since this is the first importation of such machinery into the country of importation X, the 
use of Articles  2 and 3  is precluded and , on account of the nature of the transaction , Article  5 
cannot be applied.  The data necessary for determining the computed value is not available . 
The Customs have to establish a value under Article  7. 
7. Although variou s approaches exist t o determine c ustoms value under Article  7, using 
reasonable means consistent with the principles and general provisions of the Agreement and 
Article  VII of GATT  1994, it has been decided  in this case to establish the c ustoms value on th e 
basis of rental payments payable during the full economic life of the machinery . Through 
consultation between the Customs and the lessee this economic life is estimated to be 60  months.  G/VAL/N/1/ECU/3  
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  8. The monthly rental payment is 5,300  c.u. for 36  months and 4,505  c.u. for the remaining 
24 months (15 % reduction).  The interest element of 9 % included in those amounts should be 
deducted insofar as the conditions set out in the Geneva Decision on interest are fulfilled.  
9. It has been established that the 1.5 % commission on t he total amount payable over the 
basic contract period cannot be considered as a buying commission under the terms 
of Article  8.1(a)(i) . This commission is actually the lessor 's mark -up and should not be deducted.  
10. Depending upon the national legislation of  each Party, the elements listed in Article  8.2 will 
be included in or excluded from the c ustoms value . Cost of the engineering personnel for assembly 
of the machinery, fees, duties and taxes payable in connection with leasing and i mportation are 
not part of the c ustoms value.  
11. For arriving at the c ustoms value , the rental amount, exclusive of interest , can be 
determined on the basis of the following formulae for wh ich certain symbols are adopted : 
 Calculation of the rental amount exclusive of interest over the basic contract period  
(a) If the rental payment is made in arrears : 
R1 (QN - 1) 
___________  
QN (Q - 1)  
Or in figures : 
5,300 (1.007536 - 1) 5,300 (1.3086 - 1)  
______________ = ______________ =  
1.007536 (1.0075 - 1) 1,3086 (1,0075 - 1) 
5,300 x 0.3086 1,635.58 ______________ =  
____________ = 166,896 1.3086 x 0.0075 0.0098  
(b) If the rental payment is made in advance : 
R1 (QN - 1) 
_______________  
QN-1 (Q -1) 
Or in figures : 
5,300 (1.007536 -1) 5,300 (1.3086 - 1)  
________________ = ________________ =  
(1.007536 - 1)(1.0075 - 1)       1.2989 x 0.0075  
5,300 x 0.3086 1,635.58 _______________ =  
____________ = 167,924 1.2989 x 0.0075 0.00974  
 Calculation of the rental amount exclusive of interest over the full economic life of the 
machinery . G/VAL/N/1/ECU/3  
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  (a) If the re ntal paym ent is made in arrears : 
R2 (QN - 1) 
_________ ______  
QN (Q - 1) 
Or in figures:  
4,505 (1.007524 - 1) 4,505 (1.1964 - 1) 
________________ = _______________ =  
1.007524 (1.0075 -1) 1.1964 (1.0075 - 1) 
4,505 x 0.1964 884.782  
______________ = _____________= 98,63 8 
1.1964 x 0.0075 0.00897  
(b) If the rental payment is made in advance:  
R2 (QN - 1) 
__________ _____ 
QN-1 (Q - 1) 
Or in fig ures: 
4,505 (1.007524 - 1) 4,505 (1.1964 - 1) 
____________________ = ___________________ =  
(1.007524-1)(1.0075 - 1) 1.1875 x 0.0075  
4,505 x 0.1964 884.782  
_________________ = ________________ = 99,414  
1.1875 x 0.0075 0.0089  
12. In the present case , the total rental amount payable over the full economic life of the 
machinery, calculated as indicat ed above, would constitute the c ustoms value subje ct to the 
national legislation provisions with respect to the elements listed in Article  8.2. 
CASE STUDY 5.1  
APPLICATION OF ARTICLE 8.1 (b) 
Facts of the transaction  
1. Importer I in country  of importation Y presents for c ustoms clearance 10 armoured vehicles, 
which were the subject of an armouring operation by firm A in country of exportation X.  The basic 
vehicles were purchased by I from manufacturer M, also in country X, at a total price 
of 17,400,000 c.u. and supplied free of charge to A, without having been  used since purchase.  
2. At the time of importation, I produces an invoice from A for the armouring operation for 
an amount of 43,142,000 c.u., and an invoice from manufacturer M for the basic vehicles invoicing 
I for an amount of 17,400,000 c.u.  G/VAL/N/1/ECU/3  
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  Determinatio n of c ustoms value  
3. In this case , the armoured vehicles should be valued under the provisions of Articles  1 and 8  
taken together.  The cost of the basic vehicles should be added, as an adjustment under 
Article  8.1(b)(i) , to the price actually paid or payable  for the armouring operation.  Because  A is 
providing armouring services, not selling armoured vehicles, the term "sale" as it applies to the 
transaction between I and A, will be regarded in its widest sense as a sale of goods, in accordance 
with paragraph  (b) of Advisory Opinion  1.1. Thus, ignoring for the purposes of this case the 
question of transport costs and associated charges, the transaction value of the armoured vehicles 
would be 60,542,000 c.u.  
CASE STUDY 5.2  
APPLICATION OF ARTICLE 8.1 (b) 
Facts of the transaction  
1. Firm I, established in country of importation Y, orders three identical racing cars from 
automobile manufacturer M in country of exportation X . These cars must be manufactured 
according to certain technical specifications imposed by I ; the specifications are as follows : 
(a) The carburettors for the cars will be manufactured by firm A in country Q and supplied free 
of charge to M by I.  Their cost per unit is 10,000 c.u.;  
(b) the testing of the car engines will be done in factory M by electronic check ing equipment 
manufactured by firm B in country P, which, rented by I from B, will be supplied free 
of charge to M by I . The equipment will be incorporated into M 's production line . The engines 
that pass the testing procedures will be incorporated into the  auto body ; however, 
the equipment will discard the engines that fail the test.  The hire charge for the equipment 
delivered and installed at M 's factory is 60,000 c.u.;  
(c) the racetrack testing to ensure that the performance of the cars meets the manufacturin g 
specifications will be carried out by M, using 5,000 litres of special fuel produced by 
company C in country Q . This wil l be supplied by I to M at a special price equal to  40% 
of the price invoiced by C t o I, which is 10 c.u. per litre ; 
(d) the bodywork of t he cars will be constructed by M according to plans and sketches prepared 
by firm D in country R ; these will be furnished to M free of charge, their cost to I being 
12,000 c.u.;  
(e) the gearbox of the cars will be manufactured by M according to plans and sketc hes 
undertaken by I 's technical service department located in county of importation  Y and 
supplied to M free of charge . The cost of production of these plans and sketches is 
8,000  c.u. 
2. At the time of importation of the three c ars, I presents to the Customs  Authorities of the 
country of importation Y a declaration of value based on the transaction value, together with all 
the commercial documentation and accounts relating to the manufacture of the cars by M and to 
the contracts for the materials and other go ods and services supplied.  
Determination of c ustoms value  
3. The declared value is based on the invoice price by M for the three cars, 900,000 c.u., to 
which the following amounts (ignoring for the purpose of this case study the question of transport 
costs an d associated charges related to the goods and services supplied) are added as 
adjustments : 
(a) 30,000 c.u. paid by I to A in respect of the carburettors, as components incorporated  in the 
imported cars ; this adjustment is made under Article  8.1(b)(i) ; 
(b) 60,000 c .u. paid by I to B for supplying M with the electronic checking equipment, as tools, 
dies, moulds and similar items used in the production of the imported goods ; this is an 
adjustment under Article  8.1(b)(ii);  
(c) 30,000 c.u. corresponding to the 60 % of the pr ice invoiced by C to I for the fuel supplied to 
M for the racetrack tests, as material consumed in the production of the imported cars, G/VAL/N/1/ECU/3  
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  it being understood that the 40 % of the price was already included in the invoice price ; this 
is an adjustment under Article 8.1(b)(iii);  
(d) 12,000 c.u. paid by I to D for the plans and sketches of the bodywork of the cars, 
undertaken in country R and necessary for the production of the imported cars ; this 
adjustment is added under Article  8.1(b)(iv);  
4. The Customs A uthorities a ccept the exclusion from the transaction value of the  
8,000 c.u., cost of production of the plans and sketches for the gearbox of the cars since this 
assistance is provided within the country of importation by I 's technical service ; the exclusion is in 
accordance with the provisions of Article  8.1(b)(iv) . 
5. The value ex -factory M, for c ustoms purposes, of the three cars is 1,032,000 c.u., to which 
would be added the cost of transport and associated charges to the county of importation, if this is 
provided for  in the importing country 's national legislation  
CASE STUDY 6.1  
INSURANCE PREMIUMS  
Facts of the transaction  
1. Seller S, established in the country of exportation X, is the exporter of motor vehicles 
manufactured by M, also of country X.  Seller S concluded a sales contract with buyer B of country 
of importation Y.  According to one of the conditions of the sale contract, a two -year warranty 
(spare parts and repair work) is provided for the cars to be purchased by B.  The costs for the first 
year of warranty are included in the price of the cars payable by B.  
2. The contract of sale provides that the second year 's warranty costs will be paid by buyer  B 
to seller S by way of a separate payment calculated as a certain amount per car.  The payment 
applicable to each ship ment of cars will be invoiced following shipment.  The amount payable is 
final regardless of whether there are claims and compensation during the second year 's warranty.  
3. Seller S negotiates an insurance contract for the second year 's warranty with an insura nce 
company N, established in country T.  According to the contract, the insurance company will fully 
compensate buyer B directly for all claims relating to the second year 's warranty that is given on 
the cars.  The insurance company will receive the premium  from the seller.  
4. Claims and compensation during the first year of warranty are to be settled directly between 
the manufacturer and the buyer, and during the second year between the insurance company and 
the buyer.  
Valuation treatment  
5. It should be pointed out that the price actually paid or payable is defined in the 
Interpretative Note to Article  1 as the total payment made or to be made by the buyer to or for 
the benefit of the seller for the imported goods.  This definition is further amplified in paragrap h 7 
of Annex III , which states that the price actually paid or payable includes all payments actually 
made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by 
the buyer to a third party to satisfy an obligation of the seller.  
6. In this case, the first year 's warranty cost is part of the price actually paid or payable.  
The second year 's warranty cost, although paid for separately, is also part of the price actually 
paid or payable by the buyer to the seller for the imp orted cars.  G/VAL/N/1/ECU/3  
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  CASE STUDY 7.1  
APPLICATION OF THE PRICE ACTUALLY PAID OR PAYABLE  
Facts of the transaction  
1. An importer purchases a machine at a price of 10,000 c.u.  
2. The machine in question, which is highly specialized and incorporates advanced technology, 
calls for the use of a sophisticated operating method . The seller has therefore prepared a training 
course to instruct buyers in the operation of the machine . The course is to be held, prior to 
importation, at the seller 's premises in the country of exportation . The charge for the course is 
500 c.u. 
3. Prior to the c ustoms clearance of the machine, the importer/buyer presents an invoice of the 
price for the machine.  
4. The importer, being uncertain as to whether the amount in respect of the course should or  
should not  be included in the c ustoms declaration, informs Customs of the separate billing for the 
charge for the training course.  
Situation 1  
5. According to the contract of sale, it is up to the buyer to decide whether he needs the course 
or whether he feels capable of operating the machine without attending the course . Payment for 
the course is due only if the buyer actually attended . By way of information, it is po inted out that, 
at the time of c ustoms clearance, the buyer has attended the course.  Furthermore, the p rice of the 
machine can be verified as being 10,000 c.u.  
Determination of c ustoms value  
6. The Interpretative Note to Article  1 and paragraph 7 of Annex  III make it clear that the price 
actually paid or payable is the total payment made or to be made, directl y or indirectly, by the 
buyer to or for the benefit of the seller for the imported goods . That price includes all payments 
actually made or to be made by the buyer to the seller as a condition of the sale of the imported 
goods.  
7. The payment for the course i s not a condition of sale if it is possible to purchase the machine 
without paying for the course . The fact that the charge for the course has been billed separately 
implies that the buyer has attended the course.  In this case, the payment for the course i s not for 
the imported goods because it is not a condition of the sale of the machine . In fact, the contract of 
sale comprises two elements, namely the provision of goods and providing the course . Insofar as 
the machine may be purchased without paying for the course, these two elements are separable.  
8. Thus, the payment for  the course is not part of the c ustoms value, under the provisions 
referred to in paragraph 6 above, because it is not a condition of the sale.  
Situation 2  
9. The payment for the course is an explicit requirement in the contract of sale and must be 
made even if the buyer does not attend.  
Determination of c ustoms value  
10.  The payment for the course is a condition of sale ; it is due even if the buyer has not 
actually attended the course and the mac hine cannot be purchased without paying for the course . 
In this case, the total payment, which includes the price of the course is, under the provisions 
referred to in paragraph 6 above, made for the imported goods, because it is made as a condition 
of the  sale. This is so, even though the cost of the course appears on a separate billing.  G/VAL/N/1/ECU/3  
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  Situation 3  
11. The contract of sale obliges the buyer both to attend and to pay for the course.  
Deter mination of c ustoms value  
12. The payment fo r the course forms part of the c ustoms value of the goods for the same 
reasons as under Situation 2 above.  
CASE STUDY 8.1  
APPLICATION OF ARTICLE 8.1  
Facts of the transaction  
1. ICO sells high fashion men 's garments to retailers in the country of importation.  
All garments are imported from on e overseas supplier, XCO.  XCO manufactures the garments 
using paper patterns supplied free of charge by LCO on behalf of ICO.  LCO, which is located in 
a third country, specializes in designing high fashion men 's garments.  There is no relationship, 
within t he meaning of Article  15.4, between ICO, XCO and LCO.  
2. ICO has a licence agreement with  LCO under which ICO is granted : 
(i) An exclusive licence to distribute garments incorporating LCO 's designs in the country ; 
(ii) the right to use paper patterns, incorporating de signs, developed by LCO.  
3. The licence agreement also provides that LCO will supply designs and paper patterns to 
whomever ICO nominates.  ICO instructed LCO to supply XCO with multiple copies of the paper 
patterns (incorporating the designs) necessary to man ufacture garments in the various sizes.  
4. ICO pays XCO 200 c.u. for each garment.  In consideration for the licence granted, ICO pays 
to LCO a licence fee equal to 10 % of ICO 's gross sales price of the garments.  At the time 
of importation, all the garments ha ve been sold to retailers for 400 c.u. each.  Therefore, it is 
known at the time of importation that a licence fee of 40 c.u. will be paid to LCO for each garment.  
Determination of c ustoms value  
5. The importer presents to the Customs of the country of importa tion a declaration of value 
based on the transaction value, together with all the documentation relating to both the licence 
agreement with LCO and the payment made for the rights granted under this licence agreement.  
6. All the provisions of Article  1(a) to (d) are satisfied and the c ustoms value is to be 
determined under the transaction value method.  
Price actually paid or payable  
7. The price actually paid or payable for each garment under Article  1 is 200 c.u. as this is the 
total payment made by the buyer to  or for the benefit of the seller in respect of each garment.  
Adjustments  
8. Is it for the Customs A dministration to determine the exact nature of the additional payment 
of 40 c.u. per garment, in order to establish wheth er or not it forms part of the c ustoms  value 
of the impor ted garments?  If the facts show that the payment referred to as a licence fee relates 
to an element of Article  8.1(b) (an "assist "), then Article  8.1(b) would apply.  Otherwise, Customs 
should examine whether the payment satisfies the con ditions laid down in Article  8.1(c).  
9. The paper patterns perform a similar function to a mould or die . The buyer sends the paper 
patterns free of charge through the licensor LCO and they are used in the production and sale for G/VAL/N/1/ECU/3  
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  exportation of the imported go ods. These patterns therefore constitute an assist under  
Article  8.1(b)(ii) and their value, which also includes the cost of the designs, should be added to 
the price actually paid or payable for the imported goods.  
10. The Interpretative Note to Article  8.1(b )(ii) contains two methods of determining the value 
of an item.  First, if the importer acquires the element from a seller not related to him at a given 
cost, the value of the element is that cost.  Second, if the element was produced by the importer or 
by a person related to him, its value would be the cost of producing it.  In this case, ICO is not 
related to LCO ; therefore, the value of the paper patterns would be ICO 's cost to acquire the 
patterns from LCO . ICO acquired the patterns through the licence agr eement wit h LCO. 
In consideration for the licence, ICO must pay LCO an amount equal to 10 % of ICO 's gross sales 
price of the garments.  Thus,  ICO's cost to acquire the patterns is 10 % of the gross sales price 
(400 c.u.) or 40  c.u. for each garment.  
11. Given th at the additional payment of 40  c.u. is to be included in the c ustoms value of the 
imported garments under the terms of Article  8.1(b),  it is not necessary to consider its possible 
addition to the price actually paid or payable under the terms of Article  8.1(c). 
Conclusion  
12. The transaction value per garment is 240  c.u., that is to say 200  c.u. as the price actually 
paid or payable and 40  c.u. as the adjustment provided for under Article  8.1(b)(ii) insofar as the 
licence fee in this case has to be treated, fo r valuation purposes , as the payment for an assist.  
CASE STUDY 8.2  
APPLICATION OF ARTICLE 8.1  
Facts of the transaction  
1. ICO imported multiple copies of a video laser disc which is purchased from XCO.  The discs, 
which incorporated a selection of copyright mu sic video clips, were manufactured by XCO in the 
country of exportation.  ICO obtained the right to use the music video clips incorporated on the 
discs under a separate licence agreement with LCO in a third country.  In accordance with its 
licence agreement with ICO, LCO compiled a master tape of the selection of music video clips to be 
incorporated in the discs.  ICO then supplied the master tape to XCO free of charge.  There is no 
relationship, within the meaning of Article  15.4, between ICO, XCO and LCO.  
2. The master tape formed the basis of XCO 's production process.  The master tape conveyed 
images which were reproduced in an identical form on a laser disc stamper.  Multiple copies of the 
disc were made from the stamper.  Thus, each disc was an identical reproduc tion of the master 
tape and XCO would not have been able to manufacture the discs without the master tape.  
3. ICO was required to pay XCO 1,000 c.u. for producing the stamper and 28,000  c.u. for 
4,000 copies of the disc . In consideration for the right to use the music video clips and master 
tape, ICO is required to pay to LCO a licence fee of 5 % of the gross sales price of the discs in the 
country of importation.  
Determination of c ustoms value  
4. The importer presents to the Customs of the country of importation a declaration of value 
based on the transaction value, together with all the documentation relating to both the licence 
agreement with LCO and the payment made for the rights granted under this licence agreement.  
5. All the provisions of Article  1(a) to (d) are satisfied and the c ustoms value is to be 
determined under the transaction value method.  
Price actually paid or payable  
6. The price actually paid or payable under the Interpretative Note to Article  1 is 29,000  c.u. as 
this sum is the total payment made or to be made to or for the benefit of the seller for the laser G/VAL/N/1/ECU/3  
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  discs.  The 1,000 c.u. paid for the laser disc stamper must form part of the price actually paid or 
payable because the buyer was required to pay this amount to the seller in order to obtain the 
imported goods.  
Adjust ments  
7.  It is for the Customs Administration to determine the exact nature of the additional 
payment of 5 % of the gross sales price of the discs in the country of importation in order to 
establish wheth er or not it forms part of the c ustoms value of the imported discs . If the facts show 
that the payment referred to as a licence fee relates to an element of Article  8.1(b) (an "assist "), 
then Article  8.1(b)  would apply.  Otherwise, Customs should examine whether the payment 
satisfies the co nditions laid down in Article  8.1(c) . 
8. As the master tape was used in connection with the manufacture of the discs and supplied 
by the buyer to the seller free of charge, its value will be added to the price actually paid or 
payable if it falls within the c lass of goods and services set out in paragraphs 8.1(b)(i) to (iv).  
9. As previously stated in paragraph 1 of this case study, LCO compiles music video clips on 
the master tape, which is furnished to XCO.  The compilation is part of the design and development 
phase for the imported video laser discs.  This design and development was undertaken elsewhere 
than the country of importation ; therefore, it is added to the price actually paid or payable for the 
merchandise pursuant to Article  8.1(b)(iv) . 
10. The value of th e assist is the 5 % licence fee as this was the cost to ICO of obtaining the 
music video clips and master tape.  
11. Given that the additional payment of 5 % of the gross sales price of the discs in the country 
of import ation is to be included in the c ustoms valu e of the imported discs under the terms 
of Article  8.1(b) , it is not necessary to consider its possible addition to the price actually paid or 
payable under the terms of Article  8.1(c) . 
Conclusion  
12. The transaction value of the 4,000 imported discs is the pr ice actually paid or payable 
(29,000 c.u.) , plus the assist (5 % of the gross sales price of the discs in the country of 
importation).  
CASE STUDY 9.1  
SOLE AGENTS, SOLE DISTRIBUTORS AND SOLE CONCESSIONNAIRES  
Facts of  the transaction  
1. Autoex, a company establi shed in the country of export X, manufactures "Auto" brand high 
performance motor vehicles.  Autoex designates Auto Inc. (Inc), a newly -established company in 
the country of importation I, to be its sole distributor in country I . The Agreement signed betwee n 
Autoex and Inc. provided that : 
(i) Autoex granted Inc. the exclusive right to sell and distribute "Auto" vehicles in country  I; 
(ii) Autoex and Inc. shall annually set recommended retail selling prices for vehicles in country  I 
on the basis of market trends and a nticipated demand for vehicles;  
(iii) Autoex and Inc. will negotiate Inc. 's purchase price for vehicles on the basis of agreed 
recommended retail selling prices.  In addition, Inc. will be entitled to a quantity discount, to 
be effected on the invoice, of 10 % from agreed prices on orders of more than one vehicle;  
(iv) Inc. is to conduct its business entirely on its own account.  Autoex will not indemnify or 
reimburse Inc. for any loss suffered in connection with the sale of "Auto" vehicles, including 
default of customer s. G/VAL/N/1/ECU/3  
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  2. Paragraph 1 sets out the total agreement between the parties and that agreement is 
consistent with commercial practice.  
3. Inc. subsequently sells two "Auto" vehicles to PCO, a motor vehicle dealer established in 
country I.  Both cars were manufactured by A utoex and shipped to Inc. for pre -delivery 
preparation.  
4. Inc. is responsible for arranging c ustoms clearance and prior to importation, presents to 
Customs in country I all the documentation with respect to the transaction with a request for 
a ruling.  
5. The ex amination of the circumstances surrounding the  sale establishes the following : 
(a) That both Autoex and Inc. had issued invoices in respect of the motor vehicles.  
(i) The first invoice, issued by Autoex to Inc., required the payment of 200,000  c.u. less 
"discount " of 20,000 c.u., making a total of 180,000 c.u.  The terms of sale were f.o.b. 
(port of export) with payment by letter of credit at sight upon presentation of the bill 
of lading.  
(ii) the second invoice, issued by Inc. to PCO, require d the payment of 300,000  c.u. 
(customs duty and taxes included).  The terms of sale were ex -yard from Inc. 's 
premises in country I.  Payment was required 30 days after delivery.  
(b) the overseas freight and insurance charges paid by Inc. were 5,000  c.u. 
Determination of c ustoms value  
6. The d etermination of c ustoms value in this case depends on the proper characterization 
of the role and legal status of each of the parties to the transaction.  
7. An examination of the agreement between Autoex and Inc. and the cond uct of the parties 
reveals that : 
(a) Inc. is an independent legal entity;  
(b) Inc. takes title to the goods and assumes the risk at the f.o.b. stage;  
(c) Inc. assumes the risk of non -payment by PCO.  
8. These facts indicate that there is a sale for export to country I and that Autoex is the seller 
and Inc . is the buyer of the imported goods.  
9. There is nothing in the Agreement between Autoex and Inc. to suggest relationship in terms 
of Article  15.4, and in particular Article  15.4(e) . Similarly, the various elements of the agreement 
are not conditions or rest rictions in terms of Article  1.1. 
10. The sale between Autoex and Inc. forms the basis for determining th e customs value under 
Article  1. 
CASE STUDY 10.1  
APPLICATION OF ARTICLE 1.2  
Facts of the transaction  
1. ICO of country I purchased and imported two categories  of ingredients used in the 
production of food flavourings from XCO of country X.  
2. At the time of clearing the goods, ICO declared to Customs in country I that it was related to 
XCO as:  
(a) XCO held 22 % of the shares of ICO ; and G/VAL/N/1/ECU/3  
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  (b) officers and directors of XCO we re also represented on the Board of Directors of ICO.  
3. After importation, Customs in country I decided to conduct a review of the circumstances 
surrounding the sale of goods between XCO and ICO, pursuant to Article  1.2 of the Agreement, 
because it had doubt s about the acceptability of the price.  To this end, Customs forwarded 
a questionnaire to ICO which sought information regarding the sale of products by XCO to other 
buyers in country I and, if necessary, justification of any price difference , as well as i nformation 
relating to XCO's cost of production and profit.  At the request of ICO, Customs also forwarded 
a questionnaire to XCO.  From the responses received, facts as set out below were established.  
4. ICO purchased many of the ingredients required for the p roduction of food flavourings from 
XCO. The ingredients sold by XCO to ICO fall into two categories : 
(a) Ingredients manufactured by XCO ; and 
(b) ingredients stocked by XCO which have been acquired from other manufacturers and 
suppliers . Ingredients in this catego ry are not manufactured or processed by XCO.  Some 
of these ingredients may, however, be packaged for resale by XCO.  
5. In terms of Article  15.2 of the Agreement, ingredients in category (a) are not identical or 
similar goods to the ingredients in category (b) . 
6. Ingredients in category (a) are also sold to other unrelated buyers in country I.  The prices 
charged by XCO in respect of category (a) ingredients are: 
(i) Sold to ICO 92 c.u. f.o.b.  
(ii) sold to unrelated buyers  100 c.u. f.o.b.  
7. In respect of the ingredients in c ategory (a) , Customs found that : 
(i) Unrelated buyers purchased the ingredients at the same commercial level and in similar 
quantities as ICO and used the ingredients for the same purpose.  Importations of these 
ingredients by unrelated buyers were appraised wi th a transaction value of 100 c.u. ; and 
(ii) the costs incurred by XCO were the same in relation to sales to ICO and unrelated buyers in 
country I.  
8. Customs also established that there was no seasonal influence on the price of ingredients 
which might explain the  8% difference in prices set out in paragraph 6.  Furthermore, after being 
asked to do so by Customs, ICO and XCO provided no additional information to explain the 
difference in prices.  
9. Ingredients in category (b) are sold only to ICO in country I and there  are no importations 
of identical or similar goods into country I.  
10. In respect of the ingredients in category (b), Customs established that the prices charged to 
ICO were adequate to recover all XCO's costs, including the costs of acquisition plus the costs  
of repacking, handling and freight charges, as well as to recover a profit that was representative 
of the firm's overall profit over a representative period of time.  
Determination of c ustoms value  
11. ICO and XCO are r elated persons in terms of para graphs  (a) and (d) of Article  15.4. 
As provided by Article  1.1(d) , read with Article  1.2, the transaction value of sales between XCO 
and ICO will form the basis for the determination of c ustoms value only where it is established that 
the price was not influenced by the relationship.  
12. Under Article  1.2 of the Agreement , the responsibility for demonstrating that relationship 
has not influenced price lies with the importer.  While the Agreement requires Customs to provide 
reasonable opportunity to the importer to provide information that would indicate that prices are 
not influenced by relationship, it d oes not require the Customs A dministration to conduct 
an exhaustive enquiry for the purpose of justifying the price difference.  Thus, any decision in this 
regard must, to a  significant degree, be based on the information provided by the importer.  G/VAL/N/1/ECU/3  
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  Ingredients of category (a)  
13. The information available in this case shows that the transactions between ICO and XCO are 
at prices lower than the prices at which the sales are effecte d to unrelated buyers.  When asked to 
do so, XCO and ICO have failed to explain the different prices.  
14. The information obtained by Customs shows that ICO and the unrelated buyers purchase 
similar quantities of ingredients at the same commercial level and for  the same purpose and that 
XCO's selling costs are the same for sales to ICO and the unrelated buyers.  Based on the foregoing 
and on the nature of industry and goods, there are insufficient grounds to take the view that the 
price differential is not signif icant.  
15. In respect of ingredients in category (a), therefore, the transaction value method would not 
be applicable.  Recourse to an alternat ive method for determining the c ustoms value of category  
(a) ingredients would be necessary.  In this regard, the trans action value of either identical or 
similar goods imported by unrelated buyers may form the basis of  determination of c ustoms value.  
16. It should, however, be noted that the impact of the specific price differential is unique to the 
facts as presented in this  case. This price differential should not be taken as a standard or 
benchmark for determining whether a price difference is commercially significant in other cases.  
The Agreement makes it clear that the significance of any price difference should be consid ered on 
the basis of the nature of the goods and industry in the case in question.  
Ingredients of category (b)  
17. In respect of ingredients in category (b) , which are sold only to ICO, the examination of the 
circumstances of the sale shows that the price is a dequate to ensure recovery of all costs plus 
a profit representative of XCO's overall profit on goods of the same class or kind.  In accordance 
with paragraph  3 of the Interpretative Note to Article  1.2, transaction values in respect of this 
category of ing redients may be acceptable for c ustoms purposes.  
CASE STUDY 11.1  
APPLICATION OF ARTICLE 15.4 (e) - RELATED PARTY TRANSACTIONS  
Facts of the transaction  
1. Company B in importing country I has entered into a sales, service and distribution 
agreement (the agreeme nt) with Company C in exporting country X.  Company C is a subsidiary 
of a large multi -national enterprise that manufactures heavy machinery and spare parts well 
known to consumers.  
2. The agreement provides : 
(a) Both Company B's and Company C's primary purpose in  entering into the agreement is to 
develop and promote the sale of products and to provide a high standard of parts availability 
and mechanical service to ensure th e satisfaction of product users;  
(b) Company B shall be responsible for developing and promoting  the sale of products to 
customers and prospective customers located within the agreed territory and for servici ng 
the agreed range of products;  
(c) the agreement is a personal contract entered into by Company C in reliance on the capability 
of Company B to pr ovide sales and service to customers.  Without the express written 
consent of Company C, Company B agrees not to appoint others to perform such sal es and 
service responsibilities;  
(d) Company C and Company B agree that Company B's effectiveness and ability in a chieving 
the primary purpose for the agreement could be adversely affected by Company  B's 
affiliation with another organization which is a substantial operator (end -user) of products . 
Company B agrees that during the life of the agreement it will avoid any  such affiliation 
whether by way of capital investment, source of capital, common management, common 
ownership, or otherwise, except to the extent that Company C  may otherwise agree in 
writing;  G/VAL/N/1/ECU/3  
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  (e) Company C relies upon the qualifications and abilities of cert ain individuals employed by 
Company B to promote, sell and provide maintenance in country I.  Company B agrees that 
those individuals will continue in the active management of Company B, or will continue to 
own a substantial financial interest in Company B.  No substantial change shall be made in 
the management positions, ownership or voting control of those individuals without advance 
notice to an d prior approval from Company C;  
(f) Company B agrees that, unless Company C otherwise agrees in writing, its invento ry 
of products purchased from Company C under the agreement shall remain unencumbered by 
security interests of any type in favour of any other creditor.  
(g) Company B will maintain, to the satisfaction of Company C, a suitable place or places of 
business to pr ovide an adequate source of products and mechanical service for the benefit of 
customers.  Company B agrees to establish additional places of business or re -locate existing 
establishments in order to adequately service customers.  The location of additional places 
of business and the relocation of existing places of business may only be made with the 
written consent of Company C.  All places of business shall be maintained by Company  B in a 
neat and attractive manner and stock adequate quantities of products t o the satisfaction of 
Company  C; 
(h) Company  B will employ an adequate number of qualified personnel to sell and service 
products t o the satisfaction of Company  C; 
(i) Company  B will maintain inventory and sales records in the manner specified by Company  C 
and pro vide reports regarding inventory, sales and service to Company  C at i ntervals 
specified by Company  C; 
(j) within 30  days after the end of the fiscal year of Company  C, and at any other time upon 
Company C's request, Company B will deliver to Company C such inf ormation as Company  C 
may reasonably request respecting the ownership, financial condition and operations of 
Company  B, together with any s ubsidiary and related companies;  
(k) unless otherwise agreed by Company C, within 90 days after the close of Company B's fiscal 
year Company  B will deliver to Company C audited financial statements and a statement of 
the results of operations for such fiscal year;  
(l) it is the intention of the parties that the relationship between them shall be that 
of independent contractors a nd vendor and vendee ; that nothing contained in the 
agreement or done pursuant thereto shall constitute Company B the agent of Company  C for 
any purpose whatever ; and that all the acts and things done or to be done by Company  B 
pursuant to the agreement, u nless expressly otherwise provided, shall be at Company  B's 
own cost and expense;  
(m) either party may terminate the agreement, with or without cause, by notice of termination 
to the other party.  
3. Other clauses of the agreement set out the manner in which goods  are to be sold by 
Company C to Company B , as well as the terms and conditions of each sale made in accordance 
with the agreement, including dealer prices, end user prices, passing of title, method of payment 
and warranty.  
4. In accordance with the agreement,  imports into country I of goods supplied by Company C 
fall int o the following four categories : 
(i) Goods sold by Company C to Company B;  
(ii) goods sold by Compa ny C directly to customers (end -users) pursuant to orders solicited by 
Company B;  
(iii) goods sold by Company  C to end users without the involvement of Company B or any other 
dealer ; and 
(iv) goods sold by Company C to two other dealers similar to the sales to Company B under 
category (i).  
5. An examination of the circumstances related to the two other dealers reveals th at 
Company  B has a unique association wit h Company  C. The other dealers : 
(a) Are allowed to purchase goods only on their own account;  
(b) are not permitted to solicit orders from end -users of the type solicited by Company  B under 
category  (ii) (i.e.,  commission sa les); 
(c) are not authorized to undertake diagnostic activities ; or 
(d) do not receive commissions in respect of sales by Company  C to other buyers in  country  I. G/VAL/N/1/ECU/3  
- 148 - 
  6. The terms of the contracts between these two dealers and Company  C do not contain the 
clauses outlined  in paragraph 2 above.  
7. Customs has also established that Company  B and Company  C are not related persons  
in terms of paragraphs (a), (b), (c), (d), (f), (g) and (h) of Article  15.4 of the  Agreement.  
Issue for d etermination  
8. In respect of the sales between C ompany C and Company B , the issue for determination is 
whether they are related persons under Article  15.4(e) because one of them directly or indirectly 
controls the other.  
Analysis  
9. The Interpretative Note to Article 15.4(e) provides that "one party shall be deemed to 
control another when the former is legally or operationally in a position to exercise restraint or 
direction over the latter ". The Technical Committee 's Explanatory Note 4.1 endeavours to provide 
additional guidance on the application of Article 15.4(e) and its Interpretative Note in relation to 
sole agency, sole concessionaire and sole distributor agreements.  The same considerations 
of determining control arise in this case.  
10. Explanatory Note 4.1 observes that all buyer/seller and distribution arrangements  allocate 
rights and obligations that are legally enforceable between the parties.  It also emphasizes the 
importance of distinguishing the rights and obligations normally associated with the international 
sale and distribution of goods from con tractual rights and obligations that would establish 
a relationship between the parties as envisaged by Article  15.4(e).  Explanatory Note  4.1 states 
that "the wording of the Interpretative Note to Article  15.4(e) must normally be taken to apply to 
situatio ns which ... involve a position to exercise restraint or direction in respect of essential 
aspects relating to the management of the activities of the other person ". To determine whether 
Companies B and C are related on the basis of the distribution agreem ent, it is necessary to 
critically examine the effect of the provisions of the distribution agreement against this principle, 
Article  15.4(e) and its Interpretative Note.  
11. Many of the clauses contained in the distribution agreement between Companies  C and B  
are typical of those usually encountered in distribution agreements and do not involve direction 
or restraint by one party over the other.  For example, distributi on agreements usually contain 
a termination clause (2(m)) ; clauses allocating responsibility (2(b)); a "best endeavours " 
clause  (2(h)); and a statement of independence to limit liability (2(l)).  However, a number of other 
clauses in the distribution ag reement warrant closer analysis : 
(a) Clause 2(d) - distribution agreements generally include provisio ns intended to prevent the 
establishment of associations by either party that may result in conflicts of interest.  In this 
case, the parties have identified that any affiliat ion with end -users by Company  B might 
adversely affect its ability to achieve the primary purpose for the agreement.  Company  B 
agrees to avoid any such affiliations "by way of capital investment, sources of capital, 
common management, common ownership, or otherwise except to the extent that Company 
C may otherwise agree".  Decisions rega rding investment, sources of capital, management, 
and ownership may be essential aspects in the direction of an enterprise.  However, the 
actual extent of this limitation must be evaluated in the context of the primary purpose for 
the agreement and the prev ention of conflicts of interest.  This clause restricts Company  B's 
right to affiliate with or obtain capital from "end-users ". Company B is free to affiliate with 
other parties and to obtain capital from other sources without the prior agreement of 
Company  C. In the circumstances, it is reasonable for Company C to have the right to accept 
or reject any affiliation with an "end-users " proposed by Company B because of its potential 
adverse impact on Compan y B's priorities and/or loyalty;  
(b) Clause 2(e) - distrib ution agreements typically contain clauses requiring either party to 
provide notice to the other party of any significant change in ownership or management.  
In many cases, such changes may provide grounds for termination of the agreement.  
However, Clause 2 (e) goes significantly further than a simple notification provision as it 
requires Company C 's prior approval before any changes in management positions, 
ownership and voting control take place.  Appointment of the management and decisions G/VAL/N/1/ECU/3  
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  relating to the t ransfer of ownership and voting control are essential aspects relating  to the 
management of Company B;  
(c) Clause 2(g) - requirements to maintain adequate places of business as well as adequate 
levels of stock and spare parts are commonly included in distribut ion agreements.  In many 
cases , the location of places of business may be discussed between the supplier and 
distributor.  This clause, however, makes it clear that Company  C ultimately has the right to 
decide on establishment of new places of business and o n the re -location of existing places 
of business.  Decisions relating to the location of business activities are essential aspects  of 
the management of Company B;  
(d) Clauses 2(j) & (k) - while these clauses do not grant any specific decision -making rights to 
Company C, they indicate that Company C monitors the financial status of Company  B, its 
subsidiaries and related companies.  Access to financial records is typically provided to 
enable one of the parties to audit and establish the accuracy of payments made t o it by the 
other party (e.g., royalties, commission and proceeds).  The precise nature of Company  C's 
access to Company B 's financial records is not clear from the information provided and 
further examination would be necessary to determine the practical e xtent and effect of this 
clause.  
Conclusion and r easons  
12. While all of the aspects of the agreement between Companies B and C are consistent with 
commercial practice, the agreement goes beyond usual buyer/seller and distribution 
arrangements.  Through the agr eement, Company C is in a position to exercise direction or 
restraint over Company B in respect of a number of essential aspects of it s management 
(i.e., management positions ; ownership or voting control ; and the location of places of business) . 
Companies B and C would be, therefore, related persons for the purposes of the WTO Customs 
Valuation Agreement because Company C has the capacity to directly or indirectly control 
Company B within the terms of Article  15.4(e) of the Agreement.  
13. In light of this concl usion, if there are doubts about the acceptability of the price, 
an examination into whether that relationship has influenced the price in accordance with 
Article  1.2 and its Interpretative Note shoul d be undertaken by the Customs A dministration.  
STUDIES  
LIST OF STUDIES  
1.1 - Treatment of used motor vehicles  
- Supplement to Study 1.1  
2.1 Treatment of rented or leased goods  
STUDY 1.1  
TREATMENT OF USED MOTOR VEHICLES  
1. The valuation treatment of used motor vehicles under the Agreement raises in itself no 
particular que stion of principle, but does give rise to practical problems.  It has therefore been 
considered helpful for Customs A dministrations that these problems should be made the subject 
of the present study, in which various possible solutions will be suggested.  
2. The study is designed to cover the broad spectrum of vehicles regarded as used at the time 
of importation, whether purchased new or second -hand, and does not touch on the limited fields 
of special purpose vehicles and classic or vintage cars.  
3. The criteria f or determining whether or not a vehicle should be regarded as "used" are 
a separate matter.  This matter must be left to the discretion of each administration because the 
widely differing situations which may arise in this field do not lend themselves to ha rmonization 
of the practices adopted.  The problem can be illustrated by the following pot entially difficult 
situations : G/VAL/N/1/ECU/3  
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  (a) In an importation by a trader the odometer of the imported vehicle reads 250  km, 
representing the distance travelled from the factory to  the port of departur e in the country 
of exportation;  
(b) in an importation by a private individual the imported vehicle, purchased new and registered 
abroad by that individual a couple of weeks previously, has been driven a  distance 
of 1,560  km, from the plac e of purchase abroad to the place of introduction in the country 
of importation.  
4. The question of whether imported used vehicles should be regarded as having been further 
used since last sold has also to be treated as indicated in paragraph  3 above.  Dependi ng on the 
approach adopted in this respect, the vehicles concerned would fall either in category  I or in 
category II, as defined below.  
5. Basically there are two types of situation which need to be dealt with in the valuation 
of imported used vehicles.  They are as follows, and will be discussed subsequently in the same 
order : 
I. The vehicle is imported pursuant to a purchase without intervening use.  
II. The vehicle is imported after additional use since the purchase.  
III. The vehicle is imported pursuant to a purchase wi thout intervening use.  
6. Given that importation follows upon a sale, the price actually paid or payable in connection 
with that transaction should serve as the basis for establishing transaction value whenever the 
requirements and conditions of Article  1 of the Agreement are fulfilled.  
7. If the provisions of Article  1 cannot be applied, the c ustoms value must be determined by 
means of one of the other methods specified by the Agreement, in the prescribed order of 
application ; regarding these methods, attention is drawn to paragraphs 10 to 23 below.  
II. The vehicle is imported after additional use since the purchase  
Article  1 
8. Taking precedence over all other considerations concerning the applicability of the provisions 
of Article  1 is the question whether the vehicle  to be valued,  which the A dministration considers to 
have been used since the purchase, can still be regarded for valuation purposes as being the same 
vehicle as when last sold.  
9. If it cannot be so regarded , there is no price actually paid or payable for th e vehicle in its 
condition at the time of valuation ; thus, the provisions of Article  1 cannot be applied and the value 
must be determined in accordance with the first Article applicable, following the order of 
applicat ion prescribed by the Agreement.  
Articles 2 and 3  
10. The application of the valuation methods envisaged in Articles  2 and 3 presupposes the 
existence of goods identical or similar to those being valued, exported at or about the same time 
as those goods.  Furthermore, the value of these identical o r similar goods must have been 
determined under Article  1 of the Agreement.  
11. It seems doubtful whether these conditions can be fulfilled in the specific case of used 
vehicles imported by private individuals ; however, there might occasionally be scope for ap plying 
Article  2 or 3 , particularly in the case of importations by traders.  
Article  5 
12. Failing Article  2 or 3 , if the imported used vehicles or identical or similar imported used 
vehicles are sold in the country of importation in the condition as imported, the provisions 
of Article  5, paragraph 1, should be applied whenever the requirements of that Article can be met.  G/VAL/N/1/ECU/3  
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  13. In cases where Article  5, paragraph 1 , fails, but the used vehicles are sold in the country 
of importation after further processing (for examp le, repair, reconditioning, fitting of accessories), 
valuation on the basis of paragraph 2 of that Article should be envisaged if the importer so 
requests ; the deductions needed to take account of the value added by such processing or 
reconditio ning will t hen have to be made.  
14. One would however expect that situations as described under paragraphs 12 and 13 would 
normally only occur in respect of importations by traders.  
Article  6 
15. Since used motor vehicles are obviously not manufactured as such, the provision s 
of Article  6, based on the cost of producing the imported goods, cannot be applied.  
Article  7 
16. It follows from the fo regoing that in many cases the c ustoms value of used motor vehicles 
will have to be determined under the provisions of Article  7 of the Ag reement.  
17. When valuing goods using this "fall-back" method, it is important to bear in mind certain 
broad principles laid down by the A greement and in particular that : 
- For the purposes of Article  7, the value shall be determined using reasonable means 
consistent with the principles and general provisions of the Agreement and of Article  VII 
of the GATT 1994, on the basis of data available in the country of importation;  
- certain methods of valuation are expressly excluded by paragraph 2 of Article  7; 
- the methods of valuation employed should be those laid down in Articles  1 to 6  inclusive, 
applied with reasonable flexibility, and should, to the greatest extent possible, be based on 
previously determined c ustoms values;  
- the Agreement recommends co nsultatio n between the Customs A dministration and the 
importer to establish the basis for valuation.  
18. Although it may not be possible to envisage a standard method of valuation for used motor 
vehicles, nevertheless , on the basis of the principles set out above and b earing in mind that, 
if disputed, a value determined under Article  7 must be defensible at law, several approaches 
remain open.  Some of these are indicated in the following paragraphs.  In the final analysis , it must 
be left to each A dministration to choose  a method compatible with the principles and general 
provisions of the Agreement and with Article VII  of the General Agreement, so that account can be 
taken of each country 's specific circumstances.  
19. Customs value could, for example, be based on the price a ctually paid or payable for the 
vehicle.  In this case, the goods would have to be valued with reference to their condition at the 
time of valuation.  The price would therefore be adjusted to take account of the depreciation 
(with reference to age or use) in curred since purchase.  The tables below exemplify the procedures 
which could be applied for making adjustments in the case of depreciation.  To avoid arbitrariness , 
some judgement would, of course, have to be exercised for the application of these adjustmen ts, 
account being taken of the circumstances proper to each case ; in particular, in the case of 
adjustments based on use, it should be borne in mind that the odometer reading cannot always be 
relied upon.  
Time since date of purchase  Amount to be deducted  
Less than 6 months  a% 
12 to 24 months  b% 
etc. c% 
or 
Use since date of purchase from price paid  Amount to be deducted  
Less than 5,000 km  x% 
5,001 to 15,000 km  y% 
15,001 to 30,000 km  z% 
etc. etc. 
 G/VAL/N/1/ECU/3  
- 152 - 
  It should be noted that any improvement made or acces sories added after purchase would 
enhance the value of the vehicle.  
20. In cases where there is no price actually paid or payable, the value might be determined in 
consultation with the importer on the basis of the transaction value previously accepted for 
imported new vehicles of the same make and model . This value would then have to be adjusted to 
reflect the vehicle 's condition at the time of valuation by taking into account, on the one hand, 
depreciation resulting from age, wear and obsolescence and, on the  other hand, additional 
accessories that do not form part of the equipment of the reference vehicle.  Further adjustment 
might prove necessary, to take into account any differences in level and quantity between the 
transactions under comparison.  
21. In the even t of there being no importations of new vehicles of the same make and model, 
the method described in the previous paragraph could be applied using transaction values already 
accepted for similar new vehicles.  
22. The method envisaged in paragraph 19 could also  be applied on the basis of the catalogue 
price for a new imported vehicle of the same make and model on the market of the country of 
importation . In such circumstances, where the provisions of Article  5 are applied with reasonable 
flexibility, further adj ustments may have to be made in accordance with subparagraphs (i) to (iv) 
of Article  5.1(a).  
23. Where it is possible to obtain catalogues or specialized periodicals indicating current prices in 
the used vehicle market of the country of importation, these pric es can be used as a basis for 
valuation.  In this case, of course, account should be taken of the vehicle 's condition and of all 
elements affecting its value (for example, abnormal wear, repairs, reconditioning, accessories) as 
compared with that of the ref erence vehicle.  Furthermore, it is important not to overlook the fact 
that the guideline prices given in these catalogues may be inclusive of import duties and taxes . 
However, Article  7, paragraph 2 (a), prohibits the application of this method to vehicles produced in 
the country of importation (insofar as duty may be chargeable on them, should they be 
reimported) . In such cases, reference could perhaps be made to identical or similar vehicles made 
in other countries, through a flexible interpretation of the  terms "identical " and "similar ". 
24. It has to be noted that one of the major difficulties that can arise in cases as examined in 
this study is the practical one of ascertaining the facts needed to establish the transaction value, 
given that purchases made by  private individuals often involve not a commercial invoice but simply 
a receipt, a manuscript bill or a verbal agreement.  In these circumstances , the Customs will have 
to be satisfied as to the veracity of the declared purchase price.  This question is par t of the wider 
problem of trade in used or second -hand goods, which offer s greater opportunities for fraud, 
particularly through the use of false invoices.  This is primarily a c ustoms enforcement matter, 
whose treatment will depend on the relevant national  provisions.  
25. Depending on the national legislation of each Member, the elements listed in Article  8, 
paragraph 2 , of the Agreement will be in cluded in or excluded from the c ustoms value of used 
motor vehicles.  If the transport is non -commercial or if the e lements to be deducted or added 
cannot be determined from transport documents, the necessary adjustments should be based on 
the actual cost incurred for the conveyance of the imported goods ; it is worth noting that these 
adjustments should be made on the b asis of objective and quantifiable data ( cf. Article 8, 
paragraph 3).  
SUPPLEMENT TO STUDY 1.1  
VALUATION OF USED MOTOR VEHICLES  
Question 1  
1. Is it possible to establish the c ustoms value under Article  7 of the Agreement according to 
the price of goods on the domestic market of the exporting country when a buyer of used cars 
(commercial or private), who resides in the importing country, goes to the domestic market of the 
exporting country and buys cars to be imported into the importing country?  G/VAL/N/1/ECU/3  
- 153 - 
  Answer  
2. In accord ance with Study 1.1  of the Technical Committee, basically there are two types 
of situations which need to be dealt with in the valuation of imported used au tomobiles.  They are 
as follows : 
(a) The vehicle is imported pursuant to a purchase without intervening u se; 
(b) the vehicle is imported after addit ional use since the purchase.  
From the facts presented in the question, it is assumed that situation (a) would apply * 
* With respect to situation (b), guidance may be taken from the treatment of this situation under 
Articles 1 and 8 as provided by Case Study 5.1, "Application of Article  8.1(b) " and Article  7 as provided 
in paragraph 19 of Study  1.1, "Treatment of used motor vehicles ". 
3. Following the view previously expressed by the Technical Committee in Advisory 
Opinio n 14.1, if the importer can demonstrate that the immediate sale under consideration took 
place with the view to export the goods to the country of importation, there is no need to address 
Article  7 in this case as Article  1 can apply.  
4. In these circumstance s, given that importation immediately followed the sale, the price 
actually paid or payable in connection with that sale should serve as the basis for establishing 
transaction value under Article  1 if all other requirements and conditions of Article  1 are fulfilled.  
Question 2  
5. How do you explain the relationship between Article  7.2(c) and Article  1 if the price actually 
paid or payable is the price which applies in the domestic market of the exporting country ? In this 
situation, the used cars are really bei ng bought on this market directly and personally by the 
importing buyer and the price is the only indicator that can be taken a s a basis for establishing the 
customs value.  
Answer  
6. Article  7.2(c) does not prohibit the dete rmination of c ustoms value on the b asis of the price 
actually paid or payable by the buyer.  It does, however, prohibit the use of other values derived 
from sales in the domestic market of the country of exp ort as a basis for determining c ustoms 
value under Article  7. Examples of the types o f activities that are prohibited by Article  7.2(c) would 
include basing c ustoms value on the prevailing market price in the country of exportation or on the 
price at which the seller offers goods to other buyers on the domestic market of the country 
of export. The prohibitions contained in Article  7.2 of the Agre ement apply only in respect of 
customs value determined under Article  7 and they have no application to the determination of 
transaction value under Articles  1 and 8 . 
Question 3  
7. Could values listed in a foreign catalogue, published by an independent authority indicating 
prices of new and used cars, with and without tax, on the domestic market of the exporting 
country, be used as a basis (initial price) for establ ishing the c ustoms value of a used mot or 
vehicle by applying the procedure in paragraph 19 of the Technical Committee 's Study 1.1 ? Would 
the exclusion of internal taxes and duties from such prices, making them different from those 
actually paid on the domestic market in the export country, be the reason why those values could 
be used a s a basis for establishing the c ustoms value of imported used motor vehicles ? 
Answer  
8. Article 7.2(c)  prohibits the use of the price of goods on the domestic market of the country 
of export as a basis for valuation.  Study  1.1 of the Technical Committee outlines a procedure 
which involves using catalogue prices pertaining to the country of importation, from which 
adjustments would be made for duties, tax and certain other charges (i.e. a flexible application G/VAL/N/1/ECU/3  
- 154 - 
  of the de ductive method).  In the absence of other data, any reasonable means consistent with the 
principles of the Agreement may be used in determining the c ustoms value.  
STUDY 2.1  
TREATMENT OF RENTED OR LEASED GOODS  
1. Transaction value, the primary method of valuati on under the Agreement, is based on the 
price actually paid or payable for the goods when sold for export to the country of importation.  
2. Advisory Opin ion 1.  on "the concept of sale in the Agreement " states that hire or leasing 
transactions by their very na ture do not constitute sales, even if the contract includes an option to 
purchase the goods.  Therefore , for such cases, the transaction value method is precluded and it 
becomes necessary to determine the c ustoms value under other methods, in the order pres cribed 
by the Agreement.  
3. Where goods which are identical or similar to the rented or leased goods are sold for export 
to the country of importation, it woul d be possible to establish the c ustoms value on the basis 
of Articles  2 and 3 . 
4. However, in cases whe re these two Articles cannot be used, Article  5 must next be 
considered.  Since by their nature rented or leased goods would not themselves be sold in the 
country of importation, Article  5 would apply only if identical or similar imported goods were sold 
in the country of importation.  If not, it will be nec essary to try to establish the c ustoms value 
under Article  6. 
5. Once the p ossibility of establishing the c ustoms value under Articles  2 to 6  has been 
exhausted, Article  7 must then be invoked under which var ious approaches are possible.  
6. In the event of the goods being valued under Article  7, the methods laid down in Articles  1 
to 6 inclusive, applied with reasonable flexibility, should be used first.  In this respect, attention 
needs to be drawn to the Technic al Committee 's instruments on application of Article  7 (Advisory 
Opinions 12.1, 12.2 and 12.3 ) and the documents issued on practical application of Article  7. 
7. If under Article  7 the c ustoms value cannot be determined by flexible application 
of Articles  1 to 6, it may be established using other reasonable means provided that they are not 
precluded by Article  7.2 and are consistent with the principles and general provisions of the 
Agreement and of Article  VII of the GATT 1994.  
8. For instance, valuation could be  based on the use of valid list prices (for new or used goods) 
for exportation to the country of importation.  In the case of goods which have been used, 
valuation may be based on a valid list price for new goods in the absence of a valid list price for 
used goods.  However, since the goods would have to be valued with reference to their condition at 
the time of importation, such list prices for new goods must be adjusted to take into account the 
depreciation and obsolescence of the goods being valued.  
9. Anothe r possibility would be recourse to expert advice acceptable to both Customs and 
importer.  The value so determined should be in conformity with the provision of Article  7 of the 
Agreement.  
10. In some cases, rental contracts include an option to buy.  This optio n may be given at the 
beginning, during or at the end of the basic contract period.  In the first case , valuation should be 
based on the option price.  In the last two cases, rental payments provided for in the rental 
contract plus the residual sum required may provide a basi s for the determination of the c ustoms 
value.  
11. In cases where there is no option to buy, valuation under Article  7 could also proceed on the 
basis of the rental charges paid or payable for the imported goods.  To this end, the aggregate 
rental expectations during the economic life of the goods may serve as a basis.  Care needs to be 
taken with respect to certain cases where the rental charges can be quoted higher in order to 
secure amortization of the goods within a period shorter than the ec onomic life of the goods.  G/VAL/N/1/ECU/3  
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  12. Determination of the economic life of the goods may at times create practical problems, 
such as in industries where the rate of technology change is rapid.  While the past experience of 
the life of identical and similar goods might  be useful, in most cases a solution is likely to be found 
by consulti ng with specialized firms in co operation with the importer.  It should also be noted that 
a distinction will have to be made with regard to economic life of new and used goods, such as 
using "the whole economic life " for new goods and "the remaining economic life " for used goods.  
13. Once the total rental charges have been determined, certain adjustments may  be necessary 
to establish the c ustoms value, in the form of either additions or deduct ions depending upon the 
terms of the contract and the principles underlying the Agreement.  Where probable additions are 
concerned, dutiable elements not already included in the rental charges should be taken into 
account.  In this respect, the factors liste d in Article  8 could provide some guidance.  In respect of 
deductions, any elem ents which are not part of the c ustoms value should be deducted.  
14. The following example illustrates the determination of customs value on the basis of rental 
charges payable.  (For the purposes of this example, elements mentioned in Article  8 are ignored. ) 
This approach could be applicable regardless of the duration of the contract.  In case 
of re-exportation of the goods before the expiration of the estimate d economic life, the refu nd 
of customs duties and taxes would be possible if the national legislation allows it.  
Facts of the transaction  
15. As a result of its expanding business, firm A of country X decides to rent a new machine 
from rental company B of country Y for a minimum durat ion of 36 months, renewable.  According 
to the terms of the contract the erection and maintenance costs in the country of importation 
incurred by the importer are 20,000 c.u. per annum for the first tw o years of operation and 
30,000  c.u. per annum for the f ollowing years, payable to the rental firm.  The machine is rented at 
50,000 c.u. per month inclusive of these costs and of an interest charge of 10 %. 
16. In view of the specific nature of the machine, none of the valuation methods ( Articles  1 to 
6), even appli ed with reasonable flexibility , is appropriate.  As a result of consultation between the 
Customs and the impor ter, it is decided to base the c ustoms value on the total  amount of the rent 
payable for the whole economic life of the machine.  For that purpose , it has been established that 
the machine can be used for five years.  
17. The total amount of the rent payable over five years would, therefore, be taken as a basis 
for valuation.  Once so determined, it is necessary to deduct from this amount the costs for 
erection and maintenance and the interest charges.  
18. The symbols hereafter are used for the facility of calculation : 
- R = total rent payable during the full economic life of the goods  
- M = costs of erection and maintenance  
- I = interest */ 
- Customs value = R - (M + I)  
* The interest to be deducted will have to be determined on the basis of a formula used for  calculating 
compound interest.  
WORLD CUSTOMS ORGANIZATION (WCO)   
DECISIONS OF THE COMMITTEE ON CUSTOMS VALUATION  
LIST OF DECISIONS  
1. French translation of t he term "copyrights" in the Interpretative Note to Article 8.1(c) 
of the Agreement.  
2. Meaning of the word "undertaken" used in Article 8.1(b)(iv) of the Agreement.  
3. Treatment of interest charges in the Customs value of imported goods.  
4. Valuation of carrier med ia bearing software for data processing equipment.  
5. Terms in Article 8.1(b)(iv) : Development.  G/VAL/N/1/ECU/3  
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  6. Cases where Customs administrations have reasons to doubt the truth or accuracy of the 
declared value.  
7. Minimum values and imports by sole agents, sole distributors  and sole concessionaires.  
DECISION 1.1  
FRENCH TRANSLATION OF THE TERM "COPYRIGHTS" IN THE INTERPRETATIVE NOTE TO 
ARTICLE 8.1 (c) OF THE AGREEMENT  
During its First Meeting held on 1 3 January 1 981, the Committee on Customs Valuation 
agreed that the French tr anslation of the term "copyright s" in the Interpretative Note to 
Article  8.1(c) of the Agreement, which read s "droit de reproduction" be replaced by the term 
"droit  d'auteur".  
DECISION 2.1  
MEANING OF THE WORD "UNDERTAKEN" USED IN ARTICLE 8.1 (b)(iv)  OF THE 
AGREEMENT  
 During its Sixth Meeting held on 3 March 1 983, the Committee on Customs Valuation agreed 
that in the context of  Article 8.1( b)(iv) of the Agreement the English word "undertaken" is to be 
understood as meaning "carried out".  It noted that the Fre nch and Spanish versions of the 
Agreement were not affected.  
DECISION 3.1  
TREATMENT OF INTEREST CHARGES IN THE CUSTOMS VALUE OF IMPORTED GOODS  
 During its Ninth Meeting held on 2 6 April 1 984, the Committee on Customs Valuatio n 
adopted the following decisio n: 
 The Parties to the Agreement on Implementation of Article  VII of the GATT agree as follows : 
Charges for interest under a financing arrangement entered into by the buyer and relating to 
the purchase of imported goods shall not be regarded as part of the  customs value provided that : 
(a) the charges are distinguished from the price actually paid or payable for the goods;  
(b) the financing arrangement was made in writing;  
(c) where required, the buyer can demonstrate that : 
- such goods are actually sold at the price declared as the price actually paid or 
payable ; and 
- the claimed  rate of interest does not exceed the level for such transactions prevailing 
in the country where, and at the time when , the finance was provided.  
This Decision shall apply regardle ss of whether the finance is provided by the seller, a bank 
or another natural or legal person.  It shall also apply, if appropriate, where goods are valued 
under a method other than the transaction value.  
Each Party shall notify the Committee of the date f rom which it will apply the Decision.  
DECISION 4.1  
VALUATION OF CARRIER MEDIA BEARING SOFTWARE FOR DATA PROCESSING 
EQUIPMENT  
 During its Tenth Meeting held on 2 4 September 1 984, the Committee on Customs Valuation  
adopted the following decision : 
1. It is reaff irmed that transaction value is the primary basis of valuation under the Agreement 
on Implementation of Article VII of the General Agreement on Tariffs and Trade (the Agreement) G/VAL/N/1/ECU/3  
- 157 - 
  and that its application with regard to data or instructions (software) record ed on carrier media for 
data processing equipment is fully consistent with the Agreement.  
2. Given the unique situation with regard to data or instructions (software) recorded on carrier 
media for data processing equipment, and that some Parties have sought a  different approach, 
it would also be consistent with the Agreement for those Parties which wish to do so to adopt the 
following practice : 
In determining the c ustoms value of imported carrier media bearing data or instructions, 
only the cost or value of th e carrier medium itself sha ll be taken into account.  The c ustoms value 
shall not, therefore, include the cost or value of the data or instructions, provided that this is 
distinguished from the cost or the value of the carrier medium.  
For the purpose of the  Decision, the expression "carrier medium " shall not be taken to 
include integrated circuits, semiconductors and similar devices or articles incorporating such 
circuits or devices ; the expression "data or instructions " shall not be taken to include sound, 
cinematic or video recordings.  
3. Those Parties adopting the practice referred to in paragraph 2 of this Decision shall notify 
the Committee of the date of its application.  
4. Those Parties adopting the practice in paragraph 2 of this Decision will do so on a mo st-
favoured -nation (m.f.n.) basis, without prejudice to the continued use by any Party of the 
transaction value practice.  
Statement Made by the Chairman at the Meeting of the Committee on Customs 
Valuation  of 24 September 1 984 Prior to the Adoption of the Decision on the Valuation  
of Carrier Media Bearing Software for Data Processing Equipment . 
"In the case of imported carrier media bearing data or instructions for use in data processing 
equipment (software), it is essentially the carrier media itself, e.g.  the tape or the magnetic disc, 
which is liable to duty under the c ustoms tariff.  However, the importer is, in fact, interested in 
using the instructions or data ; the carrier medium is incidental.  Indeed, if the technical facilities 
are available to the Pa rties to the transaction, the software can be transmitted by wire or satellite,  
in which case the question of c ustoms duties does not arise.  In addition, the carrier medium is 
usually a temporary means of storing the instructions or data ; in order to use i t, the buyer has to 
transfer or reproduce the data or instr uctions into the memory or data base of his own system.  
Under the international c ustoms valuation practices which were superseded by the 
Agreement on Implementation of Article VII of the General Agr eement on Tariffs and Trade 
(the Agreement), the value of the software was not, as a general rule, included when valuing the 
carrier medium.  Following their adoption of the Agreement, those countries which followed the 
previous international practice have either changed their rules for valuing carrier media bearing 
computer software or have maintained their previous practice.  
The proposed decision of the Committee on Customs Valuation on the valuation of carrier 
media bearing software for data processing eq uipment indicates that transaction value is the 
primary basis of valuation under the Agreement and that its application with regard to software 
recorded on carrier media for data processing equipment is fully consistent with the Agreement.  
It also would pr ovide that given the 'unique situation ' regarding software just described and the 
fact that some Parties sought a different approach, it would also be consistent with the Agreement 
for those Parties which wish to do so to only take account of the cost or v alue of the carrier 
medium itself in determining the c ustoms value of imported carrier media bearing data or 
instructions.  
In taking this decision on the valuation of carrier media bearing software for data processing 
equipment, it is understood that shoul d any difficulties arise in the implementation and application 
of the decision, it would be useful for those difficulties to be considered by the Parties to the 
Agreement."  G/VAL/N/1/ECU/3  
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  DECISION 5.1  
TERMS IN ARTICLE 8.1 (b)(iv) : DEVELOPMENT  
 At its 12th Meeting, held on  9-10 May 1 985, the Committee on Customs Valuation settled 
the question relating to the linguistic consistency in the English, French and Spanish texts of the 
term "development " in Article  8.1(b)(iv) of the Agreement by inserting the following statement in  
the minutes of the meeting, on the understanding that this would be without prejudice to the 
rights and obligations under the Agreement and that members of the Committee could revert to 
the matter should the need arise.  
 The Parties to the Agreement consi dered that the terms "development " in English, 
"travaux  d'études " in French and "creación y perfeccionamiento " in Spanish in Article  8.1(b)  
are understood to exclude "research " in English, "recherche " in French and "investigación " 
in Spanish, as stated in paragraph 6 of VAL/W/24/Rev. 1 However, one Signatory, Argentina, 
considered that, as used in Article  8.1(b) , the Spanish expression "creación y perfeccionamiento " 
could not be interpreted as allowing any part of the value to be excluded from the "creación  
o perfeccionamiento ". 
 
* This Decision was adopted by the WTO Valuation Committee at its first meeting on 12 May 1995 . 
 
 
DECISION 6.1  
CASES WHERE CUSTOMS ADMINISTRATIONS HAVE REASONS TO DOUBT THE TRUTH OR  
ACCURACY OF THE DECLARED VALUE  
The Committee on C ustoms Valuation,  
Reaffirming that the transaction value is the primary basis of valuation under the Agreement 
on Implementation of Article  VII of GATT 1994 (hereinafter referred to as the "Agreement "); 
Recognizing that the Customs A dministration may have to address cases where it has 
reason to doubt the truth or accuracy of the particulars or of documents produced by traders in 
support of a declared value;  
Emphasizing that in so doing the Customs A dministration should not prejudice the legitimate 
commercia l interests of traders;  
Taking into account Article  17 of the Agreement, paragraph 6 of Annex  III to the Agreement, 
and the relevant decisions of the Technical Committee on Customs V aluation;  
Decides as follows : 
1. When a declaration ha s been presented and wh ere the Customs A dministration has reason 
to doubt the truth or accuracy of the particulars or of documents produced in support of thi s 
declaration, the Customs A dministration may ask the importer to provide further explanation, 
including documents or othe r evidence, that the declared value represents the total amount 
actually paid or payable for the imported goods, adjusted in accordance with the provisions 
of Article  8. If, after receiving further information, or in the absence of a response, the Customs 
Administration still has reasonable doubts about the truth or accuracy of the declared value, 
it may, bearing in mind the provisions of Article  11, be deemed that the customs value of the 
imported goods cannot be determined under the provisions of Article  1. Befor e taking a final 
decision, the Customs A dministration shall communicate to the importer, in writing if requested, 
its grounds for doubting the truth or accuracy of the particulars or documents produced and the 
importer shall be given a reasonable o pportunity to respond.  When  a final decision is made, 
the Customs A dministration shall communicate to the importer in writing its decision and the 
grounds therefor.  G/VAL/N/1/ECU/3  
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  2. It is entirely appropriate in applying the Agreement for one Member to assist another 
Membe r on mutually agreed terms.  
 
* This Decision was adopted by the WTO Valuation Committee at its first meeting on 12 May 1995 . 
 
 
DECISION 7.1  
MINIMUM VALUES AND IMPORTS BY SOLE AGENTS, SOLE DISTRIBUTORS AND 
SOLE  CONCESSIONAIRES  
I 
1. Where  a developing country makes a reservation to retain officially established minimum 
values within the terms of paragraph 2 of Annex  III and shows good cause, the Committee shall 
give the request for the reservation sympathetic consideration.  
2. Where a reservation is consented to, the terms and conditions referred to in paragraph 2 of 
Annex  III shall take full account of the development, financial and trade needs of the developing 
country concerned.  
II 
3. A number of developing countries have a concern that problems may exist in the va luation 
of imports by sole agents, sole distributors and sole concessionaires . Under paragraph  1 of 
Article  20, developing country Members have a period of delay of up to five years prior to the 
application of the Agreement.  In this context, developing cou ntry Members availing themselves of 
this provision could use the period to conduct appropriate studies and to take such other actions 
as are necessary to facilitate application.  
4. In consideration of this, the Committee recommends that the Customs Co -operati on Council 
assist developing country Members, in accordance with the provisions of Annex  II, to formulate 
and conduct studies in areas identified as being of potential concern, including those relating to 
importations by sole agents, sole distributors and sole concessionaires.  
 
* This Decision was adopted by the WTO Valuation Committee at its first meeting on 12 May 1995 . 
 G/VAL/N/1/ECU/3  
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  ANNEX 3  
Andean Community  
RESOLUTION No. 1239  
Updat ing Resolution No. 112 
- Adoption of the  Andean  Customs  
Value Declaration  
THE GENERAL  SECRETARIAT OF THE ANDEAN COMMUNITY,  
 CONSIDERING : Decision No. 571 - Customs Valu ation of Imported Goods, Resolution 
No. 846 - Community Regulations implementing Decision No. 571, Resolution 1112 - Adoption 
of the Andean Customs Value Declaration, and Re solution No. 1137 - Amended entry into force 
of Resolution  1112; and 
 WHEREAS : The Commission of the Andean Community approved Decision  No. 571 
of 12 December 2 003 by which the Customs Valuation Agreement of the World Trade Organization 
(WTO) was adopted a s the subregional r egulations for determining the customs value of imported 
goods;  
 For the proper implementation of the WTO Customs Valuation Agreement, a document is 
needed to permit the facts and circumstances of commercial transaction s in imported good s to be 
declared and to serve in determining the customs value and ensuring uniform treatment for 
imports in to Andean Community Customs Territory ; 
 Pursuant to the provision in Article 9 of the First Transitional Provision of Decision No. 571, 
it is the re sponsibility of the General Secretariat of the Andean Community to adopt and regulate , 
by means of a resolution , the operation and form at of the Andean Customs Value Declaration;  
 This body of t he Community implemented these r egulations by means of Resolut ion 
No. 1112 of 5 July 2 007, amending the provisions on its entry into force by Resolution  No. 1137 
of 20 December 2 007; 
 The Twenty -first Meeting of the Group of Experts on Customs Valuation, held in Lima, Peru, 
from 4 to 8 May 2 009, recommended that the regulations on the Andean Customs Value 
Declaration be updated, together with its format and instructions for completing it ; and extended 
the time-limit for its submission and for electronic transmission of data, considering that, although 
progress had bee n made in physical and electronic harmonization of the Andean Customs Value 
Declaration in member countries, nevertheless, a number of activities required for its 
implementation remained pending.  
 The regulations on the Andean Customs Value Declaration still require improvement , 
together with its format and the instructions for completing it, in order to assist the correct 
determination of the customs value of goods imported into the subregion, therefore, the entire 
text of Resolution No. 1112 and amendment s thereto need to be supersed ed in order to ensure 
that the r egulations on using the Andean Customs Value Declaration are uniform;  
 A time-limit needs to be set for the submission of the Andean Customs Value Declaration 
and for electronic transmission of d ata by users in the subregion, therefore, a series of activities 
needs to be conducted to ensure full application of the Andean Customs Value Declaration in the 
Andean Community, within a reasonable timeframe, so as to achieve full compliance with the 
provisions in Decision  No. 571 and its implementing regulations;  G/VAL/N/1/ECU/3  
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  HEREBY DECIDES  
Article 1. - Andean Customs Value Declaration  
1. To adopt the "Andean Customs Value Declaration " (hereinafter the "DAV") as the supporting 
document for the customs declaration or custo ms declaration of imported goods, in the printed 
format attached as Annex  I to this Resolution.  
2. The DAV shall be completed in accordance with the instructions attached as Annex  II to this 
Resolution.  
3. The Customs Administration shall grant users every facil ity to enable them to obtain the 
instructions mentioned in the preceding paragraph and additional instructions where necessary, 
provided that the y do not modify the  provisions in Annex II.  
4. For the purposes of electronic exchange of DAV data among the Custo ms Administration s 
of member countries, the electronic format approved in the relevant Resolution of the 
General  Secretariat shall be used.  
Article 2. - Supporting documents  
 The combined  submission of the DAV and the customs d eclaration of imported goods s hall 
be accompanied by the following documents to be used in support of the checks to be undertaken 
by the c ustoms  authority:  
(a) The corresponding commercial invoice or contract in the case of a sale.  If there is no sale, 
the document showing the commercial t ransaction;  
(b) the transport document;  
(c) the document proving insurance of the goods, where applicable;  
(d) other supporting documents which, where applica ble, prove the fact s and the commercial 
circumstances of the transaction;  
Article 3. - Commercial invoice  
 For the purposes of applying the first method "transaction value of the imported goods " 
determined in Article  1 of the WTO Customs Valuation Agreement, the commercial invoice shall:  
1. Reflect the total payment for the imported goods made or to be made by the buy er to the 
seller, whether paid direct ly and/or indirect ly. 
2. Be an original final document.  Accordingly , a pro forma invoice shall not be accepted.  
3. Be issued by the seller of the goods.  
4. Contain no erasures, additions or alterations.  
5. Contain the following inf ormation as a minimum:  
(a) Number and date of the shipment;  
(b) name and address of the seller;  
(c) name and address of the buyer;  
(d) description of the goods;  
(e) quantity;  
(f) unit and total prices;  
(g) currency of the commercial transaction;  
(h) place and terms of delivery of the goo ds, according to the "INCOTERMS " international 
trade terms established by the International Chamber of Commerce or other 
agreements.  
 The commercial invoice may be in the form of an email , in which case it shall meet the 
requirements indicated above, in ac cordance with domestic legislation regulating e -trade.  
 If the commercial invoice is in a language other than Spanish, the customs authority may 
require the importer to attach the corresponding translation.  G/VAL/N/1/ECU/3  
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  Article 4. - Submission of the Andean Customs Valu e Declaration  
 The DAV shall be submitted as a document in support of the customs declaration for the 
goods imported, regardless of whether the first "transaction value of the imported goods " method 
is used or not.  
Article 5. - Exemption from submission  
 Without prejudice to the provisions in each member country 's domestic legislation, 
exemption from submitting the DAV may be given in the following cases:  
(a) Imports not of a commercial nature;  
(b) imports of the luggage of passengers, crew, tourists and household e ffects, except for 
vehicles;  
(c) postal parcels and packages sent through international courier services.  
Article 6. - Streamlined Andean Customs Value Declaration  
 A streamlined DAV may be authorized for goods which are imported regularly, continuously 
or succ essively under the same commercial conditions, coming from the same supplier and 
intended for the same importer, if their diversity, volume and features warrant a streamlined 
procedure.  
 Member countries may determine the me chanisms, methods and criteria  for a streamlined 
DAV in their domestic legislation.  
Article 7. - Declaration of provisional value  
1. An importer may declare a provisional value when, at the time of determining the customs 
value and applying the first "transaction value of imported goods " method, the value cannot be 
given definitively for the following reasons:  
(a) The agreed price has not been finally determined and depend s on a particular situation in 
the future;  
(b) the amounts for the concepts indicated in Article 18.1(a)(i), (c) and (d) of the Co mmunity 
regulations for Decision No. 571 adopted by Resolution No. 846 are not known at the time 
of import and have to be estimated;  
 In such cases, the importer shall forward the written contracts showing and proving the 
situation.  The provisional nature of the value shall be recorded in the DAV.  Without prejudice to 
the provisions in preceding paragraphs, member countries may indicate the provisional nature 
of other factors according to their needs.  
2. In any of the situations indicated in the preceding para graph, final determination of the 
customs value may be deferred;  in such cases, the importer may withdraw the goods from the 
Customs, paying the import duties and taxes corresponding to the provisional value declared and 
providing the s urety  established fo r this purpose.  
3. The s urety  indicated in the preceding A rticle shall consist of a percentage to be determined 
by each member country, applied to the value declared as the provisional taxable base and for the 
time the importer needs to declare the final valu e. This time-limit may not exceed 
twelve  (12) months as of the date of acceptance of the customs declaration of the imported goods, 
and shall only be renewable for a further maximum period of six (6) month s and, exceptionally, for 
a longer period if the terms of the contract so warrant , subject to evaluation and acceptance by 
the Customs Administration.  
4. If the importer is aware of the fi nal value, he shall inform the customs a uthority within the 
time-limit estimated for this purpose, which shall correspond to the period of validity of the s urety. G/VAL/N/1/ECU/3  
- 163 - 
   The s urety  shall be returned and no penalty shall be applied if the final value:  
(a) Is the same as the provisional value;  
(b) is more than the provisional value and the importer has paid the taxes due ; or 
(c) is less than the  provisional value, in which case the importer may request refund of  the 
excess payments made.  
5. If the provision in the first subparagraph of the preceding numbered paragraph is not met, 
the s urety shall be enforced.  Member countries may specify the penalti es to be applied in such 
cases in their domestic legislation.  
6. The provisions in the preceding numbered paragraphs neither prevent nor limit the power 
of the Customs Administration to exercise its controls.  
7. In their domestic legislation, member countries sh all regulate the other aspects required for 
the efficient processing of provisional declarations of value.  
Article 8. - Entry into force  
 This Resolution shall enter into force upon publication in the Official Gazette of the 
Cartagena Agreement.  
 The final date for implementing the submission of the DAV approved by this Resolution, 
as well as the corresponding electronic transmission of data by users , shall be 1  June 2 010. 
Article 9. - Derogations  
 Resolutions Nos. 1112 and 1137 of the General Secretariat of the Andean Community are 
hereby repealed.  
 Done in the city of Lima, Peru, on twenty -nine May of the year two  thousand  and nine.  
ANA MARÍA TENENBAUM DE  REÁTEGUI  
Director -General responsible for the  General Secretariat  G/VAL/N/1/ECU/3  
- 164 - 
  ANNEX I  
 
 
 G/VAL/N/1/ECU/3  
- 165 - 
  
 
 
 G/VAL/N/1/ECU/3  
- 166 - 
  ANNEX II 
INSTRUCT IONS FOR COMPLETING THE ANDEAN CUSTOMS VALUE DECLARATION FORM 
(DAV), GENERAL ASPECTS  
Pursuant to Article 9 of Decision No. 571, importers have to submit a declaration of the facts 
and circumstances concerning the com mercial transaction involving the goods to be imported and 
being valued.  
For this purpose, in accordance with Article  8 of the aforementioned Decision, the Andean 
Customs Value Declaration form (hereinafter the DAV) form adopted in the first Article of this 
Resolution is to be used and completed  in accordance with these instructions.  
The DAV is composed of the following:  
The cover  sheet containing : 
I. General information . 
II. A detailed description of the goods and determination of the customs value.  
III. The declarant.  
Additional sheets (which m ay be one or more) containing:  
II. A detailed description of the goods and determination of the customs value.  
 The DAV is designed for declar ing the commercial facts and circumstances surrounding  
a single  transaction that results in the importation of pro ducts classified in one or more 
subheadings.  If the transaction relates  to a sale covered by several commercial invoices in which 
the seller, the buyer, the currency of the transaction, the terms of delivery and other information 
recorded in part I are the  same, a single DAV may be completed.  Otherwise, a form should be 
completed for each sale.  
 If the goods can be valued using the transaction value method, parts I and II should be 
completed, determining the customs value per item, giving information by typ e of product.  If the 
taxable base is determined using alternative methods, in part I the boxes relating to the 
description of the goods should be completed and in part II the codes of the countries of origin, 
shipment and purchase, without filling in the b oxes on values.  
 In any event, the boxes in part III have to be filled in and the form signed.  
 The goods should be described by item ; if information on more than one item has to be 
recorded, as many additional sheets as necessary should be completed, bein g sure to indicate in 
box 1 of the cover  sheet the number of additional sheets used.  Two dashes ( --) should be entered 
in boxes that are not utilized . 
 For the purposes of these instructions, "Community regulations " mean the Community 
regulations implement ing Decision No. 571 on the customs valu ation of imported goods, adopted 
by Resolution No. 846. 
 For the purposes of these instructions, "Agreement " means the Customs Valuation 
Agreement of the World Trade Organization (WTO).  G/VAL/N/1/ECU/3  
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  INSTRUCTIONS FOR COMPLETING T HE FORM  
No. of form : The number attributed by the Customs Administration  
1. No. of additional sheets : Indicate the number of sheets used.  Example:  
a. If there is only one item, indicate zero on the cover sheet because no additional sheets are 
required.  
b. if there is more than one item, additional sheets have to be completed.  Accordingly, on the 
cover sheet the number of additional sheets used should be indicated ; in the space provided 
on each of these, indicate their order in succession and the total number u sed. For example, 
if there are 3 additional sheets, on the cover sheet put 3 ; on the first additional sheet, 
put 1 of 3; on the second, 2 of 3 ; and on the third, 3 of 3.  
2. No. of customs declaration of the goods ; Indicate the number and date of the customs 
declaration for the goods being imported to which the DAV corresponds.  
3, 4, 5 and 6 : Decision : Provide the following information:  
Type : Indicate the code corresponding to the decision of the Customs Administration that affect s 
determination of the customs value of the goods or completion of the DAV.  
1. Advance decision ; 
2. Permanent adjustments of value ; 
3. Streamlined ; 
4. Other . 
Specify : If the code corresponding to "Other" has been entered in the previous box , indicate 
which decision . 
Number and year of t he decision : Indicate the number of the decision and the year it was 
taken.  
For example, there is a decision on permanent adjustment s of value for the importation in 
question and it should be recorded as follows:  
Type:  02, Specify : - -, Number and year : 15/2007.  
I. GENERAL INFORMATION  
Contains general information concerning a transaction covered by one or more commercial 
invoices in the case of a sale or substitute document in other cases.  
IMPORTER : 
 Where the transaction is in the form of a sale, the informat ion to be given refers to the 
buyer, otherwise  to the importer.  
7. Name or trade name : Indicate the surnames and first names or the trade name of the 
buyer, as they appear on the commercial invoice , otherwise  those of the importer appearing on 
the contract or  document showing the commercial transaction.  
8. Type and number of identity document : Indicate the code for the type of document and 
the identity number, using the codes in Table 5 of Annex IV.  G/VAL/N/1/ECU/3  
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  9. Commercial level code : Enter the code for the buyer 's commercial  level, according to the 
definition in Arti cle 2(f) of the Community r egulations.  This box also needs to be filled in when 
there is a sale, using the codes below : 
1. Wholesaler  
2. Retailer  
3. Industrial user (manufacturer)  
4. End user  
5. Other  
10. Specify : If the code corres ponding to "Other " has been entered in the previous box , give 
details . 
11. Address : Enter the address of the buyer or the importer, as applicable, as the y appear on 
the commercial invoice or the document showing the transaction.  
12. City: Indicate the name of the city in the address of the buyer or importer as shown 
in box 11. 
13. Country code : Enter the country code for the country in which the city indicated in box  12 
is situated.  Use the codes provided for the customs declaration of goods in Table 4 of Annex IV.  
14, 15 and 16 . Telephone, fax and email: Indicate this information for the buyer or importer 
of the goods.  For the telephone and fax numbers, enter the international dialling code in brackets 
followed by the local number.  
SUPPLIER  
 The information to be enter ed in these boxes refers to the supplier of the imported goods, 
who may be the seller if the transaction corresponds to a sale.  
17. Name or trade name : Indicate the surnames and first names o r the trade name of the 
seller , as they appear on the commercial invo ice, otherwise  those of the supplier  appearing on the 
contract or document showing the commercial transaction . 
18. Code function : Indicate the code for the seller 's function in the case of a sale, using the 
codes below : 
1. Manufacturer  
2. Distributor  
3. Dealer  
4. Other  
If there is no sale, enter two dashes ( --). 
19. Specify : If the code corresponding to "Other " has been entered in the previous box, give 
details . 
20. Address : Enter the address as it appears on the commercial invoice or the document 
showing the transaction.  
21. City: Indicate the name of the city in the address entered in the previous box as it appears 
on the commercial invoice or the document showing the transaction.  
22. Country code : Enter the country code for the country in which the city indicated in the 
previous box  is situated as it appears on the commercial invoice or the document showing the 
transaction, using the codes indicated in Table 4 of Annex IV.  G/VAL/N/1/ECU/3  
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  23, 24 and 25 . Telephone, fax and email: Indicate this information for the seller  or supplier 
of the goods.  For the telephone and fax numbers, enter the international dialling code in brackets 
followed by the local number.  
COMMERCIAL TRANSACTION  
26. Number of invoices : Record the total number of commercial invoices issue d by the seller 
relating  to a single transaction and c overing the goods that are the subject of the declaration.  
Each invoice should be identif ied by number and date in part II of the form.  
27. Number and date of the contract or other document : Indicate the number and date 
of the sales contract or other type of c ontract or document covering the transaction.  
28. Specify : Indicate which document covers the transaction if it is not the same as the sales 
contract.  
29. Form of payment : Indicate the form of payment of the goods that are the subject of the 
commercial transaction  using the codes  below : 
1. Advance payment  
2. Cash payment  
3. Credit payment  
4. More than one form of payment (specify)  
5. No payment  
6. Other (specify)  
30. Specify : If the code corresponding to "More than one form of payment " or "Other " has been 
entered in the previous box , give details . 
31. Method of payment : Indicate the method of payment used for the transaction.  
If "No payment " was indicated in the appropriate box, two dashes sh ould be entered in this box.  
The information is to be recorded using the code s below : 
1. Cash 
2. Cheque  
3. Simple payment order  
4. Clean  remittance  
5. Documentary remittance  
6. Documentary credit  
7. Other (specify)  
NOTE : Use of the payment methods should conform to the provisions in each member country 's 
domestic legislation.  
32. Specify : If the code corresponding to "Other " has been entered in the previous box , give 
details . 
33. Form of consignment : Record the form of consignment of the goods that are the subject 
of the transaction using the code s below : 
1. Partial or split consignments ; 
2. Entire consignment . 
34. Nature of the transaction : The nature of the transaction must correspond to one of the 
codes in the list below : 
1. Sale at a fixed price for export to Andean Community Customs Territory ; 
2. Sale at a fixed price for export to Andean Customs Territory after the goods have been 
shipped but pr ior to importation (successive sales) ; 
3. Sale at a provisional or reviewable price, subject to a future condition, for export to 
Andean Community Customs Territory ; G/VAL/N/1/ECU/3  
- 170 - 
  4. Sale for internal use abroad and subsequent export to Andean Community Customs 
Territory ; 
5. Consignment of the goods ; 
6. Supplied free of charge (gifts, samples, p romotional  material) ; 
7. Goods supplied to branches directly or indirectly from the parent company ; 
8. Partial supply of materials and/or machinery under a general construction contract ; 
9. Goods supp lied under an assistance programme promoted or financed wholly or 
in part by the Andean Community or another international organization ; 
10. Replacement of goods returned ; 
11. Replace ment of goods not return ed (for example under a guarantee) ; 
12. Countertrade (barter,  offset trade, voucher, offer to purchase, switch arrangement, 
merchanting, swap or partial offset) ; 
13. Leasing or hire; 
14. Financial leasing ; 
15. Loan or loan for use ; 
16. Assembly or processing service ; 
17. Repair or maintenance free -of-charge ; 
18. Repair or maintenance again st payment ; 
19. Government aid ; 
20. Other aid (private or from non -governmental organizations) ; 
21. Operations under intergovernmental joint manufacturing programmes ; 
22. Other transactions for temporary use ; 
23. Other transactions . 
35. Specify : If the codes 20, 22 or 23 have bee n entered in the previous box , give details . 
36. Terms of delivery : Indicate the terms and place of delivery according to the arrangement 
between the seller and buyer using the INCOTERMS international trade terms of the International 
Chamber of Commerce in Par is, using Table 1 of Annex IV.  If terms of delivery other than those 
provided in the INCOTERMS are agreed, enter "Other ". 
37. Specify : If the word "Other " has been entered in the previous box , give details . 
38. Total value : Enter the total value of the commercial transaction according to the 
commercial invoice or equivalent document, taking into account the currency of the transaction 
and the terms of deliver y. 
INTERMEDIATION  
39. Any intermediation ? Indicate whether any intermediary termed an agent, broker or other 
is involved in the transaction.  Enter "1" if the answer is yes or "2" if it is no.  
40. Code type of intermediary.  Indicate the type of intermediary if the reply to the previous 
question is yes, using the codes below:  
1. Sales agent  
2. Buying agent  
3. Broker  
4. Other type of intermediation.  
41. Specify : If the code corresponding to "Other type of intermediation " has been entered in 
the previous box , give details . 
42. Name or trade name : Enter the first names and surnames or the trade name of the 
intermediary, as applicable.  
43. Address : Indicate the address of the intermediary 's domicile.  
44. City: Indicate the name of the city corresponding to the intermediary 's address.  G/VAL/N/1/ECU/3  
- 171 - 
  45. Country code : Enter the country code for the city corresponding to the intermediary 's 
address, using the codes indicated in  Table 4 of Annex IV.  
46, 47 and 48 . Telephone, fax and email: Indicate this information for the intermediary.  
For the telephone and fax numbers, enter the international dialling code in brackets followed by 
the local number.  
REQUIREMENTS FOR APPLYING THE TRANSACTION VALUE  
 These boxes concern application of the transaction value method so should only be 
complete d for transactions which correspond to a commercial sale.  
49. Any restriction ? Indicate whether there are any restrictions on the assignment or use 
of goods after importation by the buyer, in accordance wi th Article 10 of the Community 
regulations.  Enter "1" if the answer is yes or "2" if it is no. 
50. Code type of restriction . If the answer to the question in the previous box is "yes", 
indicate the type of restriction using the codes below:  
1. Taxes or restrictions required by law or by authorities in Andean Community Customs 
Territory;  
2. Limitation on the geographical area where the goods may be resold;  
3. No significant effect on the value of the goods;  
4. Affects th e value of the goods.  
51. Any conditions or considerations?  Indicate whether there are any conditions or 
consideration s imposed on the buyer by the seller in relation to the sale or the price of the goods 
being valued in accordance with the provision s in Artic le 11 of the Community r egulations.  
Enter  "1" if the answer is yes or "2" if it is no.  
52. Code condition or consideration:  If the answer to the question in the previous box is 
"yes", indicate the type of condition or consideration using the codes below:  
1. The p rice of the goods depends on the purchase of other goods;  
2. The price of the goods depends on the price at which the buyer sells other goods to the 
seller;  
3. The price depends on a particular form of payment unrelated to the imported goods;  
4. The price depends o n discounts granted according to the quantities bought, form of  payment 
or any other condition of the transaction;  
5. Sale of the goods depends on activities related to the marketing of the imported goods 
(advertising, guarantees, exhibition in premises, at f airs or in shop windows, etc.);  
6. Sale depends on making indirect payment for the imported goods to the benefit of the seller 
(see Article 8.4 of the Community r egulations);  
7. Sale of the goods depends on the supply of services related to their production 
(see Article s 2, 18 and 25 of the Community r egulations);  
8. Sale depends on payments to be made by the buyer for the right to utilize patents, 
trademarks, copyright, distribution or resale or other rights, related to the imported goods 
being valued.  
9. Other types of condition or consideration.  
53. Specify : If the code corresponding to "Other types of conditio n or consideration " has bee n 
entered in the previous box, give details.  
54. Can the value of the conditions or considerations be determined ? If "Yes" has been 
entered in box 51,  enter "1" if the value of these conditions or considerations can be determined 
or "2" if it cannot be determined.  
55. Any royalties or licence fees ? Enter "1" if there is an obligation to pay the right to use 
patents, trademarks, copyright or other rights, as a condition  of sale of the goods being valued.  
If there is no such obligation, enter "2". G/VAL/N/1/ECU/3  
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  56. Any accruals to the seller ? Enter "1" if any part of the proceeds of the subsequent resale, 
disposal or use of the goods being valued is directly or indire ctly paid to the seller abroad by the 
buyer.  Enter "2" if there is no such accrual.  
57. Any relationship between buyer and seller : Enter "1" if there is a relationship between 
the buyer and seller or "2" if there is no such relationship.  
58. Code type of relations hip: If the reply to the question in the previous box is "Yes", enter 
the code corresponding to the category of relationship between the buyer and seller according to 
the codes below:  
1. One of the persons is an officer or director of the other 's firm;  
2. They a re legally recognized partners in business (see  Article 13.2 of the Community 
regulations);  
3. They are employer -employee;  
4. One of the persons directly or indirectly owns, controls or holds 5% or more of the 
outstanding voting stock or shares of both of them ; 
5. One of them directly or indirectly controls the other (see  Article 13.3 of the Community 
regulations);  
6. Both of them are directly or indirectly controlled by a third person.  
7. Together they directly or indirectly control a third person;  
8. They are members of th e same family (see  Article 13.4 of the Community r egulations).  
59. Influence of the relationship on the price : If "yes" has been entered in box 57, enter 
"1" if the relationship has influence d the price of the goods or "2" if it has not. If there is 
no relatio nship, enter two dashes (- -). 
60. Any test values ? Enter "1" if any test value is known or "2" if none is known.  This should 
be completed if the answer in the previous box was in the affirmative, otherwise cross out the box.  
61. Number and date of the customs dec laration of the goods:  Specify the number and 
date of the customs declaration in support of a test value if the answer in the previous box was 
in the affirmative.  
62. Total f.o.b. value : Enter the total of the sum of f.o.b. values per item.  
62.1 Total price ac tually paid or payable : Enter the total price actually paid or payable 
per item. 
63.  Total transport costs : Enter the amount of  transport and related costs paid or payable 
for all the goods declared.  This sum should be entered in the corresponding box in the customs 
declaration of the goods.  
64. Total insurance costs : Enter the amount of the insurance paid or payable for all the goods 
declared.  This sum should be entered in the corresponding box in the customs declaration of the 
goods.  
65. Total o ther additions : Enter the total sum of the additions made under  each item, 
as provided in Article 8 of the Agreement , and the additions corresponding to indirect payments, 
retroactive discounts and other payment s. 
66. Total deductions : Enter the total sum of the deductions made fr om each item.  
 The total sum of the amounts  entered in boxes 65 and 66 (negative) should be entered 
in the corresponding box of the customs declaration of the goods.  
67. Total transaction value declared : Enter the total sum of the amounts entered in boxes 
62.1 to 65, minus the value entered in box 66 . The total sum should be entered in the 
corresponding box of the customs declaration for the goods.  G/VAL/N/1/ECU/3  
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  II. DETAILED DESCRIPTION OF THE GOODS AND DETERMINATION OF THE CUSTOMS 
VALUE  
 The description of the goods should enab le them to be distinguished and identified.  
The calcula tions provided in part II and the determination of the cust oms value shall be in the 
currency stipulated in the domestic legislation of each member country . 
68. Item : Indicate the category or number corres ponding to the description of the product.  
69. Subheading : Indicate the ten(10) -digit tariff subhea ding for the goods declared.  
70. Number and date of the commercial invoice : Indicate the numbe r and date of the 
commercial invoice issued by the seller for the impor ted goods being valued.  
71. Designation of goods : Indicate the name by which the goods imported are commercially 
known.  Example : fried potatoes, chewing gum, tights, bond paper, engine, truck.  
72. Trademark : Indicate the name or sign on the goods at the time of im portation 
distingu ishing them from others on the market.  
73. Type : Record  the category for the goods imported.  
74. Class:  Record the special features which distinguish the goods from others in the same 
class.  
75. Model : Indicate the name given to the goods according t o their special features and which 
reflect any modification or improvement of the product over a specific period ; this is to distinguish 
them from others bearing the same trademark.  May be in the form of a digital or numerical code.  
76. Condition : Indicate the  condition of the goods being imported according to the following 
list: 
1. New; 
2. Used;  
3. Obsolescent;  
4. Dismounted /new; 
5. Dismounted /used;  
6. Semi-assembled/new;  
7. Semi-assembled/used;  
8. Spoiled, damaged or deteriorated;  
9. Repaired, refurbished or rebuilt;  
10. Remanufactured;  
11. Other. 
77. Specify : If the code for "Other " has been entered in the previous box , give details . 
78. Year of manufacture : If applicable, indicate the year in which the good being imported 
was manufactured.  This date is required in particular in respect of goods for w hich this information 
is important, for example, vehicles.  
79. Quantity : Indicate the number of goods in the transaction declared, according to the 
commercial unit.  
80. Commercial unit : Indicate the size (metres, yards, litres, gallons, linear metres, inches, 
etc.) in which the transaction is expressed.  
81. Other features : Indicate other features which clarify and identify the goods being valued.  
For goods for which there is only a minimum description, information complementing that entered 
in boxes 71 to 78 should be given.  G/VAL/N/1/ECU/3  
- 174 - 
   For textile products a nd clothing, depending on each m ember country 's legislation, the 
information contained in Annex III may be included for reference purposes . 
82. Net p rice per item on invoice : Enter the net price  per item appearing on the commercia l 
invoice using the agreed INCOTERMS and in the currency determined by each m ember  country 's 
legislation;  if the transaction is in a foreign currency, it should be converted at the selling rate 
published by the competent authorities in effect on  the date o f acceptance of the value declaration 
for the imported goods.  
83. Additions  or deductions  to determine the  f.o.b. value per item: Indicate the additions 
and/or deductions to be made to the net price per item on the invoice in order to convert it into 
the f.o.b . price, taking into account the terms of the transaction.  
Additions to be made using the INCOTERMS agreed for the transaction:  
- EXW : Total f.o.b. value per item US$ = Net price per item + clearance costs for export 
per item + transport costs to the place  of shipment per item + handling and stevedoring 
charges per item + other charges in the country of export per item.  
- FAS or FCA: Total f.o.b. value per item  = Net price per item + handling and stevedoring 
charges per ite m + other charges in the country o f export per item . 
- CFR, CPT, DAF or DES: Total f.o.b. value per item = Net price per item - Transport costs 
from the place of shipment to the country of import per item.  
- CIF or CIP: Total f.o.b. value per item = Net price per item - Transport costs fro m the 
place of shipment to the country of import per item - Cost of insurance from the place 
of shipment to the country of import per item.  
- DEQ: Total f.o.b. value per item = Net price per item - Transport costs from the place 
of shipment to the country of import per item - Unloading costs in the port of the country 
of import per item.  
- DDU: Total f.o.b. value per ite m = Net price per item - Transport costs from the place 
of shipment to the country of importation  per item - Cost of i nsurance from the plac e 
of shipment to the country of importation  per item - Transport costs in the country 
of importation  - Other charges in the country of importation  per item.  
- DDP: Total f.o.b. value per item = Net price per item - Transport costs from the place 
of shipmen t to the country of importation  per item - Cost of i nsurance from the place 
of shipment to the country of importation  per item - Transport costs in the country 
of importation  - Other charges in the country of import ation per item - Duties and taxes 
payable  on the import of goods per item.  
84. F.o.b. value per item : Indicate the f.o.b. value per item, using the commercial unit 
entered in bo x 80. This figure should be entered even if the transaction corresponds to terms 
of delivery other than f .o.b. 
85. F.o.b. value per unit by product : Enter  the result of dividing the f.o.b. value per item and 
the amount entered in box 79.  
86. Indirect payments per item : Enter in this box the amount of the indirect payment 
mentioned in Article 8 .4 of the Community r egulations.  
87. Retroactiv e discounts per item  or others not accepted per item:  Enter in this box the 
amount of the retroactive discounts mentioned i n Article 9.4 of the Community r egulations or 
others not accepted for valuation purposes.  
88. Other payments per item : Enter advance paym ents or other payments per item which 
compose the price actually paid or payable and not included in the commercial invoice or not 
entered in other boxes.  
89. Total price actually paid or payable per item : Enter the total of the amounts in boxes 
82, 86, 87 and  88. 
90. Trans port costs from the place of shipment to the place of importation : Enter the 
cost per item incurred for carriage, transport -related costs and, in general, all costs incurred for G/VAL/N/1/ECU/3  
- 175 - 
  transporting the goods from the place of shipment to the place of im portation, provided that these 
are not included in the price actually paid or payable.  
 If any of these elements is provided to the buyer free of charge using the  buyer 's own 
means or services or was not duly incurred , the procedure laid down in Article  6 of Decision 
No. 571 and Article 28 .3 of the Community r egulations shall be followed.  
91. Insurance cost per item : Enter the cost of transport insurance per item, provide d that it is 
not included in the price actually paid or pay able. If insurance is free of ch arge for the buyer 
or was not duly incurred , the procedure laid down in Article  6 of Decision No. 571 and Article  28.3 
of the Community Regulations shall be followed.  
 If the goods are insured in part, the parts not covered by an insurance policy may be 
determined in accordance with the preceding paragraph.  The total of both parts shall be entered in 
this box.  
92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102 and 103 . Other add itions per i tem: Enter the 
code and the amount  per it em for the adjustment of additio ns to the price actually paid or payable 
for the imported goods, in accordance with Table 2 in Annex  IV and the supporting documents for 
the elements to be added.  
104, 105, 106, 107, 108, 109, 110 and 111 . Other deductions : Enter the code and the 
amount per item for adjustment of deductions to the price actually paid or payable for the 
imported goods, in accordance with Table 2 in Annex  IV and the supporting documents for the 
elements to be deducted.  Deductions will only be allowed  if the amount  is actually included in the 
price paid or payable entered in box 89  
112. Customs value per item:  Enter the  total of the amounts in the box es (89, 90, 91, 93, 95, 
97, 99, 101 and 103), minus  the total in the boxes (105, 107, 109 and 111).  
113. Customs value per unit b y product : Enter the total obtained by dividing the customs 
value per item among the quantity  entered in box 79,  
114. Estimated or provisional values : Indicate the numbers of the boxes in which estimated or 
provisional values have been entered.  
115, 118, 1 21. Code for the currency used in the transaction:  Indicate the code for the 
currency in which the transaction of the goods or any of the customs valuation elements for the 
goods took place, using Table 3 in Annex IV.  
116, 119, 122 . Rate of exchange : Enter the exchange rate fixed by the competent authority in 
each member country  on the date determined in domestic leg islation, to be used as the basi s for 
calculati ng the currency conversion, where applicabl e Also indicate the date of th is exchange rate . 
117, 120, 123 . Box no. : Indicate the number of the box corresponding to the amount  of the 
adjustment for which the exchange rate is used if the transaction took place in a currency other 
than that selected for declaring customs value for each member country . 
124. Code country of origin : Code for the country where the imported goods were 
manufactured, exploited, extracted or grown or other features which make the country the origin 
of the goods , in accordance with Table 4 in Annex IV.  
125. Code country of shipmen t: Code for the country where the goods were loaded with the 
country of importation as the final destination, in accordance with Table  4 in Annex  IV. A country 
where the mode of transport makes a stop or where the goods are transhipped is not considered 
to be the country of shipment.  
126. Valuation method used:  Enter the code corresponding to the valuation me thod used to 
determine the customs value declared for the imported goods, in accordance with Table  6 in 
Annex  IV. G/VAL/N/1/ECU/3  
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  III. DECLARANT  
 Enter data on the importer  or buyer and , where the domestic legislation of the member 
country so requires, on their legal representative or the person authorized to act on their behalf.  
The provisions in Articles  11, 12 and 13 of Decision  No. 571 shall be taken into account for thi s 
purpose.  
127. Name or trade name : Indicate the trade name of the person acting as the legal 
representative or the person authorized to act on behalf of the importer.  
128. Type  and no. of identity document : Indicate the type and number of the declarant 's 
identity document, using the codes listed in Table 5 in Annex IV  
129. Address : Indicate the address of the legal representative or the person authorized to act on 
behalf of the importer.  
130. City: Enter the name of the city where the legal representative or the person authorized to 
act on behalf of the importer has his /her domicile.  
131. Telephone : Indicate the telephone number together with the national and local dialling 
codes.  
132. Surnames and first names of the signatory  of the declaration.  
133. Type and number of the identity document  of the person signing the declaration : 
Indicate the code corresponding to the type of identity document and its number, using the codes 
in Table 5 in Annex  IV. 
134. Signature and stamp : The DAV must be signed by the decl arant and stamped if so 
required by the m ember country 's legislation.  G/VAL/N/1/ECU/3  
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  ANNEX III  
MINIMUM DESCRIPTIONS FOR IMPORTS IN THE TEXTILE AND CLOTHING SECTORS  
(Chapter 50 to 63 of the Harmonized System)  
MINIMUM DESCRIPTION OF THE GOOD S 
I. FIBRES  
1. Composition : % of fibres according to type;  
2. Level of preparation of the fibre : raw, carded, combed, staple fibres;  
3. Colour : unbleached , bleached, coloured ; 
4. Form of presentation : bulk, b obbins, rolls, b ales; 
5. Weight per commercial unit : net kilogrammes.  
II. YARNS  
1. Description of  the yarn: coated, sewing thread, yarn for weaving, gimped, loop-wale, 
chenille, metallized, etc. ; 
2. Composi tion: % of fibres according to type;  
3. Decitex and number o f filaments per tow:  for example, 30 dtex/number of filaments 
per tow, etc. ; 
4. Type of yarn : Single, m ultiple (folded), cabled, etc. ; 
5. Level of processing and type  of finishing : unbleached, coloured, bleached, yarns of different 
colours, printed, mercerized, dressed, etc. ; 
6. Weight per c ommercial unit : net kilogrammes;  
7. Presentation : conical bobbins, ha nks, skeins, reels, spools, etc. . 
Note: In addition to the foregoing requirements, the following must also be taken into account:  
1. For silk yarn, clarify whether it is silk or silk waste (noil silk);  
2. For yarns in Chapter 54, specify the type of finishing : textured, high tenacity.  
III. FABRICS  
1. Description of the fabric : warp and weft, crocheted, netting, embroidered, woven pile, etc. ; 
2. Composition:  % of fibres according to type ; 
3. Level of processing and type of finishing : unbleached, bleached, yarns of various colours, 
sanforized, waterproofed, etc. ; 
4. Weight per m2: grammes per m2; 
5. Width of the fabric : example : 1.50 m., 2.20 m. 0.80 m. etc.  
Note: In addition to the foregoing  requirement s, the following must also be taken into account:  
1. For carpets in Ch apter 57 an d fabrics in Chapter 58 and heading 60.01, the composition 
of the ground fabric, the pile and looped surface sho uld be separated, as applicable;  
2. For single carpets and tapestries in heading 58.05, their dimensions must be specified;  
3. For fabrics in Chapter 59, the composition must indicate the type of ma terial used for 
waterproofing or coating, and the combined weight.  
IV. MADE -UP ARTICLES - A. CLOTHING  
1. Description of the clothing : trousers, bag, shirt, suit, blouse, etc. ; 
2. Trade name : example : Adidas, Lacost e; 
3. Composition of the fabric used:  % of fibres acco rding to type;  
4. Type(s) of fabric(s) : crocheted or other;  
5. Size and gender : men's, women 's, unisex , etc.; G/VAL/N/1/ECU/3  
- 178 - 
  6. Commercial unit ; in units . 
Note: In addition to the foregoing  requirement s, the following must also b e taken into account:  
- For clothing with lining, the composition of the lining must be indicated separately.  
V. OTHER MADE -UP ARTICLES  
1. Description of the made -up article : bed linen, blankets, etc.;  
2. Composition of the fabric used:  % of fibres according to type;  
3. Commercial unit : in units.  G/VAL/N/1/ECU/3  
- 179 - 
  ANNEX IV  
Table 1: Terms of delivery  
CODE MODE  DEFINI TION 
EXW Ex works   
(… named  place of delivery)  The seller makes the goods available to the buyer at the seller 's works  or in 
another place agreed without clearing them f or export o r loading them on to 
a collecting vehicle.  
FCA Free carrier  
(… named place of delivery ) The seller delivers  goods, cleared for export, to the buyer -designated carrier 
at a named place . This term may be used for any means of transport.  
FAS Free alongside ship  
(… named port of shipment ) The seller places the goods alongside the ship at the named port of shipment.  
May only to be used for maritime or inland waterway transport.  
FOB Free on board  
(… named port of shipment)  The seller hands over t he goods when they are actually on board the vessel 
in the name d port of shipment.  May only be used for maritime or inland 
waterway transport.  
CFR Cost and freight  
(… named port of destination)  The seller hands over the goods when they are actual ly on bo ard the vessel in 
the port of shipment.  The seller must pay the costs and freight.  May only be 
used for maritime or inland waterway transport.  
CIF Cost, insurance and freight  
(… named port of  destination)  The seller pays the costs and freight needed for release of the goods in the 
named port of destination.  The seller must also procure maritime insurance for 
the buyer 's risk of loss or damage during transport.  
CPT Carriage paid to  
(… named place of  destination)  The seller hands over the goods to the car rier designated by it;  it must also 
pay the transport costs.  May be used for any mode of transport, including 
multimodal transport.  
CIP Carriage and insurance paid  
(… named place of  destination)  The seller hands over the goods to the carrier designated b y it, but must also 
pay the costs of carriage needed for release of the goods in the named 
destination.  The seller must also procure insurance against the risk to the 
buyer of loss or damage of the goods during transport.  May be used 
irrespective of the mo de of transport, including multimodal transport.  
DAF Delivered at frontier  
(…named place of delivery)  The seller ha nds over the g oods when they are made available to the buyer on 
the mode of transport used and not unloaded, at the named frontier post and  
place, but before passing through the frontier Customs in the neighbouring 
country ; the goods must be clear ed for export but not for import.  May be used 
irrespective of the mode of transport when the goods have to be delivered at 
a land frontie r Where del ivery has to be made at the port of destination, 
on board a ship or on the quay (wharf) , the terms DES or DEQ should be used . 
DES Delivered ex ship  
(… named port of  destin ation) The seller hands over the goods to the buyer on boar d the ship, not cleared by 
the C ustoms for import, in the named port of destination . The seller must  pay 
the costs and risks incurred for release of the goods at the port of  destination 
agreed prior to unloading.  May only be used when the goods have to be 
handed over on board a v essel at the port of destination, after being carried 
by sea, by inland waterway or by multimodal transport.  
DEQ Delivered ex quay  
(…. named port of  destination)  The seller hand s over the goods when they are made available to the buyer, 
without being cle ared by the C ustoms for import, on the quay (wharf) in 
the named port of destination.  The seller has to bear the costs and risks 
incurred for rel ease of the goods in the named port of destination  and for 
unloading the goods on to the quay (wharf).  May only  be used when the goods 
are handed over, after carriage by sea, by inland waterway or by multimodal 
transport, at the name p ort of destination.  
DDU Delivered duty unpaid 
(… named place of  destination)  The seller hands over the goods to  the buyer, not clea red by the C ustoms 
for import and not unloaded from the means of transport, upon arrival in 
the named place of destination.  The seller has to bear all the costs and risk s 
incurred associated with supplying the goods to this place, other than 
any "duty" payable upon import into the country of destination.  The buyer is 
responsible for paying s uch "duty", together with any other cost s and ris ks 
incurred for not delivering the goods for import in time.  May be used 
irrespective of the mode of transport, but when  delivery is to take place in 
the port of destination on board the vessel or on t he quay  (wharf), the terms 
DES or DEQ should be used.  
DDP Delivered duty paid  
(… named place of  destination)  The seller hands over the goods to the buyer, cleared for import  and not 
unloaded from the means of transport, upon arrival in the named place 
of destination.  The seller has to bear all the  costs and risks incurred in  
supplying the goods to this place, including, where applicable, any "duty" 
(term which includes liabil ity and risks in completi ng customs formalities, 
and payment of  the formalities, customs duties, taxes and other charges) 
payable  upon import into the country of destination.  May be used irrespective 
of the mode of transport, but when delivery is in the po rt of destination on 
board the  vessel or on the quay (wharf), the terms DES or DEQ sh ould be 
used.  
Source : INCOTERMS 2000.  G/VAL/N/1/ECU/3  
- 180 - 
  Table 2: Codes for unit additions and/or deductions  
UNIT ADDITION CODES  (Article 18 Community r egulations ) 
1. Commissions and broke rage, except buying commissions;  
2. The cost of containers or packaging which are treated as being one for customs purposes 
with the goods in question ; 
3. Services : materials, components, parts and similar items incorporated in the imported 
goods;  
4. Services: tools, dies, moulds and similar items used in the production of the imported 
goods ; 
5. Services : materials consumed in the production of the imported goods;  
6. Services : engineering, development, artwork, design work, and plans and sketches 
undertaken  outside Community Customs Territory and necessary for the production of the 
imported goods;  
7. Royalties and licence fees related to the goods being valued that the buyer must pay, either 
directly or indirectly, as a condition of sale of the said goods, t o the extent that such 
royalties and fees are not included in the price actually paid or payable;  
8. The value of any part of the proceeds of any subsequent resale, disposal or use of the 
imported goods that accrues directly or indirectly to the seller.  
UNIT DEDUCTIONS  (Article 31 Community Regulations ) 
9. Cost of construction, erection , installation, assembly, maintenance and technical assistance 
undertaken after importation of the imported goods, such as industrial plant, machinery or 
indus trial equipment ; 
10. Import duties and taxes or other charges  payable in Community Customs Territory for 
import o r sale of the goods in question ; 
11. Transport, carriage  and insurance incurred after the goods have arrived at the place 
of import ation into Community Custom s Territory, as well as the cost of temporary storage 
of the goods for reasons of carriage after arrival at the place of import ation; 
12. Unloading and handling charges  at the place of import ation into Commu nity Customs 
Territory, and the charges paid for ships' berthing in port s in this Territory;  
13. The interest included in the commercial invoice, paid under a financing a rrangement  
entered into by the buyer and relating to th e purchase of the imported goods, provided 
that the circumstances indicated in Decision  No. 3.1 of the WTO  Committee on Customs  
Valuation apply . If any of these circumstances do not apply, it shall be considered that the 
amount attributed to interest forms part of the transaction value ; 
14. Other charges . G/VAL/N/1/ECU/3  
- 181 - 
  Table 3: Currencies  
 
CODE NAME CODE NAME  
AED United Arab Emirates  dirham  CLF (funds 
code) Unidades de fomento chilenas  
AFN Afghan a fghani CLP Chilean peso  
ALL Albanian lek  CNY Chinese yuan r enminbi  
AMD Armenian d ram COP Colombian peso  
ANG Netherlands Antillean guilder  COU Unidad  de valor real colombiana (UVR) 
(added  to the COP)  
AOA Angol an kwanza  CRC Costa Rican colon  
ARS Argentine peso  CSD Serbian dinar ( It was replaced by RSD 
on 25 October 2 006) 
AUD Australian dollar  CUP Cuban peso  
AWG Aruban f lorin  CVE Cape Verde e scudo  
AZM Azerbaijani ma nat  CYP Cypriot pound  
BAM Bosnia and Herzegovina convertible mark  CZK Czech koruna  
BBD Barbados dollar  DJF Djiboutian franc  
BDT Bangladeshi taka  DKK Danish krone  
BGN Bulgarian lev  DOP Dominican peso  
BHD Bahraini dinar  DZD Algeria n dinar  
BIF Burundian franc  EEK Estonian kroon  
BMD Bermudian dollar  EGP Egyptian pound  
BND Brunei dollar  ERN Eritrean nafka  
BOB Bolivian boliviano  ETB Ethiopian birr  
BOV Bolivian m vdol ( funds code ) EUR Euro 
BRL Brazilian real  FJD Fiji doll ar 
BSD Bahamian dollar  FKP Falkland Islands pound  
BTN Bhutanese n gultrum  GBP Pound sterling (British pound)  
BWP Botswana p ula  GEL Georgian lari  
BYR Belarusian ruble  GHC Ghan aian cedi  
BZD Belize dollar  GIP Gibraltar pound  
CAD Canadian dollar  GMD Gambian dalas i 
CDF Congolese franc  GNF Guinean franc  
CHF Swiss franc  GTQ Guatemalan q uetzal  
GYD Guyanese dollar  LTL Lithuanian l itas 
HKD Hong Kong dollar  LVL Latvian lats  
HNL Honduran  lempira  LYD Libyan dinar  
HRK Croatian k una MAD Moroccan dirham  
HTG Haitian gou rde MDL Moldovan leu  
HUF Hungarian forint  MGA Malagasy ariary (Madagascar)  
IDR Indonesian rupiah  MKD Macedonian denar  
ILS Israeli new shekel  MMK Myanmar kyat  
INR Indian rupee  MNT Mongolian tug rik 
IQD Iraqi dinar  MOP Macanese pataca  
IRR Iranian rial  MRO Mauritanian o uguiya  
ISK Icelandic krona  MTL Maltese pound   
JMD Jamaican dollar  MUR Mauritian rupee  
JOD Jordanian dinar  MVR Maldivian r ufiyaa  
JPY Japanese yen  MWK Malawian k wacha 
KES Kenyan shilling  MXN Mexican p eso 
KGS Kyrgystani som  MXV Mexican  Unidad de Inversión (UDI) 
(funds  code) 
KHR Cambodian riel  MYR Malaysian ri nggit 
KMF Comoro franc  MZM Mozambican metical  
KPW North Korean w on  NAD Namibian dollar  
KRW South Korean w on  NGN Nigerian n aira 
KWD Kuwaiti dinar  NIO Nicaraguan cordoba  
KYD Cayman Islands dollar  NOK Norwegian krone  
KZT Kazakhstani tenge  NPR Nepalese rupee  
LAK Lao k ip NZD New Zealand dollar  
LBP Lebanese pound  OMR Omani r ial 
LKR Sri Lan kan rupee  PAB Panamanian balboa  
LRD Liberian dollar  PEN Peruvian n uevo sol  
LSL Lesotho  loti PGK Papua New Guinea kina  
PHP Philippine peso  TWD Taiwan dollar  
PKR Pakistani rupee  TZS Tanzanian shilling  
PLN Polish zloty  UAH Ukrainian h ryvnia  
PYG Paraguayan guarani  UGX Ugandan shilling  
QAR Qatari riyal  USD United States dollar  
RON Romanian  leu (since 1  July 2 005) USN United States dollar  (Next day ) (funds code ) 
RUB Russian rouble  USS United States dollar (Same day ) (funds code ) 
RWF Rwandan franc  UYU Uruguayan peso  
SAR Saudi riyal  UZS Uzbekistan s om 
SBD Solom on Islands dollar  VEB Venezue lan bolivar  G/VAL/N/1/ECU/3  
- 182 - 
  CODE NAME CODE NAME  
SCR Seychelles  rupee  VEF Venezuelan boli var  
SDD Sudanese pound  VND Vietnamese dong  
SEK Swedish krona  VUV Vanuatu vatu  
SGD Singapore dollar  WST Samoan tala  
SHP Saint Helena pound  XAF CFA franc  
SKK Slovakian koruna  XAG Silver (one troy oun ce) 
SLL Sierra Leonean leone  XAU Gold (one troy ounce)  
SOS Somali shilling  XBA European Composite Unit (EURCO) 
(Bond  market unit)  
SRD Surinamese dollar (as of 1  January 2 004)  XBB European Monetary Unit E.M.U. -6) 
(Bond  market unit)  
STD São Tomé and P rincipe dobra  XBC European Unit of Account 9 (E.U.A. -9) 
(Bond  market unit)  
SYP Syrian pound  XBD European Unit of Account 17 (E.U.A. -17) 
(Bond  market unit)  
SZL Swazi l ilangeni  (Swaziland)  XCD East Caribbean dollar  
THB Thai baht  XDR Special Drawing Righ ts (IMF) 
TJS Tajikistani  XFO Gold franc  (Special settlement currency)  
TMM Turkmenistani manat  XFU UIC franc (Special settlement currency)  
TND Tunisian dinar  XOF CFA franc  
TOP Tongan p a'anga  XPD Palladium (one troy ounce)  
TRY New Turkish lira  XPF CFP franc 
TTD Trinidad and Tobago dollar  XPT Platinum (one troy ounce)  
XTS Code reserved for testing purposes  ZAR South African rand  
XXX No currency  ZMK Zambian kwacha  
YER Yemeni rial  ZWD Zimbabwe dollar  
Source : ISO 4217, C urrency and fund codes . G/VAL/N/1/ECU/3  
- 183 - 
  Table 4: Country  
 
CODE NAME  CODE NAME  CODE NAME  
AD Andorra  CD Congo, Democratic 
Republic of  GB United Kingdom  
AE United Arab Emirates  CF Central African Republic  GD Grenada 
AF Afghanistan  CG Congo  GE Georgia  
AG Antigua and Barbuda  CH Switzerland  GF French Gu iana 
AI Anguil la CI Côte d'Ivoire    
AL Albania  CK Cook Islands  GH Ghana  
AM Armenia  CL Chile GI Gibraltar  
AN Netherlands Antilles  CM Came roon GL Greenland  
AO Angola  CN China  GM Gambia  
AQ Antarctica  CO Colombia  GN Guinea  
AR Argentina  CR Costa Rica  GP Guad eloupe  
AS American Samoa  CS Serbia and Montenegro  GQ Equatorial Guinea  
AT Austria  CU Cuba GR Greece 
AU Australia  CV Cape Verde  GS South Georgia and the 
South Sandwich Islands  
AW Aruba CX Christmas Island  GT Guatemala  
AZ Azerbai jan CY Cyprus  GU Guam 
BA Bosnia and 
Herzegovina  CZ Czech Republic  GW Guinea -Bissau  
BB Barbados  DE Germany  GY Guyana  
BD Bangladesh  DJ Djibouti  HK Hong Kong  
BE Belgium  DK Denmark  HM Heard Island and  
McDonald  Islands  
BF Burkina Faso  DM Dominica  HN Honduras  
BG Bulgaria  DO Dominican  Republic  HR Croatia 
BH Bahra in DZ Algeria  HT Haiti 
BI Burundi  EC Ecuador  HU Hung ary 
BJ Benin  EE Estonia  ID Indonesia  
BM Bermuda  EG Egypt IE Ireland  
BN Brunei Darussalam  EH Western Sahara  IL Israel  
BO Bolivia  ER Eritrea  IN India 
BR Brazil ES Spain  IO British Indian Ocean 
Territory  
BS Bahamas  ET Ethiopia  IQ Iraq 
BT Bhutan  FI Finland  IR Iran, Islamic Republic of  
BV Bouvet Island  FJ Fiji IS Iceland  
BW Botswana  FK Falkland Islands 
(Malvinas)  IT Italy 
BY Belarus  FM Federated States of 
Micro nesia  JM Jamaica  
BZ Belize FO Faroe Islands  JO Jordan  
CA Canada  FR Franc e JP Japan 
CC Cocos (Keeling)  
Islands  GA Gabon KE Kenya 
KG Kyrgyzstan  MT Malta  RE Reunio n 
KH Cambo dia MU Mauri tius RO Romania  
KI Kiribati  MV Maldive s RU Russia, Federation of  
KM Comoro s MW Malawi  RW Rwanda 
KN Saint Kitts and Nevis  MX Mexico SA Saudi Arabia  
KP Korea, Democratic 
Republic of  MY Malaysia SB Solomon Islands  
KR Korea, Republic of  MZ Mozambique  SC Seychelles  
KW Kuwait  NA Namibia  SD Sudan 
KY Cayman Islands  NC New Caledonia  SE Sweden  
KZ Kazakhstan  NE Niger SG Singap ore 
LA Laos, People 's 
Democratic Republic of  NF Norfolk  Island  SH Saint Helena  
LB Lebanon  NG Nigeria  SI Slovenia  
LC Saint Lucia NI Nicaragua  SJ Svalbard and Jan Mayen  
Islands  
LI Liechtenstein  NL Netherlands  SK Slovakia  
LK Sri Lanka  NO Norway SL Sierra Leone  
LR Liberia  NP Nepal  SM San Marino  
LS Lesotho  NR Nauru  SN Senegal  
LT Lithuania  NU Niue SO Somalia  G/VAL/N/1/ECU/3  
- 184 - 
  CODE NAME  CODE NAME  CODE NAME  
LU Luxemb ourg NZ New Zealand  SR Surinam  
LV Latvia  OM Oman ST São Tomé and Principe  
LY Libya  PA Panama  SV El Salvador  
MA Morocco  PE Peru SY Syrian Arab Republic  
MC Monaco PF French Polynesia  SZ Swaziland  
MD Moldova, Republic of  PG Papua New Guinea  TC Turks and Caicos Islands  
MG Madagascar  PH Philippines  TD Chad 
MH Marshall  Islands  PK Pakista n TF French Southern 
Territories  
MK Macedonia  PL Poland TG Togo 
ML Malí PM Saint Pierre and  Miquelo n TK Tokelau  
MM Myanmar  PN Pitcairn  TL East Timor  
MN Mongolia  PR Puerto Rico  TM Turkmenista n 
MO Macao  PS Palestine, State of  TN Tunisia  
MP Northern Maria na 
Islands  PT Portugal  TO Tonga  
MQ Martini que PW Palau  TT Trinidad  and Tobago  
MR Mauritania  PY Paraguay  TV Tuvalu  
MS Montserrat  QA Qatar  TW Taiwan, Province of China  
TZ Tanzania, United 
Republic of  VC Saint Vincent and the 
Grenadines  YE Yemen  
UA Ukraine VE Venezuela  YT Mayot te 
UG Uganda  VG Virgin Islands, British  ZA South Africa  
UM United States Minor 
Outlying Islands  VI Vírgin Islands, U.S.  ZM Zambia  
US United States  VN Viet Nam  ZW Zimbabwe  
UY Uruguay  VU Vanuatu    
UZ Uzbekista n WF Wallis and Futuna   
VA Holy See  WS Samoa    
Source:  ISO 3166 -1 Codes for countries and their subdivisions, Part 1, Country codes . G/VAL/N/1/ECU/3  
- 185 - 
  Table 5 
Types of identity documents  
CODE NAME  INCLU DES 
1 Single Taxpayer 's Registration  Tax identification number (BO, CO)  
Single Taxpaye r's Registration  (EC, PE)  
2 National Identity Document  Identity card  (EC, CO)  
Identification document  (BO) 
National identification registration (BO) Single national 
registration (BO) National identity document ( PE) 
3 Passport  
4 Public bodies   
5 Foreig ner's identity card  Foreigner 's identification document  
6 International organizations   
7 Armed and police forces  Police/Military identification document (PE) 
 
Table 6 
Methods for determining customs value  
CODE NAME  
1 First method:  transaction value of the imported goods  
2 Second method:  transaction value of identical goods  
3 Third method : transaction value of similar  goods  
4 Fourth method : deductive value  
5 Fifth method:  computed value  
6 Sixth method : "fall-back" 
 G/VAL/N/1/ECU/3  
- 186 - 
  ANNEX 4 
Andean Community  
RESOLU TION No. 1456  
Special customs valuation  cases  
THE GENERAL SECRETARIAT OF THE ANDEAN COMMUNITY,  
 CONSIDERING : The First Final Provision of Decision No. 571 on customs va luation  
of imported goods, its implementing r egulations approved by Resolution No. 846 an d Resolution 
No. 961 on Procedure for Special Cases of Cus toms Valuation;  
 WHEREAS : The First Final Provision of Decision No. 571 provides for the creation 
of an Ad Hoc group of government experts on customs valuation within the Andean Committee on 
Customs  Matters for the purpose of recommending the procedures to be followed in special cases 
of customs valuation;  
 Paragraph 2 of Article  46 of the Community r egulations approved by Resolution  No. 846 
provides that "The General Secretariat, by means of a Resol ution, shall determine the special 
cases subsequently aris ing as a result of the practices of the Customs Administrations … "; 
 Resolution No. 961 adopted the Procedure for Special Cases of Customs Valuation;  
 At the Thirteenth Meeting of the Group of Exper ts on Customs Valuation, held by means 
of a videoconferen ce on 14  December 2 011, the representatives of member c ountries supported 
the draft Resolution prepared by the General Secretariat, which updates the procedures to be 
followed in certain special case s of customs valuation;  
HEREBY DECIDES : CHAPTER  I 
General provisions  
Article 1. - Purpose  
 The purpose of th is Resolution is to lay down the criteria for determining customs value in 
certain special cases in which it is not possible to apply the principal transaction value method or 
the secondary methods, not even taking into account the flexibility afforded by the "fall-back" 
method, either because of the special nature of the goods to be valued or the circumstances of the 
import operations, or because ther e has been  a change of regime or customs destination.  
 In cases not covere d by th is present Re solution  or by the legislation of each member 
country, the criteria set out in Article  17 shall be followed.  
Article 2.- Additions and deductions in order to dete rmine the customs value  
 In order to determine the customs value of imported good s, the additions and/or deductions 
provided in Article  6 of Decision No. 571 and Artic les 18 and 31 of the Community r egulations 
approved by Resolution No. 846 shall be made t o the basic price resulting from application of the 
criteria contained in th is Resolution.  
Article 3.- Taxation  
 This Resolution  does not cover the tax treatment of imported goods, which is governed by 
each member c ountry 's domestic legislation . G/VAL/N/1/ECU/3  
- 187 - 
  Article 4.- Internal regulation of the criteria for determining customs value  
 In order to implement the criteria for determining customs value established in the Articles 
in this Resolution more effectively, the ir order of application may be regulated by th e domest ic 
legislation of each member c ountry . 
CHAPTER  II 
Special cases of valuation  
Article 5.- Used or obsolescent goods  
 The customs value of goods which, subsequent to their purchase but before importation, 
have been used or become obsolescent, shall be determ ined on the basis of one of the following 
criteria:  
(a) The r eference price determined for identical or similar  used or obsolescent good s imported, 
without any depreciation or application of obsolescence, as applicable;  
(b) the reference price determined for ident ical or similar  new good s, to which depreciation or 
obsolescence shall be applied, as applicable;  
(c) the price in f.o.b. terms paid for such goods in the state in which they were purchase d, to 
which the corresponding depreciation or obsolescence shall be appl ied; 
(d) the price estimated by an expert u nrelated to the buyer or seller, with the cost being borne 
by the importer.  
 For subparagraphs (b) and (c), the percentages for depreciation or obsolescence and the 
type of goods to which depreciation or obsolescence may be applied shall be determi ned in the 
legislation of each member c ountry.  Depreciation and obsolescence shall not be applied 
simultaneously.  
Article 6 . Repaired, refurbished, remanufactured, transformed or rebuilt goods  
 The customs value of goods whic h, subsequent to their purchase but before importation, 
have been repaired, refurbished, remanufactured, transformed or rebuilt, shall be determined on 
the basis of one of the following criteria  
(a) The r eference price determined for the imported good s when re paired, refurbished, 
remanufactured, transformed or rebuilt without adding the value of the repair, 
refurbishment, remanufacturing, transformation or rebuilding;  
(b) the agreed price in f.o.b. terms as bought, adding the cost of the repair, refurbishment, 
remanufacturing, transformation or rebuilding.  This value shall include the cost of the 
materials incorporated, labour, containers or packaging where applica ble, and payment to 
the person who carried out the work;  
(c) the price estimated by an expert unrelated to the buyer or seller, with the cost being borne 
by the importer.  
Article 7.- Spoiled, damaged or deteriorated goods  
 The customs value of goods which , subsequent to their purchase but before importation, are 
found to be partly spoiled , damaged or deteriorat ed, with a residual value, shall be determined on 
the basis of the price actually paid or payable for the said good s at the time of purchase or, in its 
absence, on the basis of a reference price for identical or similar  goods, reduced pro rat a to the 
spoiling, damage or deterioration, whose value may be determined using one of the following 
criteria:  
(a) An estimate by an expert unrelated to the buyer or seller, with the cost being borne by the 
importer;  
(b) the cost budgeted for the repairs or restoration ; and 
(c) the compensation paid by the insurance company, where applicable.  G/VAL/N/1/ECU/3  
- 188 - 
   The customs value of good s completely spoiled, damaged or deteriorated  shall be 
determined on the bas is of the price estimated by an expert unrelated to the buyer or seller, the 
cost being borne by the importer or, where applicable, the price estimated by the insurance 
company.  
Article 8.- Goods imported in bulk whose quantity or weight varies in the course 
of transport  
 The customs value of goods imported in bulk whose quantity has increased o r decreased in 
comparison with that agreed shall be determined on the basis of the unit price agreed between the 
buyer and seller.  The basic price shall be calculated by multiplying the unit price agreed in the 
contract by the quantity of the goods actuall y delivered.  
 The percentage of variation and the goods for which this procedure shall be admissible shall 
be determined in th e domestic legislation of member c ountries.  
Article 9.- Imported goods of no commercial value  
 The customs value of imported goods  of no commercial value such as : presents, donations, 
publicity or promotional  items and samples shall be determined using  one of the following criteria:  
(a) The v alue recorded in the supporting documents for the transaction;  
(b) the reference prices for identical  or similar  goods; 
(c) the amount insured, as indicated on the insurance document;  
(d) the price estimated by an expert unrelated to the buyer or seller,  with the cost  being borne 
by the importer.  
Article  10.- Goods imported to replace other goods  
 The customs val ue of good s imported to replace other goods that have been spoiled, are 
defective or in general did not comply with the terms of the contract , shall be determined on the 
basis of one of the following criteria:  
(a) The p rice on the original invoice, if the repl acement good s are not invoiced or invoiced as 
free-of-charge;  
(b) the price on the original invoice with an addition to or reduction of the value agreed and 
invoiced for the new replacement good s (where permit ted by the legislation of each member 
country), pro vided that there has been a change in comparison with the good s originally 
imported.  
Article 11.- Goods reimported after outward processing  
 The customs value of goods reimported after having undergone outward processing sh all be 
determined taking into acc ount the total value of the good s as reimported, including the value 
added  abroad , transport costs, insurance costs and other handling costs for the shipment and 
return of the good s. 
 The value added abroad includes the price paid or payable for the proces sing, preparation 
and repair of the goods, without or without a warranty , including the cost of the materials, labour, 
containers or packaging, other costs incurred abroad and payment to the person who carried out 
the work abroad.  
Article 12.- Goods import ed under the temporary admission regime  
 The customs value of goods imported under the temporary admission regime shall be 
determined on the basis of one of the following criteria:  
(a) The v alue recorded in the supporting documents for the transaction;  
(b) the reference price for identical or similar  goods; 
(c) the amount insured, as indicated on the insurance document;  G/VAL/N/1/ECU/3  
- 189 - 
  (d) the price estimated by an expert unrelated to the buyer or seller, with the cost being borne 
by the importer.  
 If the good s entered under the temporary  admission regime are subject to the import for 
consumption regime, the customs value shall be that determined at the time of submission and 
acceptance of the temporary admission regime declaration for the said good s. 
Article 13.- Goods imported under a rental or financial leasing arrangement with or 
without a purchase option  
 The customs value of goods imported und er a rental  or financial leasing arrangement , with 
or without a purchase option, shall be determined on the basis of one of the following criter ia: 
1. The reference price determined for identical or similar  goods; 
2. the terms of the leasing contract, in accordan ce with the following  types of contract:  
(a) Without a purchase option  
 The customs value shall be determined on the basis of the present  value of the rental paid 
or payable through out the service  life of the goods , using the following formulas for this purpose 
and taking into account:  
i. With l easing fees payable in advance:  
t 
A [(1+r) - 1] 
Vc = ______________ _ 
t-1 
r(1+r)  
 
 
ii. With leasi ng fees payable in instalments:  
 
t 
A [(1+r) - 1] 
Vc = ______________  
t-1 
r(1+r)  
 
 
In which : 
Vc Is the actual value calculated ; 
A Is the amount of the leasing fee (annual, twice -yearly, quarterly, two -monthly or monthly, 
as applicable);  
r Is the interest rate specified in the contract or, if not, the Libor (annual, twice -yearly, 
quarterly, two -month ly or monthly, according to the period indicated in  A); 
t Is the service life of the goods, which may be expressed in years or fractions of a year, 
in consonance with the payments in A and r.  
 If the service life is not k nown, the duration of identical or similar goods to those imported 
may be used or specialized firms may be consulted, with the collaboration of the importer.  
The service life of new or used goods shall be distinguished, using, for example, the terms 
"total service life " for the former and "remaining service life " for the latter.  
 (b) With a purchase option  
The purchase option shall be exercised according to the terms of the leasing contract.  Depending 
on the time of purchase, the customs value shall be determined:  
i. When the contract takes effect.  The price of this option shall be the basis.  G/VAL/N/1/ECU/3  
- 190 - 
  ii. In the course of or upon expiry of the contract.  The updated value of the rental  fees paid or 
payable throug hout the service life shall be the basis, using for this purpose the formula s 
and considera tions set out in 2(a) of this Article, adding the residual value required.  
In determining the customs value according to the foregoing formulas, in addition to the 
additions and deductions presented  in Article 2, the following deductions, inter alia, shall  be made:  
(a) The c ost of keeping and repairing the good s; 
(b) the cost of exploitation borne by the importer;  
(c) the importer 's usual profit.  
Article 14.- Antiquities, works of art or collectors ' pieces  
The customs value of antiquities, works of art, collectors ' pieces or any goods in the making 
of which inventiveness or creativ ity predominated shall be deter mined on the basis of one of the 
following criteria:  
(a) Informa tion obtained from specialized publications;  
(b) the values recorded in the documents relating to the tra nsaction;  
(c) the price determined by an expert unrelated to the buyer or seller, with the cost being borne 
by the importer.  
Article 15.- Determin ation of the customs value of waste from goods entering under 
a processing regime  
 The customs value of waste gene rated by a transformation process, goods entering 
industrial facilities or for inward processing shall be determined on the basis of one of the following 
criteria:  
(a) The s elling price of the waste or other identical or similar  waste on the dome stic market, 
taking into account the percentage of foreign raw materials and inputs in the production 
process and with the deductions indica ted in Article  5 of the WTO Customs Valuation 
Agreement, where applicable;  
(b) the price determined by an expert unrelated to the buye r or seller, with the cost being borne 
by the importer.  
Article 16.- Valuation of cinematographic films  
The customs value of imported cinematographic films shall be determined on the basis 
of the value of the physical medium and of the licence paid for the  right to show, project and 
distribut e the film, purchased under a contract, to be applied pro rata to the number of copies 
of the films imported in each case.  
For digitally recorded cinematographic films incorporated into a physical medium, the 
customs va lue shall be determined in accordance with the provisions in the domestic legislation 
of member c ountries . 
Article 17.- Criteri a for other unregulated special cases  
In order to determine the customs value in special cases not regulated by this Resolution, by 
the instruments issued by the WTO 's Committee on Customs Valuation or the WCO 's Technical 
Committee on Customs Valuat ion, attached to the Community r egulations approved by Resolution 
No. 845, or by member c ountries ' legislation, the price determined on the basis of one of the 
following criteria, inter alia, shall be taken into account : 
1. The reference price;  
2. The resale price in the country of import ation, deducting the costs and charges incurred for 
import and marketing;  
3. The value recorded on the insurance  documents for the goods;  
4. The value recorded in the contracts or other documents relating to the goods;  G/VAL/N/1/ECU/3  
- 191 - 
  5. The value recorded on the Export  Declaration, confirmed by the customs a uthority in the 
exporting country;  
6. The price determined by an expert unrelated t o the buyer or seller, with the cost being 
borne by the importer;  
7. The domestic market price of the goods in the exporting country and applicable in the 
importing country, provided that domestic taxes paid in the said country are deducted.  
To determine the customs value in accordance with the provisions in this Article, 
Article 7.2 of the WTO Customs Valuation Agreement shall be taken into account  
Article 18. - This Resolution repeals Resolution No. 961 and shall enter into force sixty days after 
its publicat ion in the Official Gazette  of the Cartagena Agreement.  
Done in the city of Lima, Peru, on the twenty -eighth day of February in the year 
two thousand  and twelve.  
ADALID CONTRERAS BASPINEIRO  
Secretary General A.i. G/VAL/N/1/ECU/3  
- 192 - 
  ANNEX 5 
Andean Community  
RESOLU TION  No. 1486 
 Incorpora ting the WCO 's Technical Committee on Customs Valuation 's implementing 
instruments in Resolution No. 846 
 THE GENERAL SECRETARIAT OF THE ANDEAN COMMUNITY , 
 CONSIDERING : Articles 1 and 22 of Decision No. 571 on Customs Valuation of Imported 
Goods; Article 65 of Resolution No. 846 implementing Decisi on No, 571; and WHEREAS:  
 Article 1 of Decision No. 571 provides that, for the purp oses of customs valuation, 
the member co untries of the Andean Community shall be governed by the provisions in the  
Agreement  on Implementatio n of Article  VII of the General Agreement on Tariffs and Trade 1994, 
attached to the said Decision;  
 Article 22 of Decision No, 571 indicates that, when interpreting and applying the valuation 
rules contained in the WTO Customs Valu ation Agreement, as set out in the aforesaid Decision and 
its implementing regulations, the Decisions of the Committee on Customs Valuation of the 
World  Trade Organization (WTO), together with the Advisory Opinions, Commentaries, Explanatory 
Notes, Case St udies and Studies of the Technical Committee on Customs Valuation of the 
World  Customs Organization (WCO) , shall be taken into account ; 
 Paragraph 1 of Article 65 of Resolution No. 846 provides that the instruments implementing 
the valuation rules referred  to in Article 22 of the aforementioned Decision No. 571 form part 
of the said Resolution in the form of an Annex;  
 Paragraph 2 of the said Article 65 provides that the General Secretariat of the Andean 
Community, following a study by the Working Group of Government Experts on Customs Valuation 
of the Andean Committee on Customs Matters, shall be responsible for updating the 
aforementioned Annex  incorporating, by means of Resolution s, the various instruments that may 
be adopted by the issuing bodies , and fo r their timely disclosure ; 
 At the Thirty First Meeting of the Group of Experts on Customs Valuation, held in Lima, Peru, 
from 11 to 15  June 2 012, the representatives of member c ountries expressed a favourable opinion 
on the draft Resolution prepared by th e General Secretariat, which incorporates the implementing 
instruments of the WCO 's Technical Committee  on Customs Valuation ; 
HEREBY DECIDES : 
Article 1.- The implementing instruments of the Technical Committee on Customs Valuation of the 
World Customs Orga nization (WCO) indicated below are hereby incorporated into the Appendix to 
the Annex to Resolution No, 846 "Community r egulations i mplementing Decision No. 571 - 
Customs Valu ation of Imported Goods ": 
ADVISORY OPINION  
22.1 Valuation of imported technical d ocuments relating to design and development 
of an industrial plant . 
COMMENTARIES  
22.1 Meaning of the expression "sold for export to the country of importation " in a series 
of sales.  
23.1 Examination of the expression "circumstances surrounding the sale " under 
Article  1.2(a) in relation to the use of transfer pricing studies  G/VAL/N/1/ECU/3  
- 193 - 
  24.1 Determination of the Value of an Assist under Article 8.1(b) of the Agreement  
25.1 Third party royalties and licence fees - General commentary  
CASE STUDIES  
12.1 Application of Artic le 1 of the Valuation Agreement for goods sold for export at prices 
below their cost of production.  
13.1 Application of Decision 6.1 of the Committee on Customs Valuation.  
13.2 Application of Decision 6.1 of the Committee on Customs Valuation.  
Article 2.- The full text of the implementing instruments of the WCO 's Technical Committee on 
Customs Valu ation mentioned in the preceding Article are incorporated a s an Annex to this 
Resolution.  
Article 3.- This Resolution shall enter into force upon publication in t he Official Gazette  of the 
Cartagena Agreement.  
Done in the city of Lima, Peru, on the seventeenth day of July in the year two  thousand  and 
twelve.  
ADALID CONTRERAS BASPINEIRO  
Secretar y General  a.i. G/VAL/N/1/ECU/3  
- 194 - 
  ANNEX ADVISORY OPINIONS  
ADVISORY OPINION  22.1 
Valuation of imported technical documents relating to design and development 
of an industrial plant  
1. Importer  I in country  P enters into a service contract with Engineering Firm  E in country  X 
for the construction of an industrial plant in country P . As a means of  providing services needed to 
construct the industrial plant, the engineering designs and development plans are produced by E in 
paper form ( "the documents ") and sent to I . In consideration for these services, I pays the 
contract price to E.  
 How should th e customs value of the documents be determined under the Agreement?  
2. The Technical Committee on Customs Valuation expressed the following views : 
The documents in question, which are tangible, should be regarded as "goods " for which 
determination of the c ustoms value is required.  No goods are imported other than the documents.  
In this case, the documents have not been sold for export to the country of importation.  
Accordingly, Article  1 of the Agreement cannot be applied.  
Based on the facts provided, Artic les 2, 3, 5 and 6 are also not applicable . Consequently , the 
customs value of the imported goods should be determined under the provisions of Article  7 of the 
Agreement.  
The contract price which I pays to E is for the services performed for the constructio n of the 
industrial plant under the service contract and not in consideration for the imported documents . 
Therefore, that payment should not be taken into cons ideration when determining the c ustoms 
value of the documents.  
Consequently, the c ustoms value of  the documents in question could be determined in 
consultation with the importer by flexible application of Article  7 of the Agreement (see Advisory 
Opinion 12.1) . For instance, the c ustoms value of the documents could be determined on the basis 
of the cos t directly incurred in transcribing the engineering designs and development plans onto 
the paper and printing of such documents.  
COMMENTARIES  
COMMENTARY 22.1  
Meaning of the expression "sold for export to the country of importation " 
in a series  of sales  
1. Introduction  
1. A series of sales consists of two or more successive contracts for sales of goods . A basic 
issue in a series of sales is which sale should be used to determine the transaction value under 
Articles  1 and 8 of the Agreement . Advisory Opinion  14.1 - Meaning of the expression "sold for 
export to the country of importation " - does not clarify the meaning of this phrase as applied to 
a series of sales situation . The purpose of this document is to clarify this issue.  
2. As provided in the General I ntroductory Commentary of the Agr eement, the primary basis 
for customs value is transaction value . Transaction value is defined in Article  1 as "the price 
actually paid or payable for the goods when sold for export to the country of importation adjusted 
in accordance with the provisions of Article  8". Price actually paid or payable is defined in the 
Interpretative Note to Article  1 as "the total payment made or to be made by the buyer to or for 
the benefit of the seller for the imported goods ". G/VAL/N/1/ECU/3  
- 195 - 
  3. In a seri es of sales, it is necessary to establish which of the sales should be taken into 
account in order to identify the price actually paid or payable for the goods when sold for export to 
the country of importation . Any series of sales will include a last sale  occurring in the commercial 
chain prior to the introduction of the goods into the country of importation (the last sale) and 
a first (or earlier) sale in the commercial chain. * In the example below, there are two successive 
contracts for sales of the impo rted goods, one between importer A and distributor B (the last sale) 
and another between distributor B and manufacturer C (the first sale ). 
* In a series of sales, it is common to refer to the various sales as the last sale and the first (or earlier) 
sale whether or not these terms are consistent with the chronological order of the sales contracts.  
2. Example  illustrating a series of sales situation  
4. A is a retail store located in the country of importation I, B is a pen distributor located in 
country Z, and C is a pen manufacturer located in country X . There is no relationship between A, 
B, or C within the meaning of Article  15.4. 
5. On July 1 0, 2004, retailer A contracts with distributor B for the purchase/sale of certain 
pens. Pursuant to the A -B sales contract:  
- A agrees to purchase 1,000 pens from B for 10,000 currency units (c.u.);  
- B will provide A with 400 pens of style xx and 600 pens of style yy;  
- Each pen will display A 's name and address;  
- B can obtain the pens from any pen manufacturer in c ountry X;  
- The pens will be shipped directly from the manufacturer to A;  
- Title will pass from B to A when the pens are boarded on the ship in country X;  
- Payment is due within 30 days of shipment;  
- A agrees to pay B 20 % of the resale price for each pe n A sells prior to October 1 , 2004.  
6. On 12 July 2 004, B contracts with manufacturer C for the purchase/sale of certain pens . 
Pursuant to the B -C sales contract:  
- B agrees to purchase 1,000 pens from C for 8,000 c.u.;  
- C will provide B with 400 pens of style xx and 600 pens of style yy;  
- Each pen will display A 's name and address;  
- C will ship the pens directly to A;  
- Title passes from C to B when the pens leave C 's factory;  
- Payment is due within 30 days of shipment.  
7. On 10 August  2004, C  ships th e pens to  A. On 20 August , the pens arr ive in country  I and  A 
files a c ustoms entry . On 1 September , A pays B 10,000  c.u. On 5 September, B  pays C 8,000  c.u. 
Prior to 1 October , A sells 400  pens at 15  c.u. each . On 5 October , A pays B 1,200  c.u. (20 % of A's 
resale price for pens sold prior to 1 October ). 
8. In this example, the last sale is the one between A and B and the first sale is the one 
between B and  C. 
3. Questions  
9. Assuming transaction value is the appropr iate basis for determining the c ustoms va lue of the 
imported pens, and that A is able to produce all the documentation pertaining to both the A -B and 
B-C sales (contracts, purchase orders, invoices, payment records):  
(1) Is the price actually paid or payable for the imported goods when sold for e xport to 
country  I 10,000 c.u. (the price A pays B in the last sale) or 8,000 c.u. (the price B  pays C in 
the first sale)?  
(2) Should the 1,200 c.u. payment from A to B be added to the price actually paid or payable as 
"proceeds of a subsequent resale of t he imported goods that accrues directly or indirectly to 
the seller " pursuant to Article  8.1(d)?  G/VAL/N/1/ECU/3  
- 196 - 
  4. Analysis  
Guidance derived from the provisions of the Agreement  
10. The Agreement does not define or otherwise directly address the meaning of the expression  
"sold for export to the country of importation ". However, it is easy to identify the sale for export to 
the country of importation that is used to determine transaction value under Article  1 when the 
import transaction involves only one sale . In that situ ation, there is only one buyer, usually located 
in the country of importation, and one seller, usually located in another country.  
11. Article  1 does not refer to import transactions involving a series of sales and consequently 
does not provide criteria in  that respect . Therefore, guidance must be sought from the purpose 
and the overall text of the Agreement, including an examination of its provisions . In addition, 
certain practical considerations are relevant.  
12. As set forth below, there are various indi cations in the General Introductory Commentary, 
Article  1 and other provisions of the Agreement that it was envisaged that Article  1 would normally 
be based on sales to buyers in the country of importation.  
13. There is explicit language in Article  1 that reflects the intended scope of Article  1. Pursuant 
to Article  1.1(a)(i), the c ustoms value of imported goods shall be the transaction value provided 
that there are no restrictions as to the disposition or use of the goods by the buyer other than 
restrictio ns which are imposed or required by law or by the public authorities in the country 
of importation . The emphasized text is a good indication that the underlying assumption 
of Article  1.1(a)(i) was that the buyer of the goods sold for export to the country of importation 
would normally be located in the country of importation. * 
* This assumption would not apply if there was no buyer in the country of importation.  
14. The intended scope of Article  1 is also reflected in the provisions regarding the adjustment s 
to the price actually paid or payable . The General Introductory Commentary makes it clear that 
the proper determination of transaction value depends on the application of Article  1 in conjunction 
with Article  8. Paragraph 1 of the General Introductory Co mmentary provid es that "the primary 
basis for c ustom s value under the Agreement is 'transaction value ' as defined in Article  1". 
It further states that "Article  1 is to be read together with Article  8, which provides, inter alia , for 
adjustments to the pri ce actually paid or payable in cases where certain specific elements which 
are considered to form a part of the va lue for c ustoms purposes are incurred by the buyer but are 
not included in the price actually paid or payable for the imported goods.  
15. Article 8 also provides for the inclusion in the transaction value of certain considerations 
which may pass from the buyer to the seller in the form of specified goods or services rather than 
in the form of money ".* If the specified amounts are not already inc luded in the price actually paid 
or payable, Article  8 requires their addition . In others words, the transaction value method is 
intended to take account of the substance of the entire commercial import transaction preceding 
import of the goods, including the economic inputs and related transactions which arise therefrom.  
* These goods or services are often referred to as assists.  
16. Therefore, as mandated by the General Introductory Commentary, it is essential to apply 
transaction value in a series of sal es situation in a manner that takes into account the substance 
of the entire commercial import transaction and permits the proper application of Article  8. 
17. In many cases, it would not be possible to make the Article  8 adjustments if transaction 
value w as determined based on the first sale . For example, under Article  8.1(a) and (c), selling 
commissions or royalties and licence fees, are only to be included in the c ustoms value where they 
are incurred or paid by the buyer . Similarly, under Article  8.1(b),  the buyer must supply the assist . 
In a series of sales, a buyer who is located in the country of importation would rarely be the buyer 
in the first sale.  G/VAL/N/1/ECU/3  
- 197 - 
  18. Moreover, in a series of sales, the buyer in the first sale is not necessarily the party who 
pays the royalties or provides the assists . Therefore, the application of the first sale may preclude 
the addition of certain selling commissions, royalties and assists that otherwise would be included 
in the transaction value . Similarly, under Article  8.1(d),  only proceeds that accrue directly or 
indirectly to the seller may be added to the price actually paid or payable . Proceeds paid by the 
buyer in the country of importation would not necessarily revert to the seller in the first sale.  
19. The example is il lustrative . If the transaction value is determined on the basis of the first 
sale between B and C, C is considered the seller of the imported goods and the proceeds of the 
subsequent resale from A to B would not be proceeds that accrue directly to the sell er. In the 
absence of evidence that the proceeds accrued indirectly to the seller, such proceeds could not be 
added pursuant to Article  8.1(d) . However, if the transaction value is determined on the basis 
of the last sale between A and B, B is considered t he seller and the proceeds paid to B would fall 
squarely within the provisions of Article  8.1(d) . Under the latter interpretation, the transaction 
value takes into account the substance of the entire commercial transaction . In contrast, 
application of the first sale results in a transaction value that does not fully reflect the substance 
of the entire transaction.  
20. In sum, a transaction value based on the first sale may not fully reflect the substance of the 
inputs resulting from, or forming part of the entire commercial chain as envisioned by the 
General  Introductory Commentary, and Articles  1 and 8 . In contrast, a transaction value based on 
the last sale will more fully reflect the substance of the entire transaction as envisioned.  
21. Certain provision s of the Agreement use the terms "buyer " and "importer " interchangeably . 
For example, while Article  8.1(a)(i) stipulates that buying commissions incurred by the buyer are 
not to be added to the price actually paid or payable, the Interpretative Note to tha t Article defines 
the term "buying commissions " as "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 ." Also, while 
Article  8.1(b) stipulates that the value of cer tain elements supplied by the buyer is to be added to 
the price actually paid or payable, paragraph 2 of the Interpre tative Note to p aragraph 1(b)(ii) 
of Article  8 explains the value of the element in relation to the importer . Furthermore, paragraph  4 
of that Interpretative Note provides an illustrative case where an importer is the buyer who 
supplies the producer with a mould to be used in the production of the imported goods.  
22. The Interpretative Note to Article  6 states that "as a general rule, c ustoms  value is 
determined under this Agreement on the basis of information readily available in the country 
of importation ". This concept is also r eflected in Article  7: "If the c ustoms value of the imported 
goods cannot be determined under the provisions of A rticles 1 to 6, inclusive, the c ustoms value 
shall be determined using reasonable means consistent with the principles and general provisions 
of this Agreement … and on the basis of data available in the country of importation ." With respect 
to the determin ation of transaction value under Article 1, it is the last sale, rather than the first 
sale, that will normally satisfy this general rule . As noted, the last sale normally involves a buyer 
located in the country of importation and information about this sa le will usually be more readily 
available in the country of importation than information about the first sale.  
23. As provided in paragraph  2 of the Interpretative Note to Article  7, the methods of valuation 
to be employed under Article  7 should be those l aid down in Articles  1 through 6 but with 
a reasonable flexibility . However, Article  7 indicates that this flexibility does not extend to allow 
the use of certain prices, including "the price of goods on the domestic market of the country 
of exportation " (see Article  7.2). This gives a clear indication of the intended scope of Article  1, 
namely , that a sale that is prohibited under a flexible application of Article  1 cannot possibly be 
considered as valid under the normal application of Article  1. In a seri es of sales situation, the first 
sale often involves a sale between a producer and a local distributor in the same country . 
Clearly,  these sales c annot be used to determine the c ustoms value under Article  7. It follows that 
such sales should also not be us ed to determine the value under Article  1. 
24. There are also other indications in the Agreement that it was not envisaged that the 
determination of transaction value would diverge, depending on whether the import transaction 
involved a single sale or a se ries of sales . For example, in the General Introductory Commentary, 
the Members recognize the need for a uniform system of valuation . In a series of sales, 
determining transaction value based on the last sale addresses this need for uniformity . In a single  
sale situation, the price actually paid or payable will normally be represented by the price paid by G/VAL/N/1/ECU/3  
- 198 - 
  the buyer in the country of importation . If, in a series of sales situation, transaction value is based 
on the last sale, the result will generally be the  same ; namely, a transaction value based on the 
price paid by the buyer in the country of importation . On the other hand, if transaction value is 
based on the first sale, then the price actually paid or payable will generally be represented by the 
price pa id by a buyer outside the country of importation and the result is a different transaction 
value.  
25. It should also be noted that the Agreement allows Members to apply different treatments in 
certain cases . In this regard, Article  8.2 specifies that , in framing its legislation, each Member shall 
provide for the inclusio n in or the exclusion from the c ustoms value of certain transportation costs . 
Article 9 specifies that the currency conversion rate to be used shall be that in effect at the time 
of exportat ion or the time of importation, as provided by each Member . Since Article  1 provides no 
such choice, the logical conclusion is that the authors envisaged that the resulting transaction 
value would be the same whether the importation involves a single sale or a series of sales 
(i.e., transaction value would normally be determined based on the price paid by the buyer in the 
country of importation) . Otherwise, they would have either specified how transaction value should 
be determined in a series of sales situ ation or provided an explicit choice to Members.  
Practical consideration s 
26. In practice, the Customs A dministration may face difficulties in verifying information, 
including accounting records, related to the first sale when such information is held by t he foreign 
intermediary or seller . This could include, for example, information and accounting records 
pertaining to the total payment made by the foreign intermediary to the seller and the Article  8 
adjustments . Such difficulties are alleviated when the l ast sale is applied.  
5. Conclusion  
27. The Technical Committee is of the view that the underlying assumption of Article  1 is that 
normally the buyer would be located in the country of importation and that the price actually paid 
or payable would be based o n the price paid by this buyer . The Technical Committee concludes 
that in a series of sales situation, the price actually paid or payable for the imported goods when 
sold for export to the country of importation is the price paid in the last sale occurring  prior to the 
introduction of the goods into the country of importation, instead of the first (or earlier) sale . 
This is consistent with the purpose and overall text of the Agreement.  
28. In the example, consistent with the conclusion, the sale between A a nd B represents such 
a sale. Therefore, the price actually paid or payable for the imported goods when sold for export to 
country I is 10,000 c.u. (the price A pays B in the last sale).  
29. Accordingly, the 1,200 c.u. payment from A to B represents proceed s of a subsequent resale 
of the imported goods that accrues directly or indirectly to the seller under Article  8.1(d) that must 
be added to the price actually paid or payable in determining transaction value.  
COMMENTARY 23.1  
Examination of the expression "circumstances surrounding the sale " under 
Article  1.2(a) in relation to the use of transfer pricing studies  
1. This Commentary seeks to provide guidance on the use of a transfer pricing study, prepared 
in accordance with the OECD Transfer Pricing Guidelines, and provided by importers as a basis for 
examining "the circumstances surrounding the sale " under Article  1.2(a) of the  Agreement.  
2. Under Article 1 of the Agreement, a transaction value is acceptable as the customs value 
when the buyer and the seller are no t related, or if related, provided that the relationship did not 
influence the price.  G/VAL/N/1/ECU/3  
- 199 - 
  3. Where the buyer and seller are related, Article 1.2 of the Agreement provides different 
means of establishing the acceptability of the transaction value:  
1. The circumsta nces surrounding the sale shall be examined to determine whether the 
relationship influenced the price (Article 1.2(a));  
2. The importer has an opportunity to demonstrate that the price closely approximates 
to one of thr ee test values (Article 1.2(b));  
4. The Interpretative Note to Article 1.2 of the Agreement provides that:  
"It is not intended that there should be an examination of the circumstances in all 
cases where the buyer and the seller are related . Such examination will only be 
required where there are  doubts about the accepta bility of the price . Where the 
customs administration has no doubts about the acceptability of the price, it  should be 
accepted without requesting further information from the importer. " 
5. In light of this, where the Customs A dminist ration has doubts about the a cceptability of the 
price, the A dministration will examine the circumstances surrounding the sale, based on 
information provided by the importer.  
6. The Interpretative Note to Article 1.2  states that where the Customs A dministrati on is 
unable to accept the transaction value without further enquiry, it should give the importer an 
opportunity to supply such further detailed information as may be necessary.  The Note also sets 
forth illustrative examples of how to determine if the rela tionship between the buyer and the seller 
does not influence the price.  
7. The question which then arises is whether a transfer pricing study prepared for tax 
purposes, and provided by the importer, can be utilized by the Customs A dministration as a basis 
for examining the circumstances surrounding the sale.  
8. On one hand, a transfer pricing study submitted by an importer may be a good source 
of information, if it contains relevant information about the circumstances surrounding the sale.  
On the other hand, a tr ansfer pricing study might not be relevant or adequate in examining the 
circumstances surrounding the sale because of the substantial and significant differences which 
exist between the methods in the Agreement to determine the value of the imported goods and 
those of the OECD Transfer Pricing Guidelines.  
9. Accordingly, the use of a transfer pricing study as a possible basis for examining the 
circumstances of the sale should be considered on a case -by-case basis.  As a conclusion, 
any relevant information and documents provided by an importer may be utilized for examining 
the circumstances of the sale . A transfer pricing study could be one source of such information.  
COMMENTARY 24.1  
Determination of the Value of an Assist under Article 8.1(b) of the Agreement  
Meaning of a "given cost " in the Interpretative Note to Article 8.1(b)(ii) of the Agreement  
1. Article 8.1(b) of the Agreement pro vides that, in determining the c ustoms value under the 
provisions of Article 1, there shall be added to the price actually paid or  payable, certain goods and 
services which are supplied directly or indirectly by the importer/buyer free of charge or at 
a reduced cost for use in connection with the production and sale for export of the imported goods, 
to the extent that such value has not been included in the price actually paid or payable.  
2. Under Article 8.1(b)(ii), the value of assists, such as, tools, dies, moulds and similar items, 
used in the production of imported goods is to be added to the price actually paid or payable for 
the imported goods in determining the c ustoms value.  
3. Sometimes, the assists supplied by the importer/buyer to an exporter/seller free of charge 
or at a reduced cost, may be produced by using other goods or services that the importer/buyer 
has also supplied free  of charge or at a reduced cost to the sellers of these assists.  G/VAL/N/1/ECU/3  
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  4. The question is whether the value of the assists supplied for production of the imported 
goods includes the cost of other goods or services as part of the "given cost. " 
5. For det ermining the va lue of assists, p aragraph 2 of the Interpretative Note to 
Article  8.1(b)(ii) provides that:  
1. If the importer/buyer acquires the element from a seller not related to the 
importer/buyer at a given cost, the value of the element is that cost ; or, 
2. if the element was produced by the importer/buyer or by a person related to the 
importer/buyer, its value would be the cost of producing it.  
6. Consequently, where the assists are produced by the importer, or by a person related to the 
importer, their value would be  calculated by including all elements used to produce them . In the 
same way, it is understood that the term "given cost ", referenced in the above -mentioned 
Interpretative Note, does not only include the price paid to the seller for the assists of the 
impor ted goods but also the cost of other goods or services supplied by the importer/buyer to that 
seller to produce the assists.  
7. In view of the above, the term "given cost " in the Interpretative Note to Article 8.1(b)(ii) 
would include all the costs incurred b y the importer in respect of acquiring the assist.  
COMMENTARY 25.1  
Third party royalties and licence fees - General commentary  
1. The purpose of this document is to provide guidance regarding the interpretation and 
application of Article  8.1(c) of the Agreeme nt in cases where a royalty or licence fee is paid to 
a third-party licensor unrelated to the seller.  
2. Under Article  8.1(c), royalties and licence fees are to be added to the price actually paid or 
payable for the imported goods where they are related to th e goods being valued that the buyer 
must pay, either directly or indirectly, as a condition of sale of the goods being valued, to the 
extent that such royalty or licence fees are not included in the price actually paid or payable.  
3. A common issue occurring in international trade is where the royalty or licence fee is paid to 
a third party, that is, a party other than the seller of the imported goods . Typically , in these 
scenarios, the buyer/importer enters into a sales contract with the seller/manufacturer a nd also 
enters into a royalty or licence agreement with a third party licensor . In some cases, a royalty or 
licence agreement also exists between the licensor and seller/manufacturer.  
4. For the purpose of making a determination under Article  8.1(c), it is im portant to examine 
all the relevant documents, including the royalty or licence agreement and sales agreement . 
The royalty or licence agreement allows the owner of intellectual property rights (the "licensor ") to 
earn revenue from an invention or creative work by charging a user (the "licensee ") a fee or 
royalty to use the licensed product . The royalty or licence agreement will generally specify what 
rights are being granted to the licensee ; the terms agreed between the licensor and licensee such 
as the len gth of the agreement, prohibited uses, rights to transfer and sublicense, warranties, 
termination of the licence contract, support and maintenance services, quality control provisions, 
etc.; and details regarding the payment of the royalty and licence fee . By licensing an intellectual 
property right, the licensor assigns a limited right to use its intellectual property, such as 
trademarks, but retains its ultimate ownership right . The sales agreement will specify terms and 
conditions relating to the sale fo r export of the merchandise being imported . The information 
contained in these agreements, and other relevant documents, may be indicative of whether the 
payment of the royalty or licence fee should be included in the customs value under Article  8.1(c).  
5. Where a royalty or licence fee is paid to a third party, it is considered unlikely that the fee 
would be included in the price actually paid or payable under Article  8.1(c) . For the purposes 
of this Commentary, it is assumed that the royalty or licence fees have not been included in the 
price actually paid or payable . The analysis therefore focuses on the two main questions that stem 
from Article  8.1(c):  G/VAL/N/1/ECU/3  
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  1. Is the royalty or licence fee related to the goods being valued ?; and 
2. Is the royalty or licence fee paid as a condition of sale of the goods being valued ? 
- Determining whether a royalty or licence fee is related to the goods being valued.  
6. The most common circumstances in which a royalty or licence fee may be considered to 
relate to the goods being value d is when the imported goods incorporate the intellectual property 
and/or are manufactured using the intellectual property covered by the licence . For example, if the 
imported goods incorporate the trademark for which the royalty or licence fee is paid, th is would 
indicate that the fee relates to the imported goods.  
- Determining whether a royalty or licence fee is paid as a condition of sale of the goods being 
valued.  
7. A key consideration for determining whether the buyer must pay the royalty or licence fee  
as a condition of sale is whether the buyer is unable to purchase the imported goods without 
paying the royalty or licence fee . When the royalty or licence fee is paid to a third party related to 
the seller of the imported goods, it is more likely that th e fee is paid as a condition of sale than 
when it is paid to a third party unrelated to the seller . There can be various situations where 
payment of royalties or licence fees is considered a condition of sale even when they are paid to 
a third party . However, each situation must be analys ed based on all the facts surrounding the 
sale and importation of the goods, including the contractual and legal obligations contained in 
relevant documents, such as the sales agreement and the royalty or licence agreement.  
8. The clearest indication that the buyer could not purchase the imported goods without paying 
the royalty or licence fee is where the sales documentation for the imported goods includes 
an explicit statement that the buyer must pay the royalty or licence fe e as a condition of sale . 
Such a reference would be determinative in deciding whether a royalty or licence fee was paid 
as a condition of sale.  
The Technical Committee recognizes however, that the sales documentation may not include 
such an explicit provis ion, particularly when the royalty or licence fee is paid to a party unrelated 
to a seller . In this case, it may be necessary to consider other factors in order to determine 
whether payment of the royalty or licence fee is made as a condition of sale.  
9. The Technical Committee is of the view that whether the buyer is unable to purchase the 
imported goods without paying the royalty or licence fee depends on a review of all the facts 
surrounding the sale and importation of the goods, including linkages between the sales and 
licence agreements and other pertinent information . The following are factors that could be taken 
into account in determining whether payment of the royalty or licence fee is a condition of sale:  
1. There is a reference to the royalty or licence  fee in the sales agreement or 
related documents;  
2. there is a reference to the sale of the goods in the royalty or licence agreement;  
3. according to the terms of the sales agreement or the royalty or licence 
agreement, the  sales agreement can be terminated as  a consequence of 
breaching the royalty or  licence agreement because the buyer does not pay the 
royalty or licence fee to the licensor . This would indicate a linkage between the 
royalty or licence fee payment and the sale of the goods being valued;  
4. there i s a term in the royalty or licence agreement that indicates if the royalties 
or licence fees are not paid, the manufacturer is forbidden to manufacture and 
sell the goods incorporating the licensor 's intellectual property to the importer;  
5. The royalty or li cence agreement contains terms that permit the licensor to 
manage the production or sale between the manufacturer and importer (sale for 
export to the country of  importation) that go beyond quality control.  
10. Each case must be considered individually having regard to the relevant circumstances.  G/VAL/N/1/ECU/3  
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  CASE STUDIES  
CASE STUDY 12.1  
Application of Article 1 of the Valuation Agreement for goods sold for export at prices 
below their cost of production.  
Facts of the transaction  
1. Importer A in Country  B buys high quality co mponents to be consumed within its 
manufacturing processes from Exporter  S in Country  T. Exporter  S is a subsidiary of a  
multinational conglomerate selling to a specific industrial sector . There is no relationship between 
buyer and seller . All negotiations  were concluded by Exporter  S advising Importer  A that agreed 
price levels can only be maintained while current stocks last . Exporter S has no position within 
Country B and sees this sale as an opportunity to break into this market . Successful market 
penet ration would have considerable long -term benefits for the company and would serve as 
a platform for the introduction of the more profitable -related companies from within their group . 
Price levels were influenced by this opportunity.  
2. Global economic circums tances have forced Exporter S to sell stock items at prices that are 
on average 30 % below its cost of production in order to generate cash flow . The components 
ordered by Importer A fall into this category . However, because of the marketing opportunity 
Exporter S has agreed to sell at prices 40 % below its cost of production.  
Question  
3. Under  the Valu ation Agreement how should the c ustoms value be calculated?  
Determination of c ustoms value  
4. The primary basis for the c ustoms value of imported goods is the transa ction value, that is 
the price actually paid or payable for the goods adjusted in accordance with Article  8, subject to 
certain requirements (Article 1) . The price actually paid or payable is the total payment made or to 
be made by the buyer to or for the benefit of the seller ( Interpretative Note to Article  1). 
5. The facts as presented indicate that a sale for export has been agreed between Exporter S 
and Importer A.  
6. Within the case under consideration there are no indications that would provide grounds for 
rejection of the transaction value under Article  1, subject of course to the provisions of Article  17 
of the Agreement . There are no restrictions recorded . There are no conditions or considerations for 
which a value cannot be determined with respect to the  goods being valued . Exporter  S and 
Importer  A have agreed upon a price for the sale . That price is conditional only on the availability 
of stock . Likewise, there are no proceeds from subsequent sales that accrue to the seller . Neither 
is there any relatio nship provided for in Article  15.4 based on the given facts.  
7. It follows therefore that there are no grounds under the provisions provided within Article  1 
of the Valuation Agreement to reject the transaction value and move to another Art icle in order to 
determine the c ustoms value.  
8. Advisory Opinion 2.1 concludes that the mere fact that a price is lower than prevailing 
market prices for identical goods is not sufficient grounds for rejection of the transaction value 
under Article 1 . Similarly, the mere fact that the price in this case is below the seller 's cost 
of production and does not return a profit to the seller, is not sufficient grounds for rejection of the 
transaction value under Article  1. 
Conclusion  
9. Based on  the information provided, the c ustoms val ue should be calculated on the basis 
of the transaction value using the price Importer A pays Exporter S adjusted in accordance with 
Article 8.  G/VAL/N/1/ECU/3  
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  CASE STUDY 13.1  
Application of Decision 6.1 of the Committee on Customs Valuation.  
Facts of the transaction  
1. Company ICO, in country I, imported 2,000 (two  thousand ) units of consumer goods from 
exporting country X . ICO presented the following information in the import declaration:  
(i) The seller of the merchandise is company XCO, domiciled in country of exportati on X;  
(ii) the manufacturer of the imported goods is company MCO, domiciled in country M;  
(iii) the declared value was calculated using the transaction value specified in Article  1 of the 
Agreement;  
(iv) no adjustments were made to the price under Article 8.1 of the Agreement;  
(v) in accordance with the provisions of Article 15.4, there is no relationship between ICO, XCO 
or MCO;  
(vi) according to the commercial invoice, the unit price of the imported goods was 9.30  c.u. 
(f.o.b.  value);  
(vii) payment was ma de in cash.  
2. After release of the goods, the c ustoms risk analysis system selected ICO for an import 
audit.  
3. Prior to the audit and as part of the process of constructing a profile of the importer, the 
Customs Administration analys ed all imports of ide ntical goods and obtained the following 
information:  
(i) Nine other buyers imported identical goods at or about the same time as the goods being 
valued;  
(ii) the c ustoms values of the identical goods were determined under the transaction value 
method;  
(iii) the unit prices of the identical goods varied from 69.09  c.u. to 85.00  c.u. ( f.o.b. ); 
(iv) the quantity of goods imported in each transaction was almost the same (between  1,800 
and 2,300  units) as in the transaction between ICO and XCO (2,000  units);  
(v) he payments for the imports of identical goods were also made in cash, except in the case 
where the goods  cost 85.00  c.u. ( f.o.b. ). 
4. The Customs A dministration conducted enquiries of the other importers and obtained the 
price lists of several suppliers in country of exportation X.  The unit prices of the identical goods in 
these lists varied from 80.00 c.u. to 140.00 c.u. ( f.o.b. ), according to the quantity sold.  The origin 
of all imported goods was country M, although the main suppliers of these goods to  import country  
I were domiciled in country of exportation X.  
5. The Customs a dministration of country I had not signed a mutual assista nce agreement with 
the Customs A dministrations of countries X or M.  The Customs A dministration wrote to supplier 
XCO and  manufacturer MCO asking for information on the price of the goods.  No answer was 
received.  
6. The Customs A dministration searched for suppliers on the Internet and found many offers 
for the sale of identical goods, whose retail sale prices for export were  between  
123.99 c.u. and 148.00 c.u..  
7. The Customs A dministration notified ICO, in writing, that it had reasons to doubt the truth 
of the declared transaction value based on the facts set out above, but primarily based on  the low 
value . The Administratio n asked the importer to present any further evidence, i.e., commercial 
correspondence and/or any other document confirming that the invoice price was the total price 
actually paid or payable for the imported goods.  G/VAL/N/1/ECU/3  
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  8. ICO replied that:  
(i) All the particul ars of the transaction had been detailed in the commercial invoice supplied;  
(ii) there was no special trade condition such as those referred to in Article 1 of  the Agreement 
applying to the transaction;  
(iii) the transaction was based upon an ordinary off er by XCO;  
(iv) there was no written contract of sale and no commercial correspondence;  
(v) the sale  was settled by telephone.  
9. The Customs A dministration decided to carry out an audit on the premises of Company ICO.  
At its first visit, the Customs Administration obtained the following information:  
(i) There was no commercial correspondence with XCO;  
(ii) ICO had sold all the goods to company BCO in country I at a unit price of 281.00 c.u.;  
(iii) the accounting records were neither in order nor up to date  and could not substantiate the 
amount  paid for the imported merchandise at issue.  
10. The Customs A dministration granted a reasonable period to enable Company ICO to update 
its accounting records and put them in order.  When the records were provided, the audit did not 
find any further evidence concerning the price actually paid or payable for the goods, adjusted in 
accordance with the provisions of Article 8.  The only information presented was that which had 
previously been provided to Customs.  
11. The aud it revealed that a credit card payment had been made by one of the employees 
of Company ICO to a third person, during business travel to country X, which was registered in the 
accounting records as an administrative cost.  The importer had provided no accep table explanation 
as to the nature of this payment.  Therefore, doubts were raised as to the low profit earned, 
considering that the resale price of the goods was much higher than the price declared at 
importation, and as to the amount of the administrative  costs registered.  
12. The audit report concluded that:  
(i) The importer did not provide any further evidence that would demonstrate that the declared 
value represented the total price actually paid or payable for the imported goods, adjusted 
as necessary in accordance with Article 8;  
(ii) the audit did not disclose any new information and did not dispel Customs' doubts as to the 
truth or accuracy of the transaction value declared.  
Determination of customs value  
13. The primary basis for customs value is th e transaction value, that is, the price actually paid 
or payable for the goods when sold for export to the country of importation, adjusted in 
accordance with the provisions of Article 8.  
14. The price actually paid or payable should not be subject to any condition or consideration 
that could prevent the value from being determined on the basis of the provisions of Article 1.  
15. This price may be represented by the invoice price, adjusted in accordance with the 
provisions of the Valuation Agreement and, in  this respect, the commercial invoice could constitute 
sufficient proof of the truth or accuracy of the declared value subject, of course, to Article  17 
of the Agreement.  
16. In accordance with Decision 6.1 of the Committee on Custom s Valuation, where the 
Customs A dministration has reason to doub t the truth or accuracy of a declared value, it may ask 
the importer to provide further explanation, including documents or other evidence, that the 
declared value represents the total amount actually paid or payabl e for the imported goods, 
adjusted in accordance with the provisions of Article 8.  
17. In this case, due to the fact that the declared value was substantially lower than the 
declared values of identical goods imported by nine other buyers at or ab out the s ame time, 
the Customs A dministration had reason to doubt the truth or accuracy of the declared value as G/VAL/N/1/ECU/3  
- 205 - 
  reflected in the commercial invoice.  Therefore, in accordance with Decision 6.1, the Customs 
Administration properly asked the importer to provide furth er evidence to confirm that the 
declared value was the total price actually paid or payable for the imported goods, adjusted in 
accordance with the provisions of Article 8.  
18. In such cases, both parties should seek  to strengthen the spirit of co operation  and dialogue 
encouraged by the Agreement with a view to finding solutions which harm neither the legitimate 
interests of  the imp orter nor those of the Customs Administration.  
19. In determining C ustoms valu e under the Agreement, Customs A dministrations sh ould not be 
required to rely on documents which are incomplete in respect of relevant information,  particularly 
if there are doubts concerning other charges and payments which may form part of the transaction 
value.  
20. Specifically, Decision 6.1 provides that if, after receiving further information, or in the 
absence of a response, the Customs A dministration still has reasonable doubts about the truth or 
accuracy of the declared value, it may, taking in account the appeals provisions of Article  11, be 
deem ed that the c ustoms value of the imported good cannot be determined under the provision 
of Article 1.  However, before taking  a final decision, the Customs A dministration shall 
communicate to the importer, in writing if requested, its grounds for doubting t he truth or 
accuracy of the particulars or documents produced and the importer shall be given a reasonable 
opportunity to respond.  
21. In this case, taking into account the facts that : (i) the importer provided no evidence other 
than the commercial invoice  to substantiate that the declared value represented the price actually 
paid or payable for the imported merchandise, adjusted in accordance with Article  8; and 
(ii) the accounting records reviewed during the audit revealed a que stionable expense, the 
Customs A dministration accordingly concluded that it still had reasonable doubts about the truth 
or accuracy of the declared value and notified the importer of its grounds for such conclusion.  
Conclusion  
22. So, in accordance with Decision 6.1, the Customs A dministration may properly conclude that 
the customs value of the imported goods cannot be determined under the provis ions of Article  1. 
The Customs A dministration shall communicate to the importer, in writing, its decision and the 
grounds therefore.  
23. In this case, the c ustoms value was established under the provisions of Article  2 
of the Agreement.  G/VAL/N/1/ECU/3  
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  CASE STUDY 13.2  
Application of Decision 6.1 of the Committee on Customs Valuation  
Facts of the transaction  
1. The Customs A dministration of country Y received a complaint alleging that spiral nails 
of country X origin were being imported and cleared on extremel y low values ranging from 
340 c.u./MT to 440 c.u./MT, while the price of raw material, i.e. steel wire rod used in the 
manufacturing of spiral nails in the international market, ranged from 600  c.u./MT to 675  c.u./MT 
and the price of the wire rod in the local market was around 670  c.u./MT.  
2. The complainant further stated that the actual import price of spiral nails was 1,250 c.u./MT . 
The complainant also furnished a copy of a Goods Declaration which showed that spiral nails were 
assessed at 750  c.u./MT against the declared value of 350  c.u./MT.  
3. The Customs A dministration of country Y carried out a study and checked the data available 
on this case . The international market price of raw material (steel wire rod) was verified by 
examining the data reported in a reputed specialized journal published in London during the 
corresponding period and by the record of the physical import of steel wire rod into the country  Y 
at 675  c.u./MT . The country of exportation/production of spiral nails and steel wire rod was the 
same, however, the producers/exporters of spiral nails and steel wire rod were different.  
4. The Customs A dministration found that there was a case i n which Customs assessed the 
value of imported spiral nails at 750 c.u. /MT . This represented the computed value based on 
available information. (The declared value of 350 c.u. /MT was determined not to represent the 
transaction value and was rejected by C ustoms).  
5. Five additional cases of importations of spiral nails were identified . The provisional values 
determined for purposes of Article  13 were 551  c.u. /MT, 551  c.u./MT, 539 c.u. /MT, 541.3  c.u. 
/MT and 565.7 c.u. /MT . These cases were forwarded to t he Directorate -General of Customs 
Valuation and Post -Clearance Audit . That department performs the specialized function of deciding 
cases involving valuation disputes that cannot be resolved by the field offices.  
6. The Customs A dministration held several meetings on these cases to give the importers an 
opportunity to demonstrate that their declared values represented the transaction value.  
7. The importers were asked to provide pro  forma invoices, commercial invoices, copies 
of contracts, evidence of payme nt and all other documents relevant to the transaction, which could 
confirm that the declared price was indeed the price actually paid or payable . However, 
the importers provided only pro  forma invoices and commercial invoices issued by exporters . 
While the importers stated that they did not use Letters of Credit as a means of payment, they 
were unable to provide any evidence of payments for the goods . The importers also stated that 
there were no written sales contracts of the goods and that the goods were imported based on oral 
agreements with the exporters.  
8. The Customs A dministration examined the accounting records of the importers during the 
course of consultations but found that they did not support the price actually paid or payable 
because the impor ters had not maintained detailed accounting records an d financial books . 
The Customs A dministration could not find any evidence of payment for the goods nor any 
information or evidence about possible additions to the price, for example, assists.  
Determinat ion of customs  value  
Transaction value m ethod  
9. The primary basis for c ustoms value is the transaction value, that is, the price actually paid 
or payable for the goods when sold for export to the country of importation, adjusted in 
accordance with the pro visions of Article 8.  G/VAL/N/1/ECU/3  
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  10. The price actually paid or payable should not be subject to any condition or consideration 
that could prevent the value from being determined on the basis of the provisions of Article 1.  
11. This price may be represented by the in voice price, adjusted in accordance with the 
provisions of the Agreement and in this respect the commercial invoice could constitute sufficient 
proof of the truth or accuracy of the declared value subject to Article 17 . This article provides that 
nothing i n the Agreement shall be construed as restricting or calling into  question the right of 
Customs A dministrations to satisfy themselves as to the truth or accuracy of any statement, 
document or declaration presented to Customs for valuation purposes.  
12. In accordance with Decision 6.1 of the Committee on Custom s Valuation, where the 
Customs A dministration has reason to doubt the truth or accuracy of a declared value, it may ask 
the importers to provide further explanation, including documents or other eviden ce, that the 
declared value represents the total amount actually paid or payable for the imported goods, 
adjusted in accordance with the provisions of Article 8.  
13. In this case, due to the fact that the declared value of the spiral nails was substantiall y 
lower than the prices on the international market of raw materials used in the manufacture 
of spiral nails, the C ustoms A dministration had reason to doubt the truth or accuracy of the 
declared value as reflected in the commercial invoices . Therefore, in accordance with Decision  6.1, 
the Customs A dministration asked the importers to provide further evidence to confirm that the 
declared value was the price actually paid or payable for the imported goods, adjusted in 
accordance with the provisions of Article  8. The importers were given several opportunities to 
provide additional information, but they could not provide the contract or any evidence 
of payment.  In addition, the accounting records reviewed during the consultation revealed that 
they did not suppor t the price actually paid or payable.  The Customs Administration still had 
reasonable doubts about the truth or accuracy of the declared value.  
14. The Technical Committee previously considered how Decision 6.1 of the Committee on 
Customs Valuation should be applied, including the appropriate procedures to be followed in Case 
Study 13.1, "Application of Decision  6.1 of the Committee on Customs Valuation ". 
Decision  6.1 provides that if, after receiving further information or in the abse nce of a response, 
the Customs A dministration still has reasonable doubts about the truth or accuracy of the declared 
value, it may, bearing in mind the provisions of Article 11, be deemed that the c ustoms value 
of the imported goods cannot be determined under the provisions of  Article 1 . Before taking  a final 
decision, the Customs A dministration shall communicate to the importer, in writing if requested, 
its grounds for doubting the truth or accuracy of the particulars of documents produced and the 
importer shall be given a rea sonable opportunity to respond.  
15. In this case, taking into account the facts that : (i) the declared value of the spiral nails was 
substantiall y lower than the prices on the international m arket of raw materials used in the 
manufacture of spiral nails ; (ii) the importers provided no evidence, including no evidence 
of payment, other than the commercial invoices and pro  forma invoices to substantiate that the 
declared value represented the price actually paid or payable for the imported goods, adjusted in 
accordance with Article 8 ; and (iii) th e importers had not maintained or provided detailed 
accounting records and financi al books, the Customs A dministration still had reasonable  doubts 
and concluded that the c ustoms value of the imported goods cannot be de termined under the 
provisions of Article 1 . Before taking  a final decision, the Customs A dministration communicated its 
grounds for doubting the truth or accuracy of the submitted documents, both in writing and orally 
during several meetings . The Customs Administration also provided the importers with 
opportunities to respond.  
16. In the light of the foregoing, the declared value was rejected taking into account Article  17, 
Decision 6.1, and Case Study 13.1.  When a final decision was made, the Customs A dministration 
communicated to the importers in writing its decision and the grounds thereof . After rejection 
of the transaction value under Article 1, attemp ts were made to determine the cu stoms value by 
proceeding sequentially starting with Article 2.  G/VAL/N/1/ECU/3  
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  Identic al/similar goods m ethod  
17. The Customs A dministration next considered the application of Articles 2 and 3.  Although 
there was on e case in which the Customs A dministration determined the value of identical or 
similar spiral nails at 750 c.u./MT, this value  could not be used for purposes of applying 
Articles  2 and 3 because it was a computed value rather than transaction value of identical or 
similar goods . The Interpretative Note s to Articles 2 and 3 make it clear that only those cases 
should be selected fo r identical or similar goods purposes where the declared values have already 
been determined under Article 1.  
18. There were five other cases of imported spira l nails, for which the Customs A dministration 
provisionally assessed the value under Article 13 . These provisional values could not be used as 
the basis of valuation under the identical/similar goods method because Article 13 relates only to 
the release of imported goods upon deposit of a sufficient guarantee when it becomes necessary to 
delay the fin al determination of the c ustoms value.  
19. Since there had not been any available transaction values of identical or similar goods in this  
case, the c ustoms value of the imported goods could not be determined under the provisions 
of Articles 2 and 3 and th e next method of valuation had to be considered in accordance with the 
Agreement.  
Deductive value m ethod  
20. After exhausting the provisions of Articles 1, 2 and 3, the deductive value method under 
Article 5 was applied.  
Conclusion  
21. In accordance with D ecision 6.1 , the customs value could not be determined under Article  1. G/VAL/N/1/ECU/3  
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  ANNEX 6 
 ORGANIC CODE OF PRODUCTION, TRADE AND INVESTMENT  
REGULATION : Law with no numbe r STATUS:  In forc e PUBLI SHED : Supplement to Official 
Journal No. 351 DATE : 29 December 2 010 
ORGA NIC CODE OF PRODUCTION, TRADE AND INVESTMENT.  Law 00, 
Supplement  to Officia l Journal No. 351 of 29 December 2 010 
THE NATIONAL ASSEMBLY  
Of. No. SAN-010-2038 Quito, 22 D ec 2010 Engineer Hugo Del Pozo  
DIRECTOR OF THE OFFICIAL JOURNA L In his office  
Mr Presiden t: 
The National Assembly, in exercise of the powers  conferred on it by the Constitution of the 
Republic of Ecuador and the Organic Law on Legislative Responsibilities, discussed and approved 
the Draft ORGANIC CODE OF PRODUCTION, TRADE AND INVESTMENT.  
At its meeting held on 16  December 2 010, the plenary session of the National Assembly 
addressed  the partial objection submitt ed by the Constitutional President of the Republic  and took 
a decision thereon . 
Accordingly, and as provided in Article 138 of the Const itution of the Re public of Ecuador 
and Article 64 of the Organic Law on Legislative Responsibilities, attach ed herewith is the a uthentic 
and certified copy of the draft Law approved, together with the certification of the dates on which 
it was considered, for publication in the Official Journal . 
Yours faithfully , 
(signed ) Dr Francisco Vergara O., Secretary General . 
THE NATIONAL ASSEMBLY  
CERTIFIC ATION  
In my capacity  as Secretary -General of the National Assembly, I hereby CERTIFY that the 
Draft Law - Organic Code of Production, Trade and Investment, was discussed and approved on 
the following dates:  
FIRST DEBATE : 04-Nov-2010 
SECOND DEBATE : 16-Nov-2010 
PARTIAL OBJECTION : 16-Dec-2010 
Quito,  21 December 2 010 
(signed )  Dr. Francisco  Vergara  O., Secret ary-General . G/VAL/N/1/ECU/3  
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  THE NATIONAL ASSEMBLY  
IN PLENARY SESSION  
Whereas : 
Paragraphs 2, 15, 16, 17, 26 and 27 of Article  66 of the Constitution of the Republic lay 
down personal constitutional guarantees which require regulations for their exercise;  
Pursuant to paragraph 2 of Ar ticle 133 of the Constitution of the Republic, organic laws shall 
govern the exercise of constitutional rights and guarantees such as those indicated in the 
preceding paragraph;  
Article 275 of the Constitution of the Republic determine s that all the system s composing 
the development structure (economic, political, socio -cultural and environmental) underpin  the 
achievement of the good way of living  and all State agencies and government action shall serve 
citizens living in Ecuador;  
Paragraph 2 of Article 276  of the Constitution of the Republic determines that the 
development structure shall have as one of its objectives to build a  fair, democratic, productive, 
mutually supportive and sustainable economic system based on the egalitarian distribution of the 
benefits of development  and the means of production , and on the generation of decent stable 
employment;  
Paragraph 5 of Article 281 of the Constitution of the Republic determines the State 's 
responsibilities for achieving food sovereignty, which include establ ishing preferential mechanisms 
for the financing of small and medium -sized producers, facilitating for them the acquisition of 
means of production;  
Article 283 of the Constitution provides that the economic system shall be social ly oriented 
and mutual ly supportive;  it recognizes the human being as a subject and as an end; it tends 
towards a dynamic balanced relationship among  society, State and the market, in harmony with 
nature;  and its objective is to ensure the production and reproduction of the material  and 
immaterial conditions that can bring about the good way of living.  
Article  284 of the Constitution of the Republic determines economic policy objectives, which 
include encouraging  national  production, systemic productivity and competiti veness , the 
accumulati on of scientific and technological knowledge, strategic in sertion  into the world  economy 
and complementary producti ve activities  within regional  integration;  
Paragraphs 1, 2 and 3 of Article 285 of the Constitution of the Republic specify as fiscal 
policy objectives : (1) the financi ng of services, investment and public goods ; (2) the redistribution 
of revenues  through a ppropriate transfers, taxes and subsidies ; (3) the creation  of incentives for 
investment in different  sectors of the economy and for the production of goods and services that 
are socially desirable and environmentally acceptable ; 
Article 304 of the Constitution of the Republic determines the objectives of trade policy, 
which include developing, strengthening and giving impetus to domest ic markets on the basis 
of the strategic objective set out in the National Development Plan;  
Article  306 of the Constitution of the Republic provides that the State shal l promote 
environmentally responsible exports, giving preference to those creating more  employment and 
value added, and in particular the exports of small and medium -sized producers and the artisan 
sector;  
Article  319 of the Magna Carta recognizes different forms of organizing production in the 
economy, including community, cooperative , public and private business, associative, family, 
domestic, autonomous and mixed -economy businesses, and accordingly shall encourage 
production that meets domestic demand and ensures Ecuador 's active participation in the global 
economy;  G/VAL/N/1/ECU/3  
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  Article 320 of our Cons titution provide s that production, in any form, shall be governed by 
principles and standards of quality, sustainability , systemic productivity, high esteem for work, and 
economic and social efficiency;  
In Article 334, paragraph 1, the Constitution provide s that the State shall promote equitable 
access to inputs, preventing the concentration or hoarding of production input s and resources, 
promoting their distribution and eliminating privileges or inequality in access to these inputs;  
Article 335 of the Cons titution of the Republic determine s that the State shall regulate, 
monitor and intervene, as necessary, in commerce and trade ; and shall punish exploitation, usury, 
hoarding, deceit, and the speculative practices of middlemen for goods and services, as wel l as 
any form of damage to economic rights and public and community assets.  It also determines that 
the State shall set up a pricing policy aimed at protecting domestic production;  shall establish 
mechanisms of sanction to prevent private monopolistic or o ligopolistic practices ; or abuse of 
a dominant market position  and other practices of unfair competition;  
Article 336 of the Fundamental Charter obliges the State to encourage and safeguard fair 
trade as a means of access to quality goods and services, min imizing the distortions of middlemen 
and promoting sustainability, thereby ensuring transparency and efficiency in markets, 
encouraging competition in equal condition s and opportunities;  
Article  304, paragraph 6, of the Fundamental Charter determine s that trade policy shall have 
as one of its objective s to prevent monopolies and oligopol ies, particularly in the private sector, 
and other practices that might affect market functioning.  
In exercise of the attributions conferred by Executive Decree No. 103, pub lished in the 
Supplement to Official Journal No, 26 of 22  February 2 007, the National Planning Secretariat has 
drawn up and implemented the National Plan for Good Living, which considers that, in view of the 
indicators on migration, unemployment and povert y, an economic revolution is needed to bring 
about a recovery in production and job creation, transforming the country into a society of owners 
and producers that transcends the current system of social exclusion;  accordingly, the means 
of production need to be democrati zed as a "necessary condition for fostering  equality and 
cohesion from the perspective of integra ted territorial development that promotes a social and 
mutually supportive economic system ". 
Objective number 11 in the National Plan for Good L iving, published in the Supplement to 
Official Journal  No. 144 of 5  March 2 010, is "To establish a mutually supportive  and sustainable 
socio-economic system "; and, 
In accordance with the attributions and functions  given to the National Assembly, and in 
exercise of its constitutional power s, issues the following  
ORGANIC CODE OF PRO DUCTION , TRADE AND INVESTMENT  
PRELIMINARY TITLE Objective and s cope 
Article 1.- Scope - All natural or legal persons and other associative forms engaged 
in production in any part o f Ecuadorian territory shall be governed by these regulations.  
The scope of these regulations shall cover production as a whole , including  approval 
of production factors, transformation of production, distribution and marketing, consumption, 
utilization of positive externalities and policies to discourage  negative externalities.  It shall also 
foster  domestic production at all levels of development and actors in the mutually supportive  
people 's economy, together with the production of goods and services by the various forms 
of organization of production in the economy, as recognized in the Constitution of the Republic.  
Likewise, it shall be governed by principles which  enable strate gic international links to be forged 
through trade policy, including the  neces sary implementing instruments and others  which facilitate 
foreign trade, through a modern transparent and efficient customs regime.  G/VAL/N/1/ECU/3  
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  Article 2.- Production .- The process by which human activity transforms inputs into lawful , 
socially necessary and environme ntally sustainable  goods and services , including business  and 
other activities which create value added.  
Article 3.- Purpose .- The purpose of this C ode is to regulate the production process at the 
stages of production, distribution, exchange, trade, consum ption, management of externalities , 
and productive  investment designed to achieve Good Living.  These regulations also seek to create  
and strengthen r ules which enhance, encourage and promote higher v alue added production, 
lay down the conditions  needed to raise productivity and promot e transformation of the production 
matrix, facilitating the implementation of instruments to develop production so as to create decent 
jobs and balance d, equitable, eco -efficient, sustainable and nature -friendly development.  
Article 4.- Objective s.- The following are the main objectives of this legislation:  
a. Transform the Production Matrix so as to achieve higher value added and promote services, 
on the basis of knowledge and innovation, in an environmentally sustainable and 
eco-efficient manner;  
b. democratiz e access to production factors, with particular emphasis on micro, small and 
medium -sized enterprises, as well actors in the mutually supportive peoples ' economy;  
c. encourage social ly and environmentally responsible domes tic productio n and t rade, and 
sustainable consumption of goods and services, as well as their marketing , and th e use 
of environmentally clean technologies and alternative sources of energy;  
d. create decent and quality jobs and employment that help to enha nce the value of all forms 
of work and comply with labour legislation;  
e. create an integrated system of innovation and entrepreneurship so that science and 
technology reinforce the change in the production matrix ; and contribute to building 
a society of o wners, producers and entrepreneurs;  
f. guarantee the exercise of the peoples ' rights to have access to, use and benefit from high 
quality goods and services on fair terms and in harmony with nature;  
g. encourage and regulate all forms of private investment  in socially desirable and 
environmentally acceptable production activities and services;  
h. regulate productive investment in strategic sectors of the economy in accordan ce with the 
National Development Plan;  
i. promote technical and vocational  training b ased on the skills of the work force an d citizens 
so that the results of the transformation benefit  all; 
j. reinforce government control so as to ensure that production activities are not affected by 
practices that affect the operation of markets;  
k. promote development of production in the country by focusing on systemic competitiveness 
with an integrated vision that includes regional development and is coordinated with 
macroeconomic goals, the basic principles and models for development of society ; action by 
producers and companies, and the legal and institutional environment;  
l. foster the development of production in areas that are less economically developed;  
m. establish the fundamental principles and instruments for international coordination 
of Ecuad or's trade policy;  
n. encourage strategic import substitution;  
o. promote and diversify exports;  
p. facilita te foreign trade operations;  
q. promote activities in the mutually supportive and community -based people 's economy, 
together with integration and pr omotion of the resulting production strategic ally throughout 
the world, in accordance with the Constitution and the law;  
r. incorporate as a cross-cutting component  in all production policies the focus on gender and 
on economic inclusion of production by peoples and nationalities;  
s. foster mechanisms that enable fair trade and a transparent market ; and 
t. promote and support industrial and scient ific research, together with innovation and the 
transfer of technology.  G/VAL/N/1/ECU/3  
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  BOOK  I DEVELOPMENT OF PRODUCTION, COMPET ITION MECHANISMS AND BODIES  
TITLE I - Development of production and its institutional s tructure  
Chapter  I - The role of the State in developing production  
Article 5.- Role of the State .- The State shall foster the development of production and 
transformati on of the production matrix by determining policies and defining and implementing 
instruments and incentives to move beyond the specialization model that depends  on primary 
products and offers little value added.  
In order to transform the production matrix , the State shall encourage investment in 
production by boosting:  
a. The systemic competitiveness of the economy by providing public assets such as education, 
health, infrastructure, and ensuring the supply of the necessary basic serv ices in order to 
foster the aptitude for production in the regions and the human skil ls of Ecuadorians.  
The State shall set as a national objective the achievement of satisfactory productivity by all 
actors in the economy, co mpanies , undertakings and managers of the mutually su pportive 
people 's economy by reinforcing  the institutional structure and efficiency in the supply 
of services by various production -related institutions;  
b. the establishment and implementation of a regulatory framework to ensure that no 
economic actor may  abuse its market power, to be set out in the relevant law;  
c. the development of production in sectors with strong positive externalities so as to raise the 
overall level of producti vity and skills  with a view to innovation throughout the economy by 
strengthening the institutional structure established in this Code;  
d. the creation  of an ecosystem for innovation, entrepreneurship and association by linking and 
coordinating government, private and mutually supportive people 's initiatives for innovation 
and transfer of technology in production, and linking research and production . It shall also 
strengthen government research institutes and investment in upgrading human skills 
through fellowship programmes and the  financing of graduate and post graduate studies ; 
e. the implementation of a trade policy that serves the development of all those involved in 
production in Ecuador, particularly actors in the mutually supportive people 's economy and 
micro, small and medium -sized enterprises, and that guarantees food an d energy 
sovereignty, economies of scale and fair trade, together with strategic integration in the 
world;  
f. increas ed access to financing for all those involved in production by means of appropriate 
incentives and regulation of the private, public and mutually supportive people 's financial 
system, together with encouragement and development of the public bank intended to serve 
development of the country 's production;  
g. improved  productivity of those involved in the mutually supportive people 's economy an d 
that of micro, small and medium -sized enterprises, so that they participate in the domestic 
market and, ultimately, achieve economies of scale and levels of production quality that 
enable them to offer products on the international market ; 
h. the develop ment of logistics and infrastructure to foster  the transformation of production so 
that the State will create the conditions to promote efficient  maritime, air and land 
transport, with an integrated focus and a multimodal approach;  
i. sustainable productio n by implementing clean production technologies and practices ; and 
j. government policy on regionally based production so as to eliminate regional imbalances in 
the development process.  G/VAL/N/1/ECU/3  
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  Chapter  II - The institutional structure for developing production  
Article 6.- Sectoral Council .- The Executive shall be responsible for defining policies to 
develop production and boost investment through the Sectoral Council  for Production , which shall 
be set up and operate in accordance with the implementing regulations f or this Code, its guidelines 
being included within the National Planning System.  
The Council  shall have a Technical Secretariat under the responsibility of the Ministry 
chairing it  and its functions shall be determined in this Code and in its implementing  regulations.  
This Secretariat shall be given the necessary technical facilities to develop public policies and 
policies to boost production and investment, inter alia, those for the production sector.  
Article 7.- Intersectoral participation .- Intersectoral  participation in developing such policies 
is guaranteed through the Advisory Council on the Development of Production and Foreign Trade , 
which is a strictly advisory body that must be convened institutionally by the person chairing the 
Sectoral Council fo r Production in the manner determined in the regulations.  
This Advisory Council shall be composed, inter alia, of representatives of the private, semi -
public, mutually supportive people 's production sector, workers and decentralized autonomous 
governments.  It shall have broad and wide -ranging membership  that reflects the various sectors, 
regions and scales of production.  It shall not receive  government resources for its operation, 
although the  Technical Secretar iat of the Sectoral  Council for Production shall provide logistical 
support for its operation and for participation by its members.  
The Advisory Council may propose or suggest technical guidelines for d rawing up policies to 
be adopted by the agencies responsible for production  development , investment and foreign trade  
policies . The integration and operation of this Advisory Co uncil shall be governed by the 
implementing regulations for this Code and, if not covered by these regulations, by a resol ution 
of the Sectoral Council for Production.  
TITLE II - Promotion of decent jobs in production  
Article 8.- Decent wages .- A decent monthly wage is one that covers as a minimum the 
basic needs of a worker and his/her family, and corresponds to the cost of basic family needs 
divided by the number of dependents  in the household.  The cost of basic family needs and the 
number of dependents  in the household shall be determined annually by Ecuador 's governing body 
for statistics and national official censuses and shall serve as the basis for determining the decent 
wage  established by the Ministry of Labour Relations.  
Article 9.- Components of the decent wage .- The following components shall be taken into 
account solely and exclusively for calculation purposes in order to determine  whether a wor ker is 
receiving a decent month ly wage:  
a. The monthly salary or wage;  
b. the thirteenth monthly remuneration divided by twelve, the period for calculation and 
payment shall be that laid down in Article  111 of the Labour Code;  
c. the fourteenth monthly remuneration divided by twelv e, the period for calculation shall be 
that laid down in Article  113 of the Labour Code;  
d. the variable commissions paid to employees  by employers in accordance with lawful and 
customary business practices;  
e. the amount of the employee 's share of the com pany's profits in accordance with the Law, 
divided by twelve;  
f. the additional benefits received by employees in cash under collective contracts, which do 
not constitute legal obligations, and regular voluntary contributions paid by employers to 
employees  in cash ; and 
g. reserve funds ; 
h. if the employee has worked for a period of less than one year, the calculation shall be 
pro-rated to the period worked.  G/VAL/N/1/ECU/3  
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  The aforementioned formula for calculation under no circumstances means monthly payment 
of the thirte enth or fourteenth remuneration or of the employ ee's share of profi ts in accorda nce 
with the Law, which shall continue to be paid to employees in full on the dates fixed by law . 
Article 10.- Economic compensation for a decent wage. - As of the fiscal year 2 011, 
employers indicated in the paragraph below who did not pay their employees an amount equ al to 
or more than the decent monthly wage shall calculate compulsory additional economic 
compensation to be paid in order to make up the decent wage, solely for t hose employees who 
received a wage l ower than that indicated in Article 9 during the year.  
The economic compensation indicated in the preceding paragraph shall be mandatory for 
those employers which:  
a. Are corporations or natural persons obliged to keep a ccounts;  
b. at the end of the fiscal period made profits during the financial year ; and 
c. made an advance payment on income tax lower than profits during the fiscal year.  
Economic compensation shall be paid up to 31  December of the corresponding fiscal ye ar 
and may be distr ibuted until March of the following year, once annually, among employees who did 
not receive a decent wage during the preceding fiscal year.  Employers shall set aside a percentage 
of up to 100 % of profits for the financial year, if neces sary. 
If the amount indicated in the preceding paragraph fails to cover the tot al amount of 
decent wages for all employees with the right to economic compensation, it shall be distributed 
among the employees pro rata to the difference between the component s for calculating the 
decent wage and the decent wage indicated in Article  8 of this Code.  
Such compensation is additional and shall not be an integral part of remuneration ; it shall 
not constitute taxable income for the purposes of the social security scheme or for the employee 's 
income tax and shall be of a strictly temporary nature until a decent wage is paid.  
TITLE III - Creation of an integral innovation, technical training and 
entrepreneurship  scheme  
Article 11.- Innovation, training  and entrepreneurs hip scheme - Each year t he 
Sectoral  Council for Production shall develop a technical training plan to serve as a compulsory 
input for planning and prioritizing the in novation, training and entreprene urship scheme, in 
accordance with the Agenda for the Tran sformation of Production and the National Development 
Plan. 
This scheme shall co mbine  the work of various public and private institutions at differ ent 
stages of development and their various instruments, in a single  deconcentrated and decentralize d 
virtual  window in order to disseminate training for the purpose of creating entrepreneurial skills, 
financing instruments, risk capital, a development bank for financing business , and a national 
guarantee fund;  technical assistance and coordination with decentral ized autonomous 
governments, non -profit -making organizations, companies, universities, incubators, inter alia . 
Article 12.- Risk capital .- By means of appropriate legal and financial mechanisms, the 
State may contribute towards the formation of risk capita l. The temporary nature of the State 's 
investment shall be agreed in advance, both in terms of the time -frame and the form, giving 
priority to disinvestment by the State in companies which it owns in part or exclusively, in favour 
of employees and workers in such companies, as well as in favour of the community in which the 
undertaking operates, according to the time-limits specified for each project.  G/VAL/N/1/ECU/3  
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  BOOK II - DEVELOPMENT OF PRODUCTIVE INVESTMENT AND OF ITS INSTRUMENTS  
TITLE I - Fostering, promoting and re gulating investment in production  
Chapter I - Investment in production  
Article 13.- Defini tions.- The following definitions shall apply for the purposes of these 
regulations : 
a. Productive i nvestment. - Irrespective of the form of ownership, means the flow of resources 
intended to produce goods and services, to expand production capacity and to create jobs in 
the domestic economy;  
b. new investment. - For the p urpose of applying  the incentives provided for new investment, 
it means the flow of resources intend ed to increase the pool of capital in the economy 
through effective investment in production so as to expand future production capacity, 
increase the production of goods and services, or create new jobs, in the terms provided in 
the regulations.  A mere cha nge in ownership of production assets already operating or loans 
given to purchase such assets does not imply new investment for the purposes of this Code;  
c. foreign investment .- Investment which is owned or controlled by foreign natural or leg al 
persons domiciled abroad or which involves capital that has not been generated in Ecuador;  
d. domestic investment .- Investment owned or controlled by Ecuadorian natural or legal 
persons or by foreigners resident in Ecuador, unless it can be  shown that the capital has not 
been generated in Ecuador ; and 
e. domestic investor .- The Ecuadorian natural or legal person ow ning or controlling an 
investment made in Ecuadorian territory.  This concept include s natural or legal persons or 
entities of Ecuadorian cooperative, ass ociative or community sectors that own or control 
an investment made in Ecuadorian territory.  Ecuadorian natural persons having dual 
nationality or foreigners resident in Ecuador shall be considered domestic investors for the 
purposes of this Code . 
Any inv estment made by an Ecuadorian or foreign company whose shares, equity, 
ownership or control belong to an Ecuadorian natural person or company shall not be considered 
foreign investment.  
Article 14.- Application. - New investment shall not require any type o f authorization  other 
than the authorizations specifically indicated in the law and those imposed by the relevant regional 
legal structure ; the requirements laid down in these r egulations shall be met in order to benefit 
from the incentives provided.  
The b enefits of this Code shall not apply to any investment by foreign natural or legal 
persons domiciled in tax havens.  The regulations shall govern the terms for application of the 
incentives to all sectors requesting them.  
The benefits and guarantee s recogni zed in this Code shall apply without prejudice to the 
provisions in the Constitution of the Republic and other legislation, as well as those in international 
agreements duly ratified by Ecuador.  
Article 15.- Competent body .- The Sectoral Council for Produc tion shall be the highest 
government authority governing investment.  
Article 16.- Forms of investment .- The forms of investment and the exceptions thereto 
shall be determined in the regulations implementing this Code. 
Chapter II - General principles  
Article 17.- Non-discriminatory treatment .- Ecuadorian and foreign investors, corporations, 
companies or entities in the cooperative sector and in the mutually supportive people 's economy 
sector in which they participat e, together with their lawful investment in  Ecuador, with the 
limitations pr escribed  in the Const itution of the Republic, shall be treated equally in respect of the 
management, operation, expansion and transfer of their investment and shall not be the subject of 
arbitrary or discriminatory measures . Foreign investment and inve stors shall enjoy full protection 
and security so that they are given the same protection as Ecuadorians within Ecuadorian territory.  G/VAL/N/1/ECU/3  
- 217 - 
  The State, at all levels of government, in exercise of its full govern ing power s, may grant 
different treatment in terms of incentives in favour of productive and new investment, depending 
on the sectors, geographical location or other parameters to be met, in the terms provide d in this 
Code and its implementing regulations.  
Foreign investment sha ll serv e as a direct complement in strategic sectors of the eco nomy 
which  require investment and financing in order to achieve the objectiv es of the National 
Development P lan and subject to the legislation applicable.  Foreign investors may participate 
directly in other sectors of the economy  without the need for additional authori zation other than 
that applicable to domestic investors.  
Government agen cies shall give priority to attracting foreign direct investment according to 
the needs and priorities defin ed in the National Development Plan, the Programme for the 
Transformation of Production, and in the various development plans of decentralized autonomous 
governments.  Moreover, investment in other sectors of the economy shall also enjoy the benefits 
of gov ernment policy to promote production, in the terms of th ese regulations . 
Article 18.- Property rights .- Investors ' property shall be protected in the terms provided in 
the Constitution and other relevant legislation.  The Constitution prohibits all forms of  confiscation.  
Accordingly, the confiscation of domestic or foreign investment shall not be decreed or carried out.  
The State may, exceptionally and in accordance with the Constitution, decide to expropriate 
real estate for the sole purpose of carrying out  social development plan s, sustainable management 
of the environment and collective well -being, subject to valuation and payment of fair and 
adequate compensation in accordance with the law.  
Chapter  III - Rights of investors  
Article 19.- Rights of investor s.- The following investors ' rights are recognized:  
- freedom to produce and market lawful, socially desirable and environmentally sustainable 
goods and service s and to fix prices freely, except for those goods and services whose 
production and market ing are regulated by Law;  
- access to administrative procedures and controls established by the State to prevent any 
private speculative practice or monopoly or oligopoly or the abus e of a dominant market 
position or other unfair trade practic es; 
- freedom to i mport or export goods and services, except for those determined by the 
restrictions in effect or under the p rovisions of international agreements to which Ecuador is 
party;  
- free transfer abroad , in foreign currency,  of regular  earnings or profits derived  from 
registered foreign investment , subject to compliance with the requirements concerning 
participation by employees, any tax obligations  applicable or other pertinent legal 
obliga tions, as determined by leg islation , where applicable;  
- free transfer of the resources earned from the total or partial sale of companies in which the 
registered foreign investment was made, or from the sale of shares, equity or rights 
acquired as a result of the investment made , subject to compliance with any tax or other 
obligations , as determined by legislation ; 
- freedom to acquire, transfer or sell shares, equity or ownership rights in investments to third 
parties, in Ecuador or abroad, subject to compliance with the formalities determined in the 
law; 
- free access to the E cuadorian financial system and the stock exchange for the purpose of 
obtaining sh ort-, medium - and long-term financial resources;  
- free access to mechanisms for promotion, technical assistance , cooperation, technology and 
other equivalent mechanisms ; and 
- access to other general benefits and incentives provided in this Code, other legislation and 
regula tions applicable.  
Article 20.- Tax regime .- For tax purposes, domestic and foreign investment shall be 
subject to the same tax regime, with the exceptions determined in this Code.  G/VAL/N/1/ECU/3  
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  Article 21.- Mandatory rules. - Ecuadorian and foreign investors and their investments shall 
in general be subject to observance of and strict compliance with Ecuador 's laws and, especially, 
those in force concerning labour, the environment, tax and social security . 
TITLE II - Development of production in the mutually supportive and community -based 
people 's economy  
Article 22.- Specific measures .- The Sectoral  Council for Production shall determine policies 
to boost the mutually supp ortive and community -based people 's economy, as well as democratic 
access to production factors, without prejudice to the competence of decentralized autonomous 
governments and the special institutional structure created for the integral development of thi s 
sector, in accordance with the relevant regulations in the Law.  
Furthermore, in order to promote and strengthen the mutually supportive and community -
based people 's economy, the Sectoral Council for Production shall carry out the following action:  
a. Draw up programmes and projects to develop and improve domestic, regional, provincial 
and local production within the fram ework of the Intercultural and P lurinational State, 
guaranteeing the rights of persons , communities and nature;  
b. support and strengthen  the community -based social model of production, for which it shall 
draw up programmes and projects with government financing  for the purpose of : recovery, 
support and transfer of technology, research, training and marketing  mechanisms , and 
government proc urement, inter alia ; 
c. promote equal opportunities by granting benefit s, incentives and means of production;  
d. promote food security through preferential financing mechanisms for micro, small, medium -
sized and large enterprises belonging to communities, indigenous, Afro -Ecuadorian and 
Montubian peoples and nationalities;  
e. financ e production projects for communities, indigenous, Afro -Ecuadorian and Montubian 
peoples and nationalities to boost  agricultural, livestock, small -scale, fisheries, mining  and 
industrial  production , tourism , and other projects in this sector.  
At the end of each economic year, t he ministries responsible or the State secretariats with 
competence for promoting the mutually supportive and community -based people 's economy shall 
submit to the ministry chairing the Sectoral Council for Production reports on the resources 
invested in programmes to generate capacity, innovation, entrepreneurship  and technology, 
improve productivity, create associations , boost and promot e the supply of expor ts, marketing, 
inter alia, in order to reinforce  this sector of the economy.  
TITLE III - Incentives for the development of production  
Chapter  I - General rules on economic development incentives and encouragement  
Article 23.- Incentives .- The tax incentive s recognized herein are incorporated as 
amendments to the applicable tax legislation, as provided in th e amending provisions at the end 
of this Code.  
Article 24.- Classification of incentives .- Three categories of fiscal incentive are provided in 
this Code : 
1. General  incentives : Applicable to investment made in any part of Ecuador  and consisting  
of the following:  
a. Gradual reduction of three percentage points in income tax;  
b. incentives provided for special economic development zones, provided that they comply with 
the criteria for their establishment;  
c. additional deductions when calculating income tax, as mechanisms to encourage 
productivity , innovation and eco -efficient production;  
d. benefits for opening up companies ' registered capital to their empl oyees;  
e. tax payment facilities for foreign tra de; 
f. deduction of the additional compensation for payment of a decent wage when calculating 
income tax;  
g. exemption from the tax on the export of foreign currency for foreign financing transactions;  G/VAL/N/1/ECU/3  
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  h. exemption from advance payment of income tax for five year for any new investment ; and 
i. revised calculation for advance payment of income tax.  
2. Sector al and equitable regional development  incentives : For those sectors which contribute 
to chang ing the ener gy ma trix, strategic import substitution, boosting exports , and  rural 
development throughout  Ecuador, and the development of the urban zones specifi ed in the second 
amending provision (2.2), total exemption from income tax for five years for new investment  in 
these sectors.  
3. Incentives f or depressed areas : Such investment may not only be eligible for the 
aforementioned general and sectoral incentives, but priority shall also be given to new investment 
in the form of a tax benefit  consisting of an addition al deduction of 100 % of the cost of employing 
new labour, for five years.  
 Article 25.- Content of inves tment contracts .- At the initiative of an investor, investment 
contracts may be drawn up in the form of a public deed specifying the treatment to be giv en to 
investment under this Code and its implementing regulations.  
 Investment contracts may accord stability of tax incentives throughout the per iod of the 
contract, in accordance with the prerogatives in this Code.  Likewise, the mechanisms for 
monitoring  and regulating compliance with the investment criteria specified for each project shall 
be defined.  The Sectoral Council for Production shall determ ine the criteria to be met for 
investment seeking to avail itself of this regime.  
 Article 26.- Validity .- Investment contracts shall remai n valid for a period of up to fifteen 
(15) years as of the date of signature and their validity shall not restrict the control and regulatory 
powers of the State through its competent bodies.  
 At the request of an investor a nd provided that the Sectoral Council for Production considers 
it appropriate, depending on the type of investment made, investment contracts may be extended 
once only for up to the same period originally granted.  
 Article 27.- Settlement of disputes .- Investment contracts with foreign inve stors may 
contain arbitral clauses for the settlement of any disputes between the State and investors.  Efforts 
shall be made to settle amicably any disputes between the Ecuadorian State and a foreign investor 
that have to tally exhausted administrative channels through direct dialogue for a period 
of 60 days. If no direct settlement between the parties can be reached, there shall be mandatory 
mediation within three (3) months following the formal date of initiation of direc t negotiations.  
 If the dispute persists after mediation, it may be submitted to national or international 
arbitration in accordance with the treaties in force to which Ecuador is party.  The decisions of this 
Arbitral Tribunal shall be final , the legislati on applicable shall be that of Ecuador and rulings shall 
be definitive and binding on the parties.  
 If the parties have not reached an amicable agreement and have not submitted the dispute 
to arbitral jurisdiction for settlement  after six months have elaps ed since administrative channels 
were exhausted , the dispute shall be brought before Ecuador 's ordinary courts.  Tax matters shall 
not be submitted for arbitration.  
 Article 28.- Application of incentives .- The Technical Secretariat of the Sectoral Council for 
Production shall coordinate with the competent control bodies the proper application of the 
benefits accorded for each investment project and investors may not be required to meet 
requirements other than those determined in this legislation.  
 Article 29.- Monitor ing.- The Technical Secretariat of the Sectoral Council for Production 
shall be responsible for monitoring compliance with the legal or contractual commitments made by 
investors.  
 Each quarter the Internal Revenue Service shall forward to the Te chnical Secretariat a list 
of new firms that have applied for incentives so that it may draw up an electronic list containing 
this information.  G/VAL/N/1/ECU/3  
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   The Technical Secretariat, together with the Internal Revenue Service, may carry out 
controls to verify complia nce with  the eligibility criteria for the incentive relat ing to the investmen t 
made.  The implementing regulations shall determine the parameters for conducting such 
monitoring.  
 If the beneficiary fails to comply with requirement s, the Technical Secretaria t shall forward 
to the Sectoral Council for Production a detailed report on the seriousness of the non -compliance 
identified and not remedied, recommending the adoption of the relevant sanction s, depending on 
the seriousness of the non -compliance.  
 Article 30.- Special ineligibility .- The following may not be eligible for the incentives 
determined in th ese regulations : the President and Vice -President of the Republic, Ministers and 
Secretaries of State, and public servants belonging to the body responsible for production policy, 
either directly or through a third person, including those firms in which they have a direct  or 
indirect share of the capital ; those who at any stage of the procedure for obtaining the incentives 
are directly or indirectly related or have any degree of responsibility for the procedure and, 
because of their activities or functions, may reasonably be assumed to be in p ossession 
of confidential information on such procedures ; also spouses of the aforementioned senior officers, 
officials or employees ; and those who have not complied with their tax, labour, environment al or 
social security obligations . 
Chapter  II - Violations and sanctions on investors  
 Article 31.- Violations .- The following constitute possible grounds for violation by inv estors 
benefiting from the incentives provided in th ese regulations : 
- Failure by investors to provide the funds or acquisitions to which they have committed 
themselves within the period specified for this purpose in the relevant investment project;  
- withdrawal of all or part of the investment, provided that this implies non -compliance with 
legal or contractual commitments;  
- failure by investors to fulfil the minimum investment terms authorized within the period 
specified for this purpose in the relevant investment project;  
- transfer of the investment, without fulfilling the legal requirements and criteria ; 
- wilful non -compliance ascertained by the competent authority in relation to Ecuador 's 
labour, tax, social security or environmental legislation or o ther rules governing investment ; 
- proven fraud concerning the documents or informa tion provided and used as a basi s for 
obtaining investment incentives;  
- prevent ing or impeding  checks by government officials with responsibility for the sector  or 
use of a ny means to mislead government entities or their officials with a view to benefiting 
from the incentives provided by this Code;  
- bribery or attempted bribery of government officials responsible for the control and 
supervision of the benefits pr ovided by t his Code , as declared by the courts, with out 
prejudice to any criminal proceedings ; and 
- taking advantage of the incentives by those who are prohibited therefrom by law.  
Article 32.- Annulment .- Without prejudice to any civil or criminal proceedings  applicable, 
any of the grounds determined in the preceding Article shall lead to annulment of the benefits 
granted.  The annulment determined in this chapter shall be decided  by means of a reasoned 
resolution by the Technical Secretariat of the Sectoral Council for Production.  The investor affected  
may lodge an administrative appeal with the plenary session of this Council, following the 
procedure determined in the Statutes of the Executive 's Legal and Administrative Regime.  
Article 33.- If the grounds for annulm ent were one of those indicated in subparagraphs (e), 
(f), (g), (h), or (i) of Article 31, re fund of the incentives received shall also be de cided, together 
with payment of any  taxes due plus the interest that should have been paid if the tax incentives 
given by these regulations had not been received, during the period of non -compliance, except in 
duly accredited cases of unforeseeable ci rcumstances or force majeure  accepted by the Sectoral 
Council for Production.  The foregoing shall be without prejudice t o the exercise of the 
decisi on-making  authority of the Tax Administration in accordance with the law.  G/VAL/N/1/ECU/3  
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  TITLE IV - Special economic development  zones  
Chapter  I - Purpose and establishment of special economic development zones  
Article 34.- The central Governm ent may authorize the establishment of special economic 
development zones (ZEDE s), as customs destinations , in clearly defined areas in Ecuador, in order 
to receive new investment, with the incentives provided in this law, which shall be conditional 
upon c ompliance with the specific objectives set out in th ese regulations , in accordance with the 
parameters to be set by means of regulations an d those provided in national land management 
plans.  
Article 35.- Location .- The ZEDEs shall be established in clearly  defined geographical areas 
in Ecuador, taking into account aspects such as : protection of the environment, the regional 
structure, the potential of each locality, highway infrastructure, basic services, links to other parts 
of Ecuador, inter alia, previou sly determined by the body responsible for development 
of production and in coordination with the body in charge of national planning, and shall be subject 
to special treatment as rega rds foreign trade, tax and finance.  
Article 36.-Types .- The following ty pes of ZEDEs may be set up:  
a. In order to engage in the transfer and unbundli ng of technology and innovation.  Any type 
of undertaking or technological development, electronic innovation, biodiversity, sustainable 
environmental or energy -related improvemen t project  may be carried out in such zones;  
b. in order to conduct industrial diversification operations, which may consist of any type of 
innovative industrial undertaking, focusing mainly on the export of goods, using skilled 
labour.  Any type of inward p rocessing may be carried out in such zones, for example, 
processing, manufacturing (including : mounting, assembly and ad aptation  to other goods) 
and repair (including  restoration or conditioning)  of any type of goods for the purpose of 
export and strategic  import substitution in particular ; and 
c. in order provide logistics services such as : storage of freight for the purposes 
of consolidation and deconsolidation, sorting, labelling, pack ing, repacking , refrigeration, 
management of inventories, handling in dry ports or inland freight terminals, coordination 
of national or international distribution of goods, as well as maintenance and repair of ships, 
aircraft and land freight transport vehicles.  Such zones shall preferably be established within 
or close to ports or airports or in border areas.  Storage or collection of goods alone may not 
be authorized wi thin this type of zone . 
Logistics  services shall be designed to reinforce the physical facilities in ports, air ports and 
border posts that serve to boost the  net positive volume of foreign trade and local supply within 
the parameters allowed, in response to the requirements  laid down in the implementing 
regulations for this Code.  
Goods included in these processes shall serve to diversify the supply of exports,  although 
authorization shall be given  for their import for consumption in Ecuador in the percentages 
determined in the implementing r egulations for this Code.  These limits shall not apply to products 
obtained in processes for the transfer of technology an d technological innovation.  
Natural or legal pe rsons setting up in special zones may only operate in one of the 
aforementioned forms , or they may diversify their operations in the same territory by operating in 
several of the aforeme ntioned forms if they p rove that the various activities facilitate production 
chains in the economic sector operating in the authorized zone and that the ZEDE 's statutes 
authorize it to operate in the form consonant with the activity it is intended to establish.  
Article 37.- Customs control .- Persons and means of transport entering or leaving a ZEDE, 
together with its limits, the access and exit points to and from a ZEDE , shall be subject to customs 
control.  This customs control may be conducted prior to entry, while the goods ar e in the ZEDE or 
after they have left.  The procedures for such controls determined by the Customs A dministration 
shall not constitute obstacles to the flow of the production processes for the activities carried out 
in ZEDEs, and shall facilitate the entry and exit of goods to or from such zones.  G/VAL/N/1/ECU/3  
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  Article 38.- Administrative act of establishment. - ZEDEs shal l be established by means 
of an authorization from the Sectoral Council for Production, taking into account the potential 
economic growth of the areas in which the ZEDEs are installed, the objectives, plans and 
strategies in the National Development Plan, the Agenda for the Transformation of Production, and 
other regional plans, based on the requirements and formalities to be determined in the 
implementing regulations for this Code.  
Authorizations shall be granted for a period of twenty (20) years, and are renewable subject 
to the evaluation procedure determined in the implementing r egulations ; they may only be 
annulled  prior to their term if it is proven th at any of the violations leading to withdrawal of the 
authorization have been committed.  
Article 39.- Public governance .- The following shall be the responsibilities of the Sectoral 
Council for Production in relation to the establishment of ZEDEs:  
a. Determining the general policies for the operation and supervision of ZEDEs ; 
b. authorizing the creation of ZEDEs th at meet the legal requirements prescribed ; 
c. approving and authorizing managers  and operators of ZEDEs;  
d. responding to questions put concernin g application of this Code in relation to ZEDE s; 
e. applying the penalties provided in these r egulations  to management firms and operators 
which fail to comply with the provisions laid down for their operations;  
f. determining general and specific requirem ents, including those on origin and national value 
added , to allow a product processed  or manufactured (including its mounting, assembly and 
adaptation to other goods) or repaired (including its restoration or conditioning) within 
a ZEDE to be imported, wi th or without full or partial payment of tariffs.  In order to establish 
such a procedure, the customs value of the good s to be imported shall be taken into 
account, deducting the national value added and/or the value of the national or imported 
goods incor porated during the production process for the goods to be imported, and 
compliance with the rules of origin for domestic products for export shall be relevant, inter 
alia. This procedure shall be used exclusively for calculating the tariff.  The proce dure 
determined by the Internal Revenue Service shall be followed for the purpose of assessing 
and paying the value added tax;  
g. in coordination with the agency responsible for the environment, ensuring that the 
management of ZEDEs has no serious environmental impact on the region ; and 
h. other responsibilities determined in the implementing r egulations for this Code.  
In order to carry out the supervision and operational control of the functioning of ZEDEs and 
compliance with the ir objectives, the Ministry respo nsible for industrial promotion shall set up 
an operational technical unit to be the authority responsible for applying the policies determined 
by the Sectoral Council for Production in relation to ZEDEs.  
Article 40.- Application for a ZEDE. - Any intereste d party may apply  to establish a ZEDE at 
the instigation of public sector institutions or of decentralized aut onom ous governments.  
Public,  private or joint i nvestment  may be  used to develop such zones . Likewise, management 
compan ies and operators setting u p in such zones may be natural or legal per sons: private, public 
or joint ventures , Ecuadorian or foreign.  
In order to evaluate the desirability of authorizing the establishment of a ZEDE, a general 
description of the project shall be required, and shall c over the criteria  laid down in the 
implementing r egulations for this Code.  
A ZEDE may not be established in areas that form part of the National Protected Areas 
Scheme or of the State 's Forest Domain or have been declared protected woodland or vegetation 
or are fragile ecosystems.  
The authorization to operate a ZEDE may list in detail the incentives to be applied in each 
particular case, both for managers and  operators.  G/VAL/N/1/ECU/3  
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  Chapter  II - Managers  and operators of Special Economic Development Zones  
Article. 41. - Managers  of ZEDEs .- Ecuadorian or foreign private, public or public -private 
legal persons which so request may become managers  of ZEDEs provided that they receive 
authorization to engage in one of the activit ies indicated in Article 36 of this Code.  Their functions 
shall be to develop, manage  and exercise operational control of the ZEDE in accordance with the 
obligations laid down in the implementing regulations for this Code and those determined by the 
Sectoral Council for Production.  
The responsibilities and control procedures to be fulfilled by managers  shall be determined 
by the Sectoral Council for Production and the implementing regulations for this Code.  
Article 42.- Opera tors of ZEDEs .- Operators are the Ecuadorian or foreign private, public or 
public-private natural or legal persons proposed by the management company of the ZEDE and 
approved by the Sectoral Council for Production and which may engage in the activities authorized 
in these delimited zones in Ecuador.  
Operators of ZEDEs may only engage in the activities for which they have been authorized in 
the relevant text, according to the terms of this Code, its implementing r egulations, the applicable 
customs legislation and the r egulations  issued by the Sectoral Council for Production.  
They shall also ensure that their activi ties comply with national and international labour and 
environmental regulations , with environmental licensing procedures where applicable, and with the 
transfer of technology and training of Ecuadorian personnel.  
Article 43.- Prohibi ted linkage .- Managers  may not hold public office.  
Article 44.- Support services .- Any Ecuadorian or foreign natural or legal person wishing to 
become established in a ZEDE in order to provide support services for operators installed in the 
authoriz ed zone shall submit an application to the relevant management company , which shall 
approve or reject the application following a favourable opinion given by the Operational Technical 
Unit responsible for supervising and controlling ZEDEs.  
Firms wishing to  provide support services for operators in a ZEDE shall comply with all the 
safety and control regulations prescribed by this Code, its implementing r egulations, and the 
guidelines issued by the Sectoral Council for Production . Institutions in the Ecuadori an or foreign 
private financial sector shall obtain an authorization from the Supervisory Authority for Banks, 
which shall specify the requirements to be met by such firms.  
Article 45.- Liability .- Operators and managers of ZEDE s shall be jointly liable for the entry, 
ownership , maintenance and final destination of any goods introduced into or processed in 
authorized zones, and shall be legally responsible for their proper use and destination.  The joint 
liability establish ed only applies to customs tax obli gations not met and the monetary penaltie s 
imposed for the violations committed recognized in this Code and its implem enting r egulations.  
Article 46.- Customs treatment and foreign trade .- As ZEDEs are  a special legal structure, 
they shall receive the trea tment of the customs destination granted to them by the legal cu stoms 
regime, except as regards the payment of tariffs on foreign goods entering the said zones for the 
purpose of authorized procedures, in the case of both managers  and operators.  The proced ures for 
the entry of goods into the ZEDEs and their exit, a s well as the use of waste, shortfalls or 
surpluses, their possible inward clearance, re -export or destruction of deteriorated goods, shall b e 
governed by the implementing r egulations for this Cod e. 
For the purposes of custom s operations, the implementing r egulations for this Code shall 
determine the criteria according to which the entry of good s into a ZEDE is deemed to be an 
export and, in turn, whether entry of good s from an authorized zone into  national customs 
territory is deemed to be an import.  
Article 47.- Admission to another regime .- Capital goods that have entered the country 
under a suspensive customs regime with relief from foreign trade taxes may co mplete  the regime G/VAL/N/1/ECU/3  
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  by re -exporting the  goods to a ZEDE , provided that an operator has requested their entry for use 
in authorized activities.  
Article 48.- Valuation of capital goods .- For the purposes of their inward clearance, capital 
goods of foreign origin used in an authorized zone shall b e valued taking into account their state at 
the time when the declaration for consumption is processed.  
Chapter  III - Violations and penalties in Special Economic Development Zones  
Article 49.- Violations .- Violations caused by non -compliance with the prov isions on ZEDEs 
shall be qualified as either minor or seriou s The penalties provided in this connection shal l be 
applied by the Ope rational Technical Unit for control of ZEDEs or by the Sectoral Council for 
Production, according to their competence, and ta king into consideration the seriousness and the 
consequences of the action or omission in question, without prejudice to any civil or criminal 
proceedings that may ensue.  
Article 50.- Minor violations .- The following are minor violations punished by a warn ing in 
writing or a fine:  
- Non-compliance by the manager with commitments contained  in the authorization, and 
which do not constitute serious violations;  
- where an operator fails to inform the management company of the arrival, use or exi t of all 
goods a nd inputs to be manufactured, transformed, processed, marketed or consumed, as 
well as the u se of labour and the sale of foreign currency in Ecuador, within th e time-limits 
specified in the r egulations;  
- failure to submit the rules of procedure for the op eration of each ZEDE within the time-limits 
specified;  
- where managers  fail to fur nish the following information online to the Internal Revenue 
Service, Ecuador 's Customs Service and the ZEDE, using efficient  informatics me ans. 
 1. The arrival of goods in  the ZEDE and their exit, identifying their origin and destination;  
 2. tables showing the incorporation of raw materials to be converted into semi -finished 
 or finished products in the ZEDEs;  
 3. partial processing operations in accordance with the legisl ation;  
 4. authorized changes of regime;  
 5. lists of their operators;  
 6. duty-free transactions completed; and  
 7. sales within the ZEDE, identifying the buyers;  
 
- non-compliance with the procedures established for the entry of goods into the ZEDE and 
their exit;  
- non-compliance with the timelines for the work 's progress, equipment and investment, 
which shall be completed within the time-limits proposed in the documents used as a basis 
for qualifying as a ZEDE operator or for granting authorization as a  manager ; and 
- non-compliance with any other regulations not specified as a serious violation.  
Article 51.- Serious violations .- Any conduct which gives grounds for presuming an act that 
inexcusably lacks due diligence and care, and any involving  a repeat ed minor violation.  
The following are serious violations punished by suspension, annulment of the status 
of operator or withdrawal of an authorization, as applicable:  
a. Non-compliance with any of the objectives indicated in the ZEDE authorization as set out in 
this Code ; 
b. non-compliance with the provision on absence of a relationship for managers  and operators;  
c. where the manager  fails to verify and control activities by its operators, using for this 
purpose the legal mechanism s determined in this Code, its imp lementing r egulations or 
other applicable rules, and does not inform the relevant agencies of the violations so that 
the necessary administrative and legal measures can be taken ; 
d. refusal to allow inspections, verifications or audits  by the ZEDE 's competent  authorities or , 
as agreed in each case by the competent administration, or impeding  their exercise;  G/VAL/N/1/ECU/3  
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  e. the entry into the ZEDE of goods such as:  arms, explosives and ammunition ; narcotics 
of any type ; and products that are harmful to health, the environment,  safety or public 
morals, not expressly authorized by the ZEDE 's Operational Technical Unit, without prejudice 
to the civil or criminal proceedings imposed by such violations ; and 
f. where activities by operators cause environmental damage or involve non -compliance with 
the Environmental Management Plan, where this exists.  
Committing any of these offences, as w ell as the repetition of a minor violation, shall be 
punished by a fine or the suspension of the manager  or operator for a period of up to three 
months.  If the offence is repeated, it shall be punished by annulment of the operator 's status  or 
withdrawal of authorization, according to whether the offender is a  manager  or operator.  
Application of the penalties provided for the aforementioned offences shall be without 
prejudice to other legal liabilities.  
Article 52.- Penalties .- Managers  and operators of ZEDEs shall be punish able for the 
violations defined in this Chapter, depending on the serious ness of each case, by:  
- For minor violations : 
a. A warning in  writing ; and 
b. fine amounting to a minimum of ten unified basic wages for workers in general or 
a maximum of one hundred ; 
- For serious violations : 
a. A fine amounting to a minimum of fifty unified basic wages for workers in general or 
a maximum of two hundred ; 
b. suspen sion of the authorization granted to engage in the activities, for a period of up 
to three months ; 
c. definitive annulment of status as an operator within the respective ZEDE ; and 
d. withdrawal of the authoriz ation for a ZEDE.  
If there is environmental damage, in addition to the penalties defined, those responsible 
shall be obliged to make good the damage in accordance with the environmental regulations in 
force, pursuant to the rules in the Constitution and the Law.  
The penalties provided for minor violations may be adopted by the unit responsible for the 
operational control of the ZEDE.  The penalties provided for serious violations shall be adopted by 
the Sectoral Council for Production.  Before applying t he penalties defined in this Articl e, the 
relevant administrative procedure shall be i nitiated  as determined in the implementing r egulations 
for this Code.  The suspension of authorizations, annulment or withdrawal shall lead to suspension 
or termination of the tax incentives granted for the  same period as the penalty determined.  
BOOK  III - BUSINESS DEVEL OPMENT OF MICRO, SMALL AND MEDIU M-SIZED 
ENTERPRISES AND THE DEMOCRATIZATION OF PRODUCTION . 
TITLE I - Promotion of m icro, small and medium -sized enterprises  
Chapter I - Promotion and developme nt of micro, small and medium -sized enterprises 
(MSMEs)  
Article 53.- Defini tion and classification of MSMEs .- A micro, small or medium -sized 
enterprise is any natural or legal person which, as a production unit, engages in production, trade 
and/or services , employs a certain number of workers  and has annual sales of a gross value 
determined for each category, in accordance with the scales to be e stablished in the implementing 
regulations for this Code.  
If the criteria applicable are not met, the gross value  of annual sales shall have priority over 
the number of workers  for the purpose of determining an enterprise 's category . Craftsmen who 
meet the criteria for MSMEs shall receive the benefits of this Code subject to compliance with the 
requirements and terms  indicated in the implementing r egulations.  G/VAL/N/1/ECU/3  
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  Chapter  II - Regulatory bodies for MSMEs  
Article 54.- Institu tional structure and functions .- The Sectoral Council for Production shall 
coordinate policies for the promotion and development of MSMEs with the sect oral ministries within 
the scope of their competence.  It shall be given the following responsibilities  and ob ligations for 
determining cross -cutting  policies on MSMEs:  
a. Approving the policies, plans, programmes and projects recommended by the implementin g 
agency, and monitoring and evaluati ng the management of the bodies responsible for 
implementation, taking into account the cultural, social and environmental specificities 
of each area and drawing up the necessary measures for technical and financial sup port; 
b. preparing, prioritizing and coordinating action for the sustainable development of MSMEs, 
and preparing the annual budget for implementation of all the programmes and plans 
prioritized within the Council;  
c. authorizing the creation of special inf rastructure for this purpose and overseeing its 
development, for example : MSME development centres, research and technological 
development centres, business incubators, transfer nodules or laboratories needed to boost, 
facilitate and encourage the developm ent of these enterprises ' production in accordance with 
the legislation applicable to each sector;  
d. coordina ting with specialized public and private bodies training, information, technical 
assistance and trade promotion programmes designed to encourage t he participation 
of MSMEs in international trade;  
e. fostering participation by universities and local, national and international teaching centres 
in the development of entrepreneurship and production programmes, relating them to 
production sector s, so as  to strengthen MSMEs;  
f. promoting application of the principles and criteria needed for certifying quality in MSMEs, as 
determined by the authority with competence for the sphere;  
g. encouraging the implementation of clean production and social responsibi lity programmes by 
MSMEs;  
h. encourag ing the use of information and organizational development tools to support linkages 
among the public and private institutions involved  in the business development of MSMEs;  
i. coordina ting ac tion to facilitate MSMEs ' access to loans with public and private sector 
institutions involved in business  financing ; and 
j. others determined by Law.  
Chapter  III - Mechanisms for the  development of production  
Article 55.- Government procurement .- Public institutions shall be require d to apply the 
principle of inclusion in  their procurement.  In order to promote MSMEs, the National Government 
Procurement Institute shall encourage and mo nitor compliance with the following by all contracting 
entities:  
- Establish ment of criteria for including  MSMEs , in the procedures and in the percentages 
determined by the National Government Procurement Scheme;  
- granting of every facility to MSMEs so that they have proper and timely information on the 
procedures  in which they may participate;  
- streaml ined procedures for becoming  government suppliers ; and 
- definition of those goods, services and works that may be supplied or carried out by MSMEs , 
within the annual procurement plans of public sector bodies.  
The National Government Procurement Institute shall keep an updated regi ster 
of procurement from the mutually supportive people 's economy and from MSMEs and shall inform 
citizens of these benefits, together with future plans for government procurement by the State and 
its institutions.  The same obliga tions and technical criteria for inclusive procurement shall apply to 
the benefit of actors in the mutually supportive people 's economy.  
Chapter  IV - Single register of MSMEs and streamlining of formalities  
Article 56.- Single register of MSMEs .- A single register of M SMEs is hereby created as 
a database under the responsibility of the Ministry chairing the Sectoral Council for Production, G/VAL/N/1/ECU/3  
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  which shall be in charge of managing it ; for this purpose, all sectoral Ministries shall furnish the 
information needed  for its creation and permanent updating in a timely manner.  
This register shall permit the identification and classification of MSMEs engaged in the 
production of goods, services or manufacturing, in accordance with the concepts, parameters and 
criteria d efined in this Code.  Likewise, it shall generate a database to provide an information 
system for the sector on MSME s participating in government programmes for their support and 
development or benefiting  from the incentives in this Code so that the compete nt body may 
exercise its governance and define government policies, as well as facilitat e suitable assistance 
and advice for MSMEs.  
Solely for the purpose of monitoring government policies implemented in this sector, the 
Ministry responsible for managing t he register may request MSMEs to enter in the database 
information concerning their classification, in the terms to be determine d in the implementing 
regulations.  
TITLE II - Democratization of the transformation of production and access 
to production  facto rs 
Article 57 .- Democratiza tion of production .- In accordance with the Constitution, 
democratization of production means the policies, mechanisms and instruments which lead to 
deconcentration of production factors and resources and facilitate ac cess to fin ancing, capital and 
technology in order to engage in production.  
The State shall protect family and community farming as guarantees of food sovereignty, 
as well as crafts, the urban informal sector and MSMEs, implementing policies to regulate their 
trade with the private sector.  
The State shall promote special policies to eliminate inequalities and discrimination against 
women producers in access to production factors  
Article 58.- Implementation of procedures for the democratization of the transformation 
of production .- The Sectoral Council for Production shall prepare and monitor effective 
implementation of the policy on democratization of the transformation of production by developing 
and implementing special programmes that enable effective access to prod uction factors such a s 
land and capital, inter alia . 
Article 59.- Objectives of democratization .- The following shall be the objectives of the 
policy on democratization of the tran sformation of production:  
a. To promote and facilitate access by Ecuadorian citizens' to ownership and transformation 
of the means of production;  
b. to facilitate Ecuadorian ownership of businesses by developing and implementing tools to 
give them access to shares in State -owned enterprises;  
c. to provide support for raising the p roductivity of MSMEs, organized production groups or 
units through innovation in develop ing new products, new markets and new production 
proces ses; 
d. to foster compliance with the business ethics advocated by the National Government by 
creating a publicly  recognized management mark that encoura ges and catalys es businesses 
whose activities are environmentally friendly , which comply with their labour and social 
security commitments vis -à-vis their employees and workers  and the community through 
timely paymen t of their tax obligations, in accordance with the legislation applicable;  
e. to support the development of innovative processes in Ecuadorian firms by developing and 
implementing tools to allow firms to become more efficient and attractive, both on the 
domestic and international markets;  
f. to encourage and attract investment that generate s local and regional development, better 
and equitable production chains, strategic integration into the international market, decent 
jobs, technological innovation and d emocratization of capital;  
g. the territoriality of government policies;  
h. to promote the deconcentration of production factors and resources;  G/VAL/N/1/ECU/3  
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  i. to implement measures specially designed for family farm s, women and local communities 
and nationalities in o rder to eliminate inequalities and discrimination;  
j. to enc ourage redistribution and eliminat e inequalities in access to production factors, in 
sectors suffering from discrimination;  
k. to promote special measures to eliminate inequalities and discriminat ion against wome n 
producers in access to production factors;  
l. to boost the development and dissemination of production -process -oriented development 
and dissemination of knowledge and technology;  
m. to support the promotion of domestic production in all s ectors, especially with a view to 
guaranteeing food and energy sovereignty , which generates employment and value added ; 
and 
n. to develop government financing services in order to democratize credit and facilitate access 
to financing , capital and technolog y for the purpose of engaging in production, especially for 
those groups traditionally excluded from such financial services.  
The initiatives which these mechanisms seek to promote shall be those which achieve 
transformation of production and add value . The implementing r egulations for this Code shall 
determine the technical criteria and requirements to be met by individual s and firms involve d in 
such processes.  
Article 60.- Incentives for opening up business capital .- In order to comply with the 
objectives  indicated in the preceding Article, the governing body responsible for production 
development policy, in coordination with the Internal Revenue Service, the Ministry responsible for 
labour policy, the Companies Supervisory Author ity, the Banking and Insur ance Supervisory 
Authority, as well as other government agencies, shall encourage and monitor implementation of 
the following mechanisms:  
- Diversification of the ownership of stock in companies exclusively owned by the State or part 
of whose  registered ca pital is publicly owned in favour of employees of the said companies . 
Shares may be acquired through the national stock exchange mechanism or other 
mech anisms recognized by the Law.  This mechanism does not apply to government -owned  
enterprises;  
- the State  may temporarily participa te in the capital of private or private -public production 
transformation companies so that it may subsequently finance the purchase of shares by the 
employees through loan and preferential financing schemes ; and 
- encourage ment to  open up the capital of private firms to their employees by approving the 
fiscal and financial incentives determined in this Code . 
The implementing r egulations for this Code shall set the parameters to be met by firms and 
employees involved in opening up t he capital of firms, especially the mechanisms restricting 
relations  among participants and any act simulating the accumulation of business capital.  Likewise, 
special powers shall be given to the competent authorities to ensure the transparent disseminatio n 
of these processes throughout society as a whole and the appropriate evaluation of the objectives 
they have achieved.  
Chapter  I - Land  
Article 61.- Access to land and its integrated promotion .- Through its competent 
government agencies, the State shall p romote and facilitate access to land for farming families and 
communities that lack land, giving the m priority in the redistribution of land through land 
registration, transfer of government land, mediation for selling/buying land on the market, 
reversion or other mechanisms enshrined in the Constitution and the Law.  In order to ensure that 
such action leads to higher productivity and better market access, the following activities shall also 
be carried out:  
- Fostering alternative marketing mechanisms which  not only lead to higher incomes for 
family producers but also guarantee supplies for local and regional markets;  
- supporting Ecuador 's food sovereignty by boosting the production of food for domestic 
consumption, as well as encouraging productivity and t he production of goods that assist 
proper nutrition of Ecuadorian families, especially children ; and G/VAL/N/1/ECU/3  
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  - promoting production practices that ensure the conservation and sustainable management 
of land, especially the fertile layer, preventing its degradation,  notably that caused by 
contamination and erosion.  
Resources for these programmes shall be set aside annually in the State 's overall budget.  
Chapter  II - Financing and capital  
Article 62.- Acces s to the public bank .- The Sectoral Council for Economic Polic y shall 
determine and monitor access to financing from the public bank for all those engaged in 
production ; it shall draw up the guidelines and incentives for supporting access to private 
financing, in particular for those in the mutually supportive people 's economy and MSMEs ; and 
shall develop mechanism s to boost the deepening of the stock market , to encourage access by all 
those engaged in production and to reduce the cost of financial intermediation.  
The authority with competence for public financi ng may establish special loan programmes 
for these sectors, with the involvement of the private financial system.  
Article 63.- Registr ation.- Public and private financial entities shall mandatorily create and 
update  a register of transactions involving firms wit h MSME status and shall report regularly to the 
agenc y responsible for implementing the policies on MSMEs.  
Article 64.- Guarantees .- The financial regulatory authority shall create a special guarantee 
regime for private and public financing of MSMEs and fo r developing both public and private risk 
capital initiatives.  
Article 65.- National Guarantee Fund .- A public National Guarantee Fund is hereby create d 
to facilitate MSMEs ' access to financing for their activitie s For financial purposes , the guarantees 
underpinning this Fund shall be considered as self -liquidating and their cover in re spect of the loan 
guaranteed shall be one to one.  The Fund shall form part of Ecuador 's credit guarantee scheme 
regulated by the Banking a nd Insur ance Supervisory Authority.  This Fund 's operating methods 
shall be determined in the implem enting r egulations.  
Article 66.- Rules for MSME s.- The stock mark et's regulatory authority shall prepare special 
rules for individual and associative access by MSMEs to financing through the st ock market.  Public 
institutional investors shall determine special rules that facilitate and permit  the purchase of stock 
generated by MSMEs.  
Article 67.- Other forms of financing .- The body with competence for promoting and 
regulating microfinancing for t he people shall establish mechanisms to boost the financing of micro 
and small enterprises throughout Ecuador, particularly in regions where there is less financial 
coverage, and to enhance efficiency and access to the specialized technology of the system 's 
private  operators  
The National Government sh all implement a risk capital programme to permit MSMEs to 
have access to such forms of financing needed for innovation and transformation of production, 
as well as an integrated entrepreneurship programme cover ing the whole pre -investment and 
investment cycle.  
Article 68.- Loans for opening up capital and investment .- Private firms which require 
financing in order to make  new investment and which in turn wish to carry out a programme to 
open up their capital, in  accordance with the provisions in this legislation, may be eligible for the 
flexible loan programmes to be implemented by the National Government for the accumulation of 
such processes, at preferential rat es of interest and for the long term.  
TITLE III - Equitable regional development  
Article 69.- Regional prioritization .- Transformation of production shall seek to catalys e all 
regions in Ecuador;  nonetheless , priority shall be given to public investment in  developing 
production in economically depressed a reas, taking into account factors such as : high 
unemployment rates, unsatisfied basic needs, inter alia ; these shall be determined jointly with th e G/VAL/N/1/ECU/3  
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  National Planning Secretariat, the Sectoral Council for Production and autonomous decentralized 
governments.  These bodies shall evaluate and monitor compliance with this policy.  
Article 70.- The National Planning Secretariat, the Sectoral Council for Production and 
autonomous decentralized governments may define policies to promote mechanisms to foster the 
endog enous economic development of the region, and integration into national and international 
markets.  
BOOK  IV - FOREIGN TRADE, ITS CONTROL BODIES AND ITS INSTRUMENTS  
TITLE I - The institutional structure of foreign trade  
Article 71.- Institu tional structure .- The body responsible for approving Ecuador 's 
government policies on trade shall con sist of a public, intersectoral  collegiate body in charge 
of regulating all foreign -trade related matters and proce dures , to be entitled the Foreign Trade 
Committee (COMEX) , which shall be composed of the following institutions or their 
representatives:  
a. The Ministry in charge of foreign trade policy;  
b. the Ministry in charge of agricultural policy;  
c. the Ministry in charge of industrial policy;  
d. the Ministry responsib le for coordinating the development of production;  
e. the Ministry responsible for coordinating economic policy;  
f. the Ministry in charge of public finance s; 
g. the National Planning Agency ; 
h. the Ministry responsible for coordinating strategic sectors;  
i. the Internal Revenue Service;  
j. the national c ustoms authority ; and 
k. other institutions determined by the President of the Republic by means of an executive 
decree.  
Representatives, as a minimum, shall hold the rank of under -secretary . 
The Committee shall operate according to the rules determined by the Executive 's collegiate 
bodies and the following provisions : 
1. COMEX shall be chaired by the Ministry designated by the President of the Republic, which 
shall also act as the Committee 's Technical Secr etariat;  and 
2. COMEX 's Technical Secretariat shall have the technical competence to develop  government 
policies and programmes on  trade, and to monitor and evaluate them.  
Article 72.- Functions .- The following shall be the functions and attributions of th e body 
governing trade policy:  
a. To formulate and approve general and sectoral policies and strategies for foreign trade, 
boost and promote exports, and designate the implementing bo dies; 
b. to issue prior opinions on the initiation of negotiations on int ernational trade and economic 
integration agreements and treaties , as well as the negotiating guidelines and strategies.  
In connection with trade negotiations, the State may offer tariff or tax preferences for the 
entry of products of commercial interest, with special emphasis on environmentally 
responsible  goods;  
c. to create, modify or dismantle  tariffs ; 
d. to revi ew foreign -trade -related non -tariff rates other than customs duty ; 
e. to regulate, facilitate or restrict the export, import, movement and tran sit of goods that 
have not been inward cleared  or are not Ecuadorian , in the cases provided in this Code and 
in international agreements duly ratified by the Ecuadorian State;  
f. to issue the rules on registration, authori zation, prior control documents, l icences and import 
and export procedures, other than customs procedu res, both general and sectoral, including 
the requirements to be fulfilled other than customs formalities ; 
g. to approve and publish the nomenclature for the classification and description  of imports and 
exports;  G/VAL/N/1/ECU/3  
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  h. to determine the parameters for international trade negotiations on origin;  
i. to adopt the measures needed  to streamlin e foreign trade and its efficient administration, 
other than customs procedures;  
j. to adopt the rules and m easure s needed to prevent unfair international trade practices 
affect ing domestic production, exports or, in general, Ecuador 's trade interests;  
k. to take cognizance of reports by the investigating authority and to adopt trade defence 
measures consonant w ith the national and international regulations in force against unfair  
international trade practices or an increase in imports which cause or threaten to cause 
injury to domestic production;  
l. to approve import quotas or measures restricting foreign trade  when the trade 
circumstances, the effect on local industry o r the country 's economic situation so require;  
m. to settle disputes on c ompetence that may arise among various public sector bodies  in 
relation to foreign trade ; 
n. to promote programmes on fina ncial assistance from the public bank for dome stic 
producers, with flexible loans that facilitate implementation of appropriate environmental 
techniques for cleaner and more competitive production  so as to promote the export of 
environmentally responsible goods ; 
o. to promote the creation of a scheme for environmental certification of agricultural and 
industrial products for the purpose of access to international markets, in coordination with 
the national environment authority ; 
p. to approve the trade polic y rules required to boost trade in products that meet 
environmentally responsible standards;  
q. to defer temporarily the application of general tariffs or those specific to an economic sector, 
as appropriate for dome stic production or the State 's economic needs;  
r. to apply the common external tariffs in accordance with economic integration treaties;  
s. to promote environmentally responsible exports and imports ; and 
t. other responsibilities determined in this Code.  
 Article 73.- Resolutions .- General and m andatory rules approved by the governing body for 
foreign trade shall be adopted through Resolutions to be published in the Official Journal . The form 
and effects of other acts approved by the Committee shall be governed by the implementing 
regulations and  shall be subject to the provisions in this Code and in international agreements duly 
ratified by Ecuador.  
 Execution of the decisions adopted by the governing body for foreign trade, as well as their 
monitoring , shall be the responsibilit y of the competen t Ministries and government agencies , in 
accordance with the functions and duties determined in the implementing r egulations and in the 
resolutio ns issued by th e agency concerned . COMEX 's Technical Secretariat shall oversee 
compliance with its provisions.  
 Article. 74. - Coordina tion.- The Ministries and government  institutions responsible for 
administering authori zations or procedures prior to import or export of goods, in relation to public 
or environmental health, animal or plant health, technical regulat ions and quality, the cultural 
heritage, control of narcoti cs and psychotropic  substances and other trade -related measures, shall 
carry out these functions according to the policies and rules adopted by the governing body for 
foreign trade.  These agencies  may not apply trade -related administrative or technical measures 
that have not previously been coordinated with the governing body for foreign trade.  
 Article 75.- Investigating authority .- For the purpo ses of this Book, the investigating 
authority mean s the agency  determined in the implementing r egulations for this Code, which shall 
administer the investigative trade defence procedures in relation to foreign trade.  
TITLE II - Tariff and non -tariff measures for regulating foreign trade  
Chapter  I - Foreign t rade tariff measures  
 Article 76.- Form of expression .- Tariffs may be expressed in terms such as : percentages 
of the customs value of the goods ( ad valorem ), monetary terms per unit of measurement 
(specific) or a combination of both (mixed).  Other forms a greed in international trade treaties duly 
ratified by Ecuador shall also be recognized.  G/VAL/N/1/ECU/3  
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   Article 77.- Types  of tariff .- Different technical types of t ariff may be adopted, for example:  
- Fixed tariffs, where a single tariff is determined for a subheading in the customs and foreign 
trade nomenclature;  or 
- tariff quotas, where a tariff level is determined for a certain quantity or value of imports or 
export s and another tariff for imports or exports which exceed this quantity  or value . 
 Other methods provid ed in international trade treaties duly ratified by Ecuador shall also be 
recognized.  National tariffs shall comply with the commitments adopted by Ecua dor in the various 
international treaties duly ratified, without prejudice to the right to apply safegua rd or trade 
defence measures when needed, to replace the tariffs determined.  
Chapter  II - Foreign tr ade non -tariff measures  
 Article 78.- Non-tariff measures .- The COMEX  may determine regulatory non-tariff 
measures for the import or export of goods in the following cases:  
a. Where necessary to guarantee the exercise of a fundamental right recognized in the 
Constitution of the Republic ; 
b. to comply with provisions in international treaties or agreements  to which the Ecuadorian 
State is party;  
c. to protect the life, health or safety of persons and national security;  
d. to guarantee the preservation of the environment, biodiversity, and animal and plant health;  
e. where measures need to be imposed in response to restrictions on Ecuador 's exports, 
imposed unil aterally and unjustifiably by other countries, in accordance with the rules and 
procedures provided in the respective international trade agreements and the provisions 
determined by the governing body for foreign trade;  
f. where mea sures need to be applied  temporarily to remedy balance -of-payments 
imbalances;  
g. to prevent unlawful traffic in narcotic s and psychotropic substances ; and 
h. to ensure compliance with laws and regulations consistent with international commitments in 
areas such as customs control s, intellectual property rights, defence  of consumers ' rights, 
control of quality or the marketing of products destined for international trade, inter alia.  
 Article 79.- In addition to the cases provided, regulatory measures and non -tariff 
restrictions on  exports may be determined in the following cases:  
- To prevent shortages of food or other essential goods in Ecuador and to control prices for 
this type of product;  
- to ensure supplies of raw materials for domestic producers in implementation of a 
govern ment industrial development plan;  
- to protect the country 's non -renewable natural resources;  to protect the national cultural, 
artistic, historical or archae ological heritage ; and 
- in other cases determined by the competent agency  as necessary for Ecuado r's trade and 
economic policies, as provided in duly ratified international agreements.  
 Article 80.- Fees.- The fees payable for permits, registration, authorizations, licences, 
analyses, inspections and other formalities required for the import and expor t of goods, or in 
connection with them, other t han the ordinary customs procedures and services, shall be 
determined pro rata to the cost of the services actually provided, whether at the local or national 
level.  
 Accordingly, only the fees mentioned in th e preceding paragraph shall be required, together 
with the formalities and requirements applicable to procedures for the import or export of goods as 
of their approval by the governing body for foreign trade, as set out in the relevant legal 
instrument pub lished in the Official Journal . The formalities and requirements applicable to such 
procedures shall be those strictly necessary to achieve the objective sought.  
 Article 81.- Proced ures.- Electronic procedures for the approval of applications, notificatio ns 
and formalities concerning foreign trade and customs facilitation shall be recognized as valid.  G/VAL/N/1/ECU/3  
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   The State shall promote the electronic system for interconnection of all foreign -trade -related 
public and private sector institutions in order to streamline  and speed up operations for the import 
and export of goods, t o be conducted by the national customs authority.  The customs authority 
shall be responsi ble for implementing and developing this system.  
 Article 82.- Mechanisms .- The non -tariff measures provi ded in these regulations include 
non-tariff quotas, import licences, sanitary and phytosanitary measures, technical regulations, and 
any other mechanism recognized in international treaties duly ratified by Ecuador.  
 The requirements and procedures for app lying these measures shall be determined in the 
implement ing regulations for this Code.  
 Article 83.- Nomenclatur e.- In applying the tariff and non -tariff measures for the import 
and export of goods, and for foreign trade statistics, the nomenclature defin ed by the governing 
body for foreign trade shall be used, in accordance with the Convention on the Harmonized 
Commodity Description and Coding System (Harmonized System), and any other system 
recognized in international treaties duly ratified by Ecuador.  The governing body for foreign trade 
may create additional or supplementary codes in order to apply specific trade measures for 
products that cannot be fully or partially classified in the existing nomenclatures.  
Chapter  III - Certifica te of origin for good s 
 Article 84.- Rules of origin .- Rules of origin mean the technical parameters established for 
the purpose of determinin g the customs territory or regio n of origin of a product.  The origin 
of goods may be national, if only one country is taken into accoun t, or regional, if there is more 
than one country.  
 Goods may have to comply with rules of origin in order to benefit from tariff preferences, 
quotas, special customs regimes, or other specific trade measures which require that the origin of 
a product be d etermined.  
 Article 85.- Certifica te or origin .- The government department designated in the 
implementing r egulations  for this Code shall be responsi ble for regulating and administering the 
certification of origin of domestic goods.  Certification may be gr anted directly or through the public 
or private bodies empowered for this purpose ; the competent authority may act ex of ficio or at the 
request of an Ecuadorian or foreign interested party in investigating doubts concerning the origin 
of a product exported  from Ecuador.  
 The body empowered for this purpose shall also certify the origin of goods undergoing  
inward processing operations in a ZEDE which meet the requirements laid down for recognizing the 
origin of the processed product or in conformity with app licable international agreements, both for 
the purposes of export and for their entry into national customs territory.  
 Article 86.- Verifica tion of origin .- The national customs authority shall be responsible for 
monitoring and verifying compliance with r ules of origin for imports that are products of foreign 
origin, irrespective of the customs regime under which they are imported.  For this purpose, it may 
make use of all the attributions given to it under the law and international agreements for the 
control of imported goods, including on -site inspection of production processes for goods imported 
into Ecuador.  
 Article 87.- Discrepanci es regarding origin .- If there are doubts concerning the veracity 
of the certification or compliance with the rules of orig in applicable, or if no certificate of origin is 
submitted, it contains mistakes or is incomplete, the Customs Administration may accept the 
deposit of security for the amount of the corresponding tariffs, duties and taxes for the import 
of goods of foreig n origin, in accordance with the regulatory provisions applicable.  
TITLE III - Trade defence measures  
Chapter I 
 Article 88.- Trade defence .- The State shall promote transparency and efficiency i n 
international markets and shall encourage equal conditions  and opportunities . For these purposes G/VAL/N/1/ECU/3  
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  and in accordance with the provisions of this Code and of  the relevant international instrument s, 
it shall adopt appropriate trade measures to:  
- Preven t or remedy any injury or threat of injury to domestic industry ar ising from unfair 
practices of dumping and subsidization ; 
- restrict or regulate any imports that increase significantly and are made under such 
conditions as to cause or threaten to cause serious injury to domestic producers of like or 
directly competitiv e products;  
- respond  to trade, administrative, monetary or financial measures adopted by a third country 
that affect the rights and trading interests of the  State of Ecuador, provided that such 
measures may be deemed incompatible or un warranted  in the lig ht of international 
agreements, or that they nullify or impair benefits accruing under an international trade 
agreement;  
- restrict imports or exports of products on social or economic grounds so as to ensure local 
supply, domestic price stability or prote ction for domestic industry and domestic consumers ; 
and 
- offset any a dverse effects on domestic production in accordance with the provisions 
of international  agreements  duly ratified by Ecuador.  
- By means of international trade agreements, the applicatio n of these measures may be 
limited or other specific trade defence me chanisms established , based on the origin or 
provenance of the goods.  
 The trade defence measures that the governing body for trade policy may adopt include 
anti-dumping measures, counter vailing duties, safeguard measures and any other mechanism 
recognized by international treaties duly ratified by Ecuador.  
 The requirements, procedures  and mechanisms for the application and execution of the 
trade defence measures shall be governed by the provisions of the implementing r egulations for 
this Code, including the retroactive application of measures determined upon  completion of  the 
formal investig ation process set forth in the r egulations;  the type of products covere d by the 
measures and the ex ceptions shall likewise be determined.  
 Article 89.- Duties .- Anti-dumping and countervailing duties and those arising from the 
application of safeguard measures shall be collected by the Customs Administration, together with 
the applicable foreign trade charges;  however, as trade levies , they may not be treated as fiscal or 
tax charges.  Accordingly, such measures shall not be b ound by the general principles of tax law.  
 Anti-dumping and countervailing duties shall remain in force as long as and insofar as they 
are necessary to offset  the injury  to the domestic industry.  Nevertheless, s uch duties shall be 
terminated within five years of their entry into force, in accordance with the terms laid down in the 
implementing r egulations for this Code. 
 Safeguards s hall be applied for up to four years and may be extended for a further period 
of up to four years where such extension is warranted, due regard  being paid to implementation 
of the domestic industry 's adjustment programme.  
 Economic levies applied as a resu lt of these proce dures  may be lower than the margin 
of dumping or the amount of the subsidy established,  provided that they suffice to discourage the 
importation of products under unfair international trade practices.  
 Where an investigation determines a n eed for retr oactive payment of such levies, the 
customs a uthority shall decide on the procedure for the retroactive collection of the surcharges set 
in such cases , in accordance with the terms laid down in the implementing r egulations.  
 Article 90.- Refund s.- The amount collected under provisional measures for anti-dumping 
duties, countervailing duties or provisional safeguards shall be re funded if, upon completion of the 
investigation, it is determined that the increase in imports has not caused or threate ned to cause 
serious injury to a domestic industry.  
 Article 91.- Review.- Definitive anti -dumping duties, safeguards or countervailing duties 
may be reviewed and amended  periodically at the request of a party or ex of ficio, at any time , G/VAL/N/1/ECU/3  
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  further to a repor t by the Investigating Authority, whether or not the duties in question are the 
subject of national or international administrative or judicial dispute proce edings . 
 In any case, the resolutions announcing the initiation and conclusion of the review shall be 
notified to known interested parties.  The interested parties shall be entitled to participate in the 
review process . 
Chapter  II 
 Article 92.- Functions .- For the purpose of defending trade against trade measures applied 
by governments of third countries , the governing body for trade policy shall be responsible for : 
a. Deciding on or, as  appropriate, recommending such trade policy measures as are necessary 
to ensure observance of the rights of the State of Ecuador in accordance with international 
trade r ules; 
b. without prejudice to the powers of the Attorney -General of the State, deciding whether 
a foreign trade dispute is to be heard by a panel, court of arb itration, international court or  
any appellate body established in accordance with international t reaties or agreements;  
c. adopting appropriate measures co mpatible with international treaties and agreements , when 
a third country initiates internal or international proceedings regarding trade, financial, 
foreign exchange or administrative matters, the outcome of which may affect the 
production, exports or trading interests of Ecuador;  
d. adopting such measures as are necessary to ensure implementation of the decisions taken 
by trade dispute settlement bodies established in accordance with this Code and relevant 
international agreements;  and 
e. the other functions assigned by this Code . 
TITLE IV - Boosting and promoting exports  
 Article 93.- Export promotion .- The State shall promote export -oriented production and 
shall boost exports using the following g eneral and directly applicable mechanisms, without 
prejudice to t hose included in other laws or g overnment programmes:  
- Acces s to tariff preference programmes or other types of benefits under trade agreements 
that are mutually advantageous for the signato ries, meaning those at the regional, bilateral 
or multilateral level, concerning products or services which meet the origin requirements 
applicable or which are eligible for such benefits;  
- the right to t otal or partial conditional refund of taxes paid on the import of inputs and raw 
materials incorporated into products for expo rt, as determined in this Code;  
- the right to be eligible for special customs regimes with suspended payment of tariff duties 
and import taxes, as well as tax -related surcharges, o n goods for export, as determined in 
Book V of this Code;  
- financial support or facilitation provided under general or sectoral programmes established 
in accordance with the national development programme;  
- assistance in relation to information, training , external promotion, development of markets, 
formation of consortiums or unions of exporters and other action to promote exports, 
furthered by the national Government ; and 
- the right to be eligible for the incentives for investment in production provided  in this Code 
and in other relevant regulations.  
 Article 94.- Insurance .- The public sector financial agency  appointed by the Executive shall 
establish and administer an export credit insurance mechanism to cover the risk of non -payment 
of the amount due for goods or services sold abroad, respecting financial security parameters.  
 Article 95.- Non-financial export promotion - An Institute for the Promotion of Exports and 
Foreign Investment, under the Ministry governing foreign trade policy, is hereby create d and shall 
be set up and operate in accordance with the Regulations.  G/VAL/N/1/ECU/3  
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  BOOK  V - SYSTEMIC COMPETITI VENESS  AND CUSTOMS FACILITATION  
TITLE I - Boos ting and promoti ng strategic sectors key for  
the production infrastructure  
 Article 96.- Investment in strategic  sectors .- The State may, exceptionally, delegate to 
private initiative and the mutually supportive people 's economy investment in strategic sectors in 
the cases determined in the legislation for each sector and, subsidiarily, in this Code.  
 Without prejud ice to the provisions in the relevant sectoral legislation, Ecuadorian and 
foreign investors implementing projects in the strategic sectors defined in the Constitution and in 
other applicable legal provisions may also be eligible for the provisions in this  Chapter.  
 Article 97.- Authorization requirement .- An investment contract may not be deemed 
authorization to engage in activities in strategic sectors, for which other special authorizations 
defined in the sectoral legislation are required, for example, c ontracts, permit s, authorizations, 
concessions, etc. T he existence of an investment contract shall not imply a limitation on the 
State 's exercise of checks  and controls through the competent authoritie s. 
 Article 98.- Non-discriminatory treatment in the el ectricity sector .- New projects in the 
electricity sector by Ecuadorian private electricity -generating firms shall be given  equal treatment, 
procedures and conditions guaranteeing and/or paying the purchase of energy as those applicable 
to international tr ansactions in electricity, in accordance with the decisions of the Andean 
Community and the regulatory provisions issued by the governing body for the electricity sector in 
relation to payment guarantees, subject to a favourable report by the Ministry of E lectricity and 
the Ministry of Finance in each case.  
 Article 99.- Streamlining of administrative formalities .- In accordance with the objective of 
the National Public Data Registration Scheme, State entities, institutions and agencies  shall 
streamline the ir administrative formalities within their areas of competence,.  In this connection, 
government  entities, institutions and agencies  shall set up computerized databases and may not 
require the submission of certified copies or photocopies of documents in th eir possession or 
of those to which they have legal and operational access.  
 Government  entities, institutions and agencies  shall endeavour to limit as far as pos sible the 
requirement to submit updated certified copies of public documents which they can ob tain through 
legal or operational channels using  the public sector 's interconnected databases.  
 Art. 100. - Excep tions.- In exceptional cases duly decreed by the President of the Republic 
where necessary and appropriate in order to meet the public, collecti ve or general interest, if the 
technical or economic capacity does not exist or if demand for the service cannot be met by 
government or public -private firms, the State or its institutions may delegate to private initiative 
or to the mutually supportive people's economy the management of strategic se ctors and the 
supply of public electricity, highway, port or airport infrastructure, rail or other services.  
 The provisions in the Constitution shall be guaranteed and it shall be ensured that the prices 
and ra tes for the services are fair and that the State 's institutional structure shall be responsible 
for their control and regulation.  
 Delegation may be in the form of a concession, association, strategic alliance or other 
contractual form allowed by the law, and, when designating the delegate , the public competition 
procedures determined in the regulations shall be followed, unless a State -owned enterprise that 
forms part of the international community is involved, in which case, authority may be delegated 
directly.  
 Article 101.- Efficient public services .- The State shall adopt special measures to support 
the generation of systemic competitiveness by lowering transaction costs through the elimination 
of unnecessary formalities, and shall promote a public cult ure of quality service.  The use 
of computer systems , telematics and other electronic management media to  obtain, validat e and 
exchang e information shall be encouraged;  for this purpose, both Central Government and G/VAL/N/1/ECU/3  
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  decentralized autonomous government s shall establish special programmes to ensure permanent, 
flexible and efficient online services.  
 Article 102.- National value added .- The Ministry respons ible for industrial policy, jointly 
with the governing body for government procurement, shall develop appro priate mechanisms to 
control the national added component in the purchase of goods and services for government 
procurement and investment in projects in strategic sectors.  
TITLE II - Customs f acilitation for trade  
Chapter I - Fundamental rules  
 Article 103.- Scope .- This Title regulates the legal relations between the State and natural 
or legal persons directly or indirectly engaged  in activities related to international goods traffic.  For 
customs purposes, goods mean any tangible movable objects.  
 The rule s in the Tax Code and other su bstantive or procedural legal rules shall apply to any 
aspects not explicit ly covered in this Title.  
 Article 104.- Basic principles .- The following shall be the basic principles of these rules in 
addition to those laid down i n the Constitution of the Republic:  
- Foreign trade facilitation .- Customs procedures shall be rapid, streamlined, expeditious and 
electronic, securing the logistic chain so as  to boost  productivity and national 
competitiveness;  
- customs controls : Specific controls using  risk management techniques shall be applied to all 
foreign trade transactions, ensuring respect for the legal system and fiscal interest;  
- coopera tion and exchange of information .- The exchange of information and integration at 
the nation al and internatio nal levels shall be implemented both with government and private 
entities;  
- good faith .- Good faith shall be assumed in all customs formalities or procedures;  
- publicity.- All general provisions issued by the National Customs Service of Ecuador shall be 
public;  
- application of good international practices .- Best international practices shall be applied in 
order to achieve international service quality standards.  
 Article 105.- Customs territory .- Customs territory is the national territo ry in which the 
provisions of this Code apply and includes the primary and secondary zones.  
 The customs border corresponds to the national border, with the exceptions provided in this 
Code.  
 Article 106.- Customs zones .- For the purpose of exercising the Customs A dministration 's 
functions, customs territory is divided into the following zones, each corresponding to one of the 
customs districts:  
a. Primar y.- composed of the internal area of ports and airports, customs zones and authorized 
premises at land b orders ; as well as other places to be determined by the Customs 
Administration, in which goods from abroad arriving in or leaving  Ecuador are loaded, 
unloaded and moved ; and 
b. secondary .- comprises the remainder of Ecuado r's territory, including territori al waters and 
air space.  
Chapter  II - Customs tax obligations  
 Article 107.- Customs tax obligations .- Customs tax obligations are the personal legal link 
between the State and persons engaged in international goods traffic, under which they are 
subject to  customs authority, to payment of the applicable taxes upon verification of the event 
incurring the obligation, and to compliance with other formal obligations.  G/VAL/N/1/ECU/3  
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   Article 108.- Foreign trade taxes. - The following are foreign trade taxes:  
a. Tariffs ; 
b. taxes based on organic and ordinary laws whose chargeable events are related to the entry 
or exit of goods ; and 
c. fees for customs services.  
 The National Customs Service of Ecuador shall create or cancel fees for customs services, 
shall set their rates and r egulate their payment by means of a resolution.  
 Tariff surcharges and other economic levies applied in connection with trade defence or 
other similar measures may not be considered as taxes in the terms laid down in this Code and are 
not the refore governe d by tax l aw principles.  
Article 109.- Event incurring a customs tax obligation .- The event incurring a customs tax 
obligation is the en try of foreign goods or the exi t of goods from customs territory under the 
control of the competent  customs authority.  
 Without prejudice to the foregoing, no customs tax obligation arises, even if goods are 
subject to customs control, when they move through national customs territory in the course 
of international customs transit covered by the regulations applicable to ea ch case, or if they enter 
customs territory as part of an international goods traffic operation proceeding to foreign territory, 
including the trans -shipment regime.  No customs tax obligation arises either if goods arrive 
unavoidably, even though they rema in subject to customs control, unless the person having the 
right to dispose of the said goods declares his /her intention in the relevant customs declaration to 
bring them into national customs territory.  
 Article 110.- Taxable base .- The taxable base for tariffs is the customs value of the 
imported goods.  The customs value of the goods shall be the value of their transaction plus 
transport and insurance costs, determined according to the provisions governing customs 
valuation.  The cost of insurance shall f orm part of the customs value, but the insurance policy shall 
not constitute a mandatory supporting document required to be attached to the customs 
declaration.  
 If the taxable base for tariffs cannot be determined  using the transaction value of the 
import ed goods, it shall be determined using  the secondary  valuation methods provided in the 
rules governing the customs valu ation of goods.  
 In calculating the taxable base, values expressed in foreign currency shall be converted into 
legal currency at the rate  in effect on the date of submission of the customs declaration.  
 Article 111.- Application of the customs tax obligation .- The following are subject to the tax 
obligation : the obligee and the obligor:  
- The State is the obligee of the customs tax obligati on, through the National Customs  Service 
of Ecuador;  
- the person liable to pay the respective tax as a taxpayer or person responsible is the obligor.  
 A natural or legal person engaged in export or import shall be registered with the National 
Customs Serv ice of Ecuador , in accordance with the provisions adopted by the Director -General for 
this purpose.  
 For imports, the taxpayer is the owner or consignee of the goods and, for exports, it is the 
consignor.  
 Article 112.- Regulations and tax es applicable .- The regulations applicable for the purpose 
of compliance with customs tax obligations are those in effect on the date of acceptance of the 
customs declaration.  The taxes applicable, however, are those in effect on the date of submission 
of the customs decla ration for consumption of the goods upon import , and for exports those in 
effect on the date the goods enter the primary customs zone.  G/VAL/N/1/ECU/3  
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   Article 113.- Customs tax obligation requirement .- The customs tax obligation is payable:  
a. Upon settlement and accordi ng to the equivalent import or export  declaration , as of  the day 
on which payment is authorized;  
b. for the fees, as of the request for the service;  
c. in other cases, as of the working day following notification of the additional settlement, 
adjustment of  taxes or the corresponding administrative decision.  
 Article 114.- Expiry of the tax obligation .- The tax obligation expires upon:  
- Payment ; 
- compensation ; 
- prescription ; 
- acceptance of express withdrawal;  
- declaration of definitive abandonment of th e goods;  
- total loss or destruction of the goods ; and 
- administrative or judicial seizure of the goods.  
 Article 115.- Method of payment .- The m ethod  of payment of customs tax obligations shall 
be determined in the implementing r egulations for this Code.  
 Article 116.- Time-limits for payment .- Foreign trade taxes shall be paid within the 
following time-limits: 
a. For the settlement and equivalent declaration, within two working days following 
authorization of payment;  
b. for fees, on the working day foll owing the day on which the obligation became due ; and 
c. in other cases, within twenty working days of notification of the decision determining the 
customs tax or the corresponding administrative decision.  
 If the taxes are not paid within the time-limits prescribed, interest shall be payable, 
calculated as of the date on which the tax obligation became due.  
 For the import of capital goods, facilities may be granted for the payment of all foreign trade 
taxes, in accordance with the provisions in the Tax Co de. Authorized self-assessment for payment , 
additional payments  made as a result of valuation and adjustment of taxes shall be enforceable 
and shall suffice to seek payment through coercive procedures.  
 All foreign trade taxes and the interest thereon lawf ully generated shal l be included in the 
credit not es to be issued by the National Customs Service as a result of credit for the ben efit of the 
oblige e, in accordance with the provision s in the implementing r egulations for this Code.  
Trade -related economic levies imposed on imports or exports as a result of trade d efence 
measures adopted by the C entral Government may also be refunded.  
 If the National Customs Service refunds amounts paid as foreign trade taxes determined in 
Article 108(b) of this Code, it sh all regularly notify the authority administering the tax for its 
respective tax contro l 
 Article 117.- Payment .- Payment of any sums due to the National Customs Service 
of Ecuador shall be made through the institutions of the National Financial System.  
The Director -General of Customs may enter into special agreements with the aforementioned 
institutions for this purpose.  
 Article 118.- Coercive action .- The National Customs Service of Ecuador shall take coercive 
action to recover any sums owing  to it. The r ules in the Tax Code or the Code of Civil Procedure 
shall apply , depending on the type of obligation to be paid.  In exercising such action, the 
settlement, additional payment , adjustment of taxes or the firm administrative decision imposing 
a sanction, whi chever is applicable, shall be enforceable and shall suffice . 
 Article 119.- Compensa tion.- Either ex officio or at the request of a party, the taxes due by 
the obligee to the National Customs Service of Ecuador shall be reimbursed in full or in part by G/VAL/N/1/ECU/3  
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  means of tax credits recognized by any central tax authority provided that such credits are not 
found to be barred by the statute of limitations.  
 Article 120.- Prescrip tion.- Action by the Customs Administration to collect tax obligations 
shall expire withi n five years as of the date on which the tax became due.  For settlement and 
additional payment  made as a result of valuation , the prescription shall end upon notification of 
the payment order under  the coercive procedure.  For subsequent control, the prescr iption shall 
end upon notification of the adjustment of the taxes or upon notification of initiation of the 
subsequent control proce dure, prior to expiry of the relevant time-limit for prescription.  
 The right to make a claim for  undue payment or over -paym ent shall expire five years as 
of the date on which payment was made;  this prescription shall end upon submission of the 
relevant claim.  
 Prescription in customs matters shall be claimed specifically by the person seeking to benefit 
from it and shall be de clared by the administrative or judicial authority, which may not declare it 
ex officio.  
 Article 121.- Express abandonment .- Express abandonment is the written renunciation 
of ownership of the goods to the benefit of the State by the person legally entitl ed to do so.  
Its acceptance on the part of  the official in charge of the District Directorate of Customs 
extinguishes the customs tax obligation.  
 Express abandonment is not admis sible if there is any well-founded presumption of 
an offence or tacit abandon ment.  
 Perishable goods likely to decompose whose express abandonment has been accepted shall 
be donated to the State secretariat  in charge of social policy.  
 Article 122.- Loss or total destruction of the goods .- The customs tax obligation shall be 
exting uished as a result of the loss or total destruction of the goods prior to their arrival, during 
their temporary storage or storage in industr ial facilities authorized to ope rate normally under the 
temporary admission for inward processing regime, provided that it is fortuitous or a case of forc e 
majeure accepted by the Customs Administration.  
 Without prejudice to the provision in the preceding paragraph, for the purpose of applying 
foreign trade taxes, removal, theft or robbery of the goods within national  territory does not 
constitute a cause of extinction.  
 Article 123.- Administrative confiscation .- Administrative confiscation  means the loss 
of ownership of goods as a result of a declaration by the official in charge of the competent 
District  Directorate  of Customs in the form of a firm o r enforceable decisio n taken in the following 
cases:  
a. Goods abandoned, including in the primary zone, if the owner, consignee or consignor is 
unknown;  
b. goods left behind in Ecuador ; 
c. goods that have been the subject  of theft or robbery in customs areas or on board means 
of transport whose owner, consignee or consignor is unknown after they have been 
recovered ; and 
d. goods whose reloading has been ordered but has not been executed within the period 
allowed for this p urpose, in which case the obligation to pay customs service fees is not 
extinguished.  
 Article 124.- Administrative claims and appeals .- Any person may submit an administrative 
claim against an administrative decision taken by the Director -General or the District Director s 
of the National Customs Service of Ecuador that directly affect s their rights, within a period 
of twenty days as of the date on which the decision  was notified.  G/VAL/N/1/ECU/3  
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   Claims shall be substantiated and decided in accordance with the procedure e stablished in 
the Tax Code within a period of sixty days as of the date on which the complainant submits the 
claim.  
 The District Director of Customs is the competent authority for considering and deciding on 
administrative claim s 
 Complainants may lodge a n appeal for review with the Director -General against decisions 
taken by the District Directors  of Customs , in accordance with the rules in the Tax Code.  
Chapter III - Exemptions  
 Article 125.- Exemptions .- Imports of the following goods for consumption ar e exempt 
from payment of any foreign trade taxes, with the exception of fees for customs services:  
a. Travellers ' personal effects;  
b. household effects and work equipment;  
c. relief shipments for natural or other disasters for the benefit of public sector  bodies or 
private charitable or relief organizations;  
d. goods imported by the State, public sector institutions, firms or organizations, including 
decentralized autonomous governments, companies whose capital is 50 % owned by a public 
institution, the Gua yaquil Charity Board and the Association to Combat Cancer (SOLCA).  
Imports by private -public companies shall be exempt for the percentage corresponding to 
the public sector 's holding ; 
e. donations from abroad to non-profit -making public or private sector i nstitutions intended to 
provide health, food, technical assistance, welfare, medical assistance, educational, scientific 
research or cultural services, provided that they have entered into cooperation agreements 
with public sector  institutions . Donations o f vehicles shall not be exempt from taxes unless 
these are needed for special purposes such as ambulances, clinical or X -ray vehicles, library 
vans, fire engines and similar vehicles , and provided that their function is consistent with the 
activity of the beneficiary institution;  
f. caskets or urns containing human bodies or remains;  
g. samples of no commercial value within the limits and conditions determined by the National 
Customs Service  of Ecuador ; 
h. goods covered by the Law on Diplomatic Immunity, Pr ivileges and Exonerations, including 
diplomatic and consular offices and missions, international organizations and other foreign 
governmental organizations accredited to the Ecuadorian Government;  
i. medical equipment, technical support, special tools, raw  materials for braces and prostheses 
for disabled persons for their own use or that of the  persons legally responsible for their 
care. Vehicles for the same purposes, within the limits determined in the Law on Disabilities.  
j. postal packages, within the l imits determined in the implementing r egulations for this Code 
and in the international laws and agreements to which Ecuador is party;  
k. human biological fluids, tissues and organs for medical procedures to be carried out in 
accordance with the relevant l egislation;  
l. items and articles that are part of the State 's cultural heritage and are imported or 
repatriated by State institutions legally set up for the purpose ; and 
m. waste of goods covered by special regimes and destroyed in accordance with the reg ulations 
of the National Customs Service of Ecuador . 
The exemptions provided in this Article shall be granted by the official in charge of the 
District Directorate  of Customs , with the exception of subparagraphs (a), (b), (c), (d), (f), (g), (j), 
(k) and ( l), for w hich an administrative decision  shall not be required , and they shall b e governed 
by the implementing r egulations for this Code.  
 Article 126.- Reimport ation and return of goods .- Total or partial return abroad of goods 
imported for consumption is  not subject to payment of taxes, except for service fees, in 
accordance w ith the terms laid down in the r egulations.  Reimportation  of goods in the same state 
under the corresponding customs regime provided in this Code is exempt from payment of taxes , 
except for service fees.  G/VAL/N/1/ECU/3  
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   If any taxes have been refunded to the exporter for goods reimported into Ecuador, for 
example , in the case of drawback, it shall first be verified that the full amount has been repaid to 
the National Customs Service, in accordance w ith the procedure and the time-limit laid down in the 
implementing r egulations for this Code.  If necessary, these sums may be recovered by means of 
coercive action.  
 Article 127.- Domain transfer. - Goods imported with full or partial exemption from taxes 
may be the subject of domain transfer subject to authorization by the competent District Director 
of the National Customs Service of Ecuador in the following cases:  
- No taxes are payable after five years have elapsed from the date on which the benefit was 
granted;  
- before five years have elapsed subject to payment of monthly instalments, taking into 
account the remaining time of the five -year period;  
- no taxes are payable if the domain transfer is made for the benefit of organizations, entities 
or persons  that enjoy the same benefit.  
- Domain transfer of goods that are exempt under special legislation shall be subject to the 
time-limit and conditions established in that legislation.  
Chapter  IV - Customs operations  
 Article 128.- Customs operations .- Custom s operations and other related operations shall 
be determined an d governed by the implementing r egulations for this Code and other rules issued 
by the National Customs Service of Ecuador.  
 Article 129.- Crossing the customs border .- Persons, goods or means  of transport may only 
enter or leave national territory through the places, on the days and at the time authorized by the 
Director -General of the National Customs Service  of Ecuador . 
 Any type or mode of transport entering customs territory shall be subje ct to control by the 
National Customs Service  of Ecuador . 
 Article 130.- Arrival of the means of transport .- The competent authority shall receive any 
type or mode of transport in the primary zone of the district where it arrives and shall be 
presented wit h the documentation indicated in the procedures and manuals established by the 
Director -General for this purpose, in the hard copy or electronic format prescribed  by the 
administration.  
 Article 131.- Loading and unloading. - Goods arriving from abroad by a ny means shall be 
expressly described in the cargo manifest.  
 Because of their  quantity, volume or nature, where necessary, the official in charge  of the 
District Directorate of Customs may authorize goods to be unloaded outside the areas usually 
approved for this purpose.  
 Goods for export shall be subject to the authority of the Customs Administration until the 
competent naval, air or land authority authorizes exit of the means of transport.  
 Article 132.- Loading units .- Loading units arriving in Ecuador  in connection with 
international trade transactions shall be subject to th e control and authority of the C ustoms, but 
shall not be considered goods as such.  The entry or exit of such units shall not give rise to customs 
tax obligations.  
 Loading units to be used for other purposes shall be declared under a customs regime and , 
if they are to remain indefinitely in Ecuador, they shall be imported;  the supporting documents and 
formalities to be completed shall be determined by the National Customs Service  of Ecuador . 
 Article 133.- Date of arrival. - For customs purposes, the date of arrival of goods is the date 
on which the means of transport arrives at the first customs check point in Ecuador.  G/VAL/N/1/ECU/3  
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   Article 134.- Temporary storage .- Unloaded goods shall be deliver ed by the carrier to 
temporary warehouses in the cases determined by the National Customs Service of Ecuador or to 
the corresponding port or airport operator.  
 It is the responsibility of the National Customs Service of Ecuador to authorize the operation 
of warehouses for the temporary storage of goods, in accordance with the requirements of foreign 
trade.  
 Article 135.- Liability  during storage of goods .- The following liabilities apply during the 
storage of goods, without prejudice to any civil or crimina l liability that may apply:  
a. Persons authorized to operate warehouses for temporary storage and in -bond warehouses 
shall be  liable for the following : 
1. compensat ion to the owner or consignee of the goods for any da mage caused by 
destruction or los s of their goods;  
2. payment of the taxes due to the State.  These include the taxes that would have been 
applicable to goods that suffered any damage or were stolen in the course of their 
transfer from the port, airport or border of arrival to the warehouse;  
b. the owner, consignee or consignor of the goods is liable for compensation for any damage or 
prejudice caused in warehouses because of the nature or risk of their goods if this 
circumstance has not been declared in the bill of lading or the owners or compan ies 
authorized to operate temporary storage and in -bond warehouses have not been informed 
accordingly.  
 Article 136.- Rights of the owner, consignee or consignor .- Before submitting the 
declaration, subject to authorization by the official in charge of the District Directorate of Cus toms 
and under his /her control, the owner or consignee or his /her agent may inspect their goods in 
order to verify that they correspond to the documentary information received and to ensure their 
proper conservation.  
 Article 137.- Transfer .- Transfer means the customs operation by which goods under the 
control of the National Customs Service  of Ecuador are transferred from one point to another 
within customs territory.  
Chapter  V - Customs declaration s 
 Article 138.- Customs decl aration s.- Customs declarations shall be submitted in accordance 
with the procedures determined by the Director -General.  
 The National Customs Service of Ecuador may authorize direct customs clearance of goods 
in the cases  indicated in the implementing r egulations for this Code, subject to compliance with 
the requirements established therein and in conformity with the provisions issued by the 
Director -General of the National Customs Service  of Ecuador . In such cases, the customs 
declaration may be submitted  after the goods have been release d in the form determined by the 
National Customs Service  of Ecuador . 
 Goods classified as war materials and exclusively imported or exported by the Armed Forces 
and the National Police Force are exempt  from submission of a  customs declaration.  
 The National Customs Service of Ecuador may establish, regulate and withdraw simplified 
customs declarations when the trade situation so requires, lessening or modifying the formalities 
in order to streamline them.  
 Article 139.- Clearance and clearance methods .- Clearance is the administrative procedure 
to which goods entering or leaving Ecuador shall be subject, the procedure commencing with the 
submission of the DAU and ending with release of the goods.  
 The methods and formalities  for clearance shall be determined in the im plementing 
regulations for this Code.  G/VAL/N/1/ECU/3  
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   The National Customs Service  of Ecuador 's risk profiles system shall determine the clearance 
method applicable to each declaration in accordance with the provisions issued b y the Director -
General for its application, based on international standards.  
 The declaration and clearance of goods transported under the special express courier regime 
shall be governed by the regulations determined by the National Customs Service  of Ecuador  for 
this purpose . 
 Article 140.- Valuation .- Valuation  is the act by which the Customs Administration 
determine s the tax and involves electronic checking, physical or documentary inspection regarding 
the origin, nature, quantity, value , weight and ta riff classification of the goods.  
 Article 141.- Tariff classification issues .- Any person may consult the Director -General of 
the National Customs Service of Ecuador with regard to the tariff classification of the goods, 
fulfilling the requirement s indica ted in the Ta x Code and in the implementing r egulations for this 
Code.  The Director -General 's decision with respect to the issue shall be binding on the 
administration and on the petitioner and shall be published in the Official Journal.  
 Article  142.- Tacit abandonment .- Tacit abandonment shall automatically apply in any of 
the following cases:  
- Failure to submit or forward the customs declaration within the period prescribed  in the 
implementing r egulations for this Code;  
- failure to pay the foreign trad e taxes within twenty days of the due date, unless payment 
facilities have been granted ; and 
- the time-limit for storage in an in -bond warehouse has expired.  
 If one of these case s applies, the oblig ee or his /her custom s broker  may remedy the 
shortcomings  within twenty -five working days, in which case the tacit abandonment shall 
no longer apply and no  administrative decision  is needed,  with a fine being imposed on the oblig ee 
for a breach of the regulations.  
 Article  143.- Definitive abandonment .- The offi cial in charge of the District Director 
of Customs shall declare the definitive abandonment of goods in any of the following cases:  
- The causes of tacit abandonment have not been remedied  within the twenty -five working 
days indicated in the preceding Arti cle; 
- the declara nt or his /her representative have not been present  on the second date set by the 
Customs A dministration for the physical inspection ; and 
- the personal effects of travellers or taxable goods held in the international arrivals hal l have 
not been collected within five days after arrival in Ecuador.  
 In the declaration of definitive abandonment, the official in charge of the District Directorate 
of Customs shall make provision for the holding of a public auction, the award or destruction of t he 
goods, in accordance with the rules determined in the implem enting r egulations for this Code and 
other administrative provisions taken for this purpose.  
Chapter VI - Customs control  
 Article 144.- Customs control .- Customs control s shall apply to the en try, the stay, 
transfer, movement, storage or exit of goods, loading units and means of transport up to and from 
national territory, including goods which enter or leave  ZEDEs for any reason.  
 Customs control shall also apply to persons engaged in foreign trade transactions and those 
entering and leaving customs territory.  
 Customs control shall be exercised at the following stages in accordance with international 
regulations : post-entry control, concurrent and post-clearance  control.  
 For these purposes, the National Customs Service of Ecuador may request information from 
other government sector institutions and government -owned  enterprises concerning persons G/VAL/N/1/ECU/3  
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  involved in international goods traffic.  No reservations or plea of secrecy may be made regarding 
information requested by the National Customs Service  of Ecuador . 
 When requested by one of the two institutions, post-entry  control may be undertaken 
through  coordinated action by the National Customs Service of Ecuador and the Internal Revenue 
Service.  
 If concurrent control reveals errors in a customs declaration already accepted that benefit 
the obligor, additional settlement shall be made.  Additional settlement may be made up until the 
taxes are paid, otherwise post-clearance  control shall apply.  In the  same circumstances and 
provided that there is no well-founded  presumption of an offence, corrections may be made to the 
customs declaration and the supporting documents, except in those cases determined by the 
relevant customs regulations.  
 Whenever corre ctions are made to a customs declaration, the National Customs Service of 
Ecuador shall keep a re cord of the information originally forwarded or submitted, all the changes 
made and the government officials involved in the procedure.  
 Article  145.- Post-clearance  control .- Within five years of the date of payment of foreign 
trade taxes, the National Customs Service of Ecuador may make  customs declarations subject to 
checking, together with any information in the possession of any natural or legal person conn ected 
with the imported goods.  Risk management methods shall be used to determine the customs 
declarations to be subject to post-clearance  control.  
 If it is found that the declaration contains errors that benefit the obligor, the necessary 
corrections shall be made without prejudice to any other lawful action required, definitive 
adjustment  of the taxes shall be enforceable and suffice for taking coercive action.  
 The obligee may submit a substitute declaration with a view to correcting the errors made in 
good faith in the customs declaration if higher amounts are involved or even if the amount payable 
does not change, within five years as of the acceptance of the declaration, provided that the 
administration has not issued a tax adjustment for the same rea son and the post-clearance control 
procedure has not been formally initiated.  The substitute declaration shall be endorsed and 
accepted in the same way as the customs declaration.  
 If deemed necessary, the National Customs Service of Ecuador may conduct an  audit 
of special regimes within five years as of the date of the customs declaration and may undertake 
any verifications, either of documents or accounts or physical inspection.  
 The National Customs Service of Ecuador may also, through its operational un its, investigate 
any claims of customs violations and carry out the checks it deems necessary with in customs 
territory  and within its scope  in order to ensure compliance with this Code and its implementing 
regulations, adopting the precautionary measures a nd supervisory action required.  
 The operation al unit of the National Customs Service of Ecuador respons ible for 
post-clearance  control may seize goods and i tems that may constitute proof or evidence that 
a customs violation has been committed and immediat ely make them available to the official in 
charge of the competent District Director ate of Customs.  
 Article 146.- Risk profiling .- Risk profiling consists of a predetermined combination of risk 
indicators based on information that has been collected, anal ysed and prioritized.  
Note: Includes an Erratum published in Official Journal No. 374 of 31  January 2 011. 
Chapter VII - Customs regimes  
Section I - Import regimes  
 Article 147.- Import  for consumption .- The customs regime under which goods imported 
from ab road or from a ZEDE may move freely within customs territory with the objective 
of remaining there definitively, after payment of import duties and taxes, surcharges and 
penalties, where applicable, and compliance with customs formalities and requirements.  G/VAL/N/1/ECU/3  
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   Article 148.- Temporary admission for re -export in the same state .- The customs regime 
that allows certain imported goods to enter customs territory in order be used for a specific 
purpose, with total or partial suspension of payment of import duties , taxes and surcharges, and 
then re -exported within a specified time-limit without undergoing any modification, except normal 
depreciation caused by wear and tear, as provided in the regulations.  
 Article. 149. - Temporary admission for inward processing  - The customs regime that allow s 
goods intended for export  after having been processed to enter Ecuadorian customs territory with 
suspension of payment of the import duties , taxes and surcharges applicable, in the form 
of compensating products.  
 Industrial facil ities which normally operate under this regime covered by a general 
guarantee may receive authorization if they meet the requirements provided in the implementing 
regulations for this Code.  
 Compensating products obtained by applying this regime may be the  subject of a change in 
regime to the import for consumption regime, paying taxes on the imported component of the said 
compensating product.  
 Article 150.- Replacement of goods duty free .- The customs regime that allows goods that 
are identical or similar  to those in free circulation because of their type, quality and technical 
characteristics and which have been used to obtain the goods previously definitively exported , 
to be imported free of import duties , taxes and surcharges, except for the fees applic able. 
 Article 151.- In-bond processing, - The customs regime that allows goods to enter customs 
territory, with suspension of payment of import duties and taxes and surcharges applicable, for the 
purpose of undergoing operations that modify their type or s tate with a view to subsequent import 
for consumption of the resulting products, applying  the import duties , taxes and surcharges due 
according to the tariff category of the finished product.  
 Article 152.- Customs warehouse .- The customs regime under whic h imported goods are 
stored for a specified period under the control of the customs in a place approved and recognized 
for this purpose, without payment of the duties, taxes and surcharges applicable.  
 Article 153.- Reimport  in the same state .- The customs  regime that allows goods exported 
to be imported for consumption with exemption from import duties, taxes and the surcharges 
applicable, provided that they have not undergone any transformation, processing or repair abroad 
and that all amounts due for ref unds or drawback , conditional exemption from duties and taxes or 
any other subsidies or amounts granted at the time of export, have been paid.  
Section II - Export regimes  
 Article 154.- Definitive export .- The customs regime that allow s the definitive exit  of goods 
in free circulation outside Community customs territory or a ZEDE situated within Ecuadorian 
customs territory, subject to the provisions of this Code and the other regulations applicable.  
 Article 155.- Temporary export for re -import in the same  state.-The customs regime that 
allows the temporary exit of goods in free circulation from customs territory for a specified purpose 
and period during which they are re-imported without having undergo ne any change, except for 
normal deterioration caused b y wear and tear.  
 Article 156.- Temporary export for outward processing .- The customs regime under which 
goods in free circulation in the customs territory may be exported temporarily outside the customs 
territory or a ZEDE situated therein for the purpose  of transformation, processing or repair and 
then re -imported as compensating products with exemption f rom the corresponding taxes 
according to the provisions in the implementing r egulations for this Code.  
Section III - Other customs regimes  
 Article 157.- Conditional drawback .- The regime under which foreign trade taxes paid on 
imports of goods that are exported within the time-limits and in the percentages indicated in the G/VAL/N/1/ECU/3  
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  implementing regulations for this Code are automatically refunded , in full or in pa rt, in the 
following cases:  
- Goods  used in processing in the country;  
- goods  incorporated into other goods ; and 
- packages and containers.  
 The National Customs Service of Ecuador shall be wholly respons ible for the conditional 
drawback procedure.  Conseq uently, the customs authority shall refund all th e corresponding 
foreign trade t axes and subsequently cross -reference these amounts with the other authorities 
entitled to the taxes refunded, which shall belong to the interconnected foreign trade electronic  
single window system . 
 The National Customs Service of Ecuador, through its electronic system, shall make the 
corresponding refund, without prejudice to the taxpayer 's right to lodge an administrative 
complain t against the action taken if it considers it has been affected thereby.  
 Article 158.- Duty-free stores .- The duty-relief regime that allows Ecuadorian or foreign 
goods to be stored and sold to travellers leaving Ecuador or entering from abroad at international 
ports or airports, without payment of f oreign trade taxes.  
 Article 159.- Special warehouses. - In accordance with the relevant international 
regulations , special warehouses may be authorized for the purpose of supplying, repairing and 
maintaining ships, aircraft and loading units intended for t he supply of public passenger and 
freight transport services, and spare parts for their repair, preparation or adaptation may also 
enter free of foreign trade taxes.  
 The Director -General shall be responsible for determining streamlined formalities for 
implementing this provision.  
 Article 160.- International fairs .- The special customs regime which authorizes the entry of 
permitted imports with suspension of payment of taxes for a specified period to be used in 
exhibitions on previously authorized  sites, and goods imported for consumption for the purposes 
of tasting, promotion or decoration, without payment of foreign trade taxes, subject to compliance 
with the requirements and formalities indicated in the regulations.  
 Article 161.- Customs transit .- The c ustoms regime under which goods are transported 
abroad from a district office  under customs control . 
 Article 162.- Return shipment .- The customs regime under which goods declared being  
stored in a temporary deposit while awaiting attribution of a regime o r customs destination may be 
shipped back from customs territory.  
 Even when goods have been declared under a customs regime, they shall be shipped back 
if the customs control determines  a change in tariff classification that requires prior control 
documen ts or others that were not required for the declaration originally made by the importer , 
and this prevents the legal import ation of the goods.  
 Return shipment shall not be authorized when there is a well-founded  presumption of 
an offence in relation to th e goods.  
 Return shipment shall be mandatory for goods whose import is banned, except clothing, 
perishable goods and education al material s, which shall be donated to the State Secretariat 
responsible for social policies.  This regime shall be applied by mea ns of streamlined procedure s in 
accordance with the implementing r egulations for this Code.  
 Article 163.- Trans -shipment .- The customs regime under which goods are transferred 
from the means of transport utilized for their arrival in customs territory and loaded on to the 
means used for leaving customs territory, the transfer taking place under customs control.  
This regime shall be implemented by means of streamlined procedure s in accordance with the 
implementing r egulations for this Code.  G/VAL/N/1/ECU/3  
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  Section IV - Exemption regimes  
 Article 164.- Postal traffic .- Postal dispatches or pack ages imported or exported for 
consumption whose customs value does not exceed the limits set in the regulations shall be 
cleared using streamlined formalities that comply with the rele vant international agreement s, 
according to the procedures determined by the National Customs Service.  Dispatches or packages 
which exceed the limits set shall be subject to general customs rules.  
 Article 165.- Express or courier services. - Correspondence , documents and goods that 
meet the requirements in the regulations issued by the Director -General of the National Customs 
Service and which do not exceed the limits set therein, carried by so -called express services, shall 
be cleared by customs using stre amlined formalities according to the regulations  determined by 
the National Customs Service.  Dispatches or packages which exceed the limits set shall be subject 
to general customs rules  
 Article 166.- Border traffic .- In accordance with international treat ies and agreements, 
the exchange of goods intended for domestic use or consumption by the population along the 
border shall be exempt from formalities and payment of foreign trade taxes, within the 
geographical limits determined by the National Customs Ser vice. 
 Article 167.- Tourism vehicles for private use .- The regime under which the entry of 
a tourism vehicle for private use is permitted without payment of taxes within the time-limits and 
under the conditions determined in the implementing r egulations f or this Code.  
 Article 168.- Other exemption regimes .- Travellers ' luggage, household effects and 
supplies for ships and aircraft shall be subject to streamlined procedures in ac cordance with the 
implementing r egulations for this Code and the relevant r egulations  issued by the National 
Secretar y of the National Customs Service.  
Section V - Common rules  
 Article 169.- Change of regime .- Goods declared under a regime that suspends or exempts 
them from foreign trade taxes may be declared under any other regime  before expiry of the 
time-limit allowed.  Subject to compliance with the legal and regulatory requirements, a change 
of regime shall be authorized by the competent public official.  Change to any other regime is not 
allowed for goods declared for consumptio n. 
 Article 170.- Payment of taxes .- For changes to the import for consumption regime, foreign 
trade taxes shall be paid on the customs value of the good s, applying the rates and the exchange 
rate in effect on the date of acceptance of the declaration for consumption.  
 Article 171.- Payment of service fees .- None of the special regimes exempts  from, 
compensates or suspends payment of service fees and does not permit their refund.  
 Article 172.- Transfer  to third parties .- Goods subject to the temporary admi ssion for 
inward processing regime may be the subject of a domain transfer in favour of third parties, 
subject  to prior authorization by the Customs A dministration, in accordance with the implementing 
regulations for this Code and the provisions adopted f or this purpose by the Customs 
Administration.  The transfer of this type of goods to third parties for the purpose of export shall 
also be governed by the same procedure.  
Chapter  VIII - Customs guarantees  
 Article 173.- Right of pledge .- The National Custom s Service of Ecuador has a special and 
preferential right of pledge over goods subje ct to customs authority in order to ensure compliance 
with customs tax obligations.  This right takes precedence over any other legally or conventionally 
established right.  
 Article 174.- Types of guarantee .- Customs guarantees are general or specific and shall be 
granted, approved and applied in the form, within the time-limits and for the amounts determined 
in the implementing r egulations for this Code.  G/VAL/N/1/ECU/3  
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   General guarantees secure all activities by a person engaged in international goods traffic or 
in carrying out customs operations.  
 Specific guarantees secure a particular customs or foreign trade operation . 
 Customs guarantees shall be irrevocable, applied in full or part, uncondition al and payable 
immediately , and shall constitute sufficient assurance for their immediate application solely upon 
presentation for payment, in accordance with the provisions in the law.  
TITLE III - Penalties for customs violations  
Chapter  I - General rules  
 Article 175.- Customs violations .- Offences, minor offences and breaches of regulations 
determined in this Code shall constitute customs violations . 
 The existence of fraud is required in order to determine that an offence  has been committed , 
whereas failure to comply with a rule suffices for punishment of minor offences or breaches of 
regulations.  
 If goods not fit for human consumption are imported or exported, the District Director 
of Customs shall order their immediate destruction, informin g the Director of the National Customs 
Service  of Ecuador  accordingly, the cost to be met by the owner, consignee or declarant.  
 Article 176.- Preventive measures .- If it is presumed that a customs offence may have 
been committed, the National Customs Serv ice of Ecuador may take preventive and temporary 
measures for the provisional arrestment or retention of the goods in order to ensure compliance 
with customs formalities and obligations . For this purpose, the National Customs Service 
of Ecuador shall have the same powers  as the National Police Force in respect of objects and 
instruments  relating to  the offence as regards the chain of custody . 
 Arrestment is the act by which the official in charge of the District Directorate of Customs 
decides that the goods  should remain in the primary zone or other specific place, under the 
custody and responsibility of the legal representative of the temporary warehouse o r the person 
designated by the customs authority, respectively, and may decide that they should be insp ected. 
Arrestment may not last more t han three working days, after which the respective procedure shall 
continue.  
 Provision al retention  of the goods consists of taking compulsory possession of the goods in 
the secondary zone and transfer ring them  to an in-bond warehouse or other place designated by 
the customs authority for this purpose while the legal situation of the goods is determined.  
The goods may not be retained  for more t han three working days, after which the respective 
procedure shall continue.  
 At any time, and provided that there is no risk to the shipment or any well-founded  
presumption of the carrier 's involvement in the violation being investigated, the official in charge 
of the District Directorate of Customs may decide that the goods should  be taken out of the 
loading units containing them so that the  latter  may be returned to the carrier or their owner.  
 The Director -General shall regulate the procedure for applying these measures.  
Chapter  II - Customs offences  
 Article 177.- Smuggling .- Any person who, in order to evade customs control and 
monitoring of goods of a value exceed ing ten unified basic wages for workers in general , carries 
out any of the following acts shall be liable to a term of imprisonment of two to five years, a fine 
of up to three times the customs value of the goods that are the subject of the offence and 
definitive seizure of the goods:  
a. Unlawfully  takes goods out of or into customs territory;  G/VAL/N/1/ECU/3  
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  b. moves foreign goods within the secondary zone without a document prov ing their legal 
ownership, provided that the lawful origin of the goods cannot be proved within 72  hours 
after discovery of the fact, unless there is evidence to the contrary;  
c. loads or unloads undeclared goods from a means of transport without any authorizat ion, 
provided that this is done in the absence of control by the competent authorities;  
d. brings goods from a ZEDE or subject to a special regime into national customs territory 
without comply ing with the requirements laid down in this Code and its implem enting 
regulations;  
e. disembarks or unloads foreign goods , moves them by land, sea or any other means 
of transport  before undergoing customs control, unless their arrival is fortuitous ; or 
f. hides foreign goods on ships, aircraft, transport vehicles or l oading units in any way wit hout 
undergoing control by the customs authorities.  
 Article 178.- Customs fraud .- Any person who imped es the Customs A dministration in 
collecting taxes on goods whose quantity exceeds one  hundred  and fifty unified basic wages for 
workers in general by carrying out any of the following acts shall be punishable by a term of 
imprisonment of two to five years and a fine of up to ten times the amount of the taxes it is 
sought to evade, provided that the goods are subject to foreign tr ade taxes : 
a. Imports o r exports goods with false or adulterated documents in order to alter their value, 
quality, quantity, weight, type, age, origin or other features such as trademarks, codes, 
series, models;  in such cases the initiation of criminal pro ceedings shall not depend on 
preliminary questions to be decided upon by civil courts;  
b. simulates a foreign trade transaction in order to obtain an incentive or economic benefit in 
full or in part, or any other type of benefit;  
c. fails to declare the  exact quantity  of the goods;  
d. hides goods subject to declaration amo ng other declared goods;  
e. improperly obtains exemption or reduction of foreign trade taxes for goods which, according 
to the law, do not comply with the requirements for such benefits;  
f. sells, transfer s or improperly uses goods imported under special regimes, or with total or 
partial exemption, without  proper  authorization ; or 
g. damages or removes seals, padlocks or other security devices  placed on the means 
of transport, loading units , sites or premises authorized as temporary deposit s, provided 
that all or some of the goods are declared missing.  
 Article 179.- Attempted offences .- The mere fact of attempt ing to commit a customs 
offence shall be punish able by one half of the penalty fi xed, provided that it is in the process of 
being carried out.  
 Article  180.- Administrati ve penalties and repeated offences .- If the value of the goods 
does not exceed the amounts defined for the offence of smuggling or fraud, the violation shall not 
const itute an offence and shall be subject to an administrative penalty as a minor offence , with the 
maximum fine provided in this Code  for an offence.  
 Notwithstanding the above, any person who has received an administrative penalty more 
than once over a two -year period and the total amount of the goods concerned exceeds half of the 
amount specified as constituting the offence of smuggling or fraud provided in Articles  177 and 
178 of this Code shall be subject to an investigation and proceedings for the corresp onding 
offence.  . 
 Article 181.- Responsi bility of administrators, directors and representatives .- Persons 
acting as administrators, directors or representatives of a legal person who commit customs fraud 
are personally respons ible, as perpetrator  of the f raud, even if the customs fraud is for the benefit 
of the legal person they represent.  
 Persons who exe rcise control over a legal person and provide their services as employees or 
workers shall be respons ible as perpetrators  if they unlawfully  commit custo ms fraud for the 
benefit of the legal person, even if they have acted with out a mandate.  
 If the customs fraud committed is directly related to the functioning and control of legal 
persons, the competent Criminal Guarantees Tribunal may at any time take a decision and G/VAL/N/1/ECU/3  
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  automatically dissolve the legal person, for which purpose it shall forward to the Supervisory 
Authority for Companies a certified copy of all the proceedings showing the sentence pronounced 
so that the order may be carried out.  
 Article 182.- Concealment from the customs .- The acquisition of foreign goods against 
payment or free -of-charge or as a pledge, their possession or storage in order to conceal or sell 
them or for any other purpose without proof that they have been legally imported into  or acquired 
in Ecuador within 72  hours following the competent customs a uthority 's request shall be 
punishable by a fine of two times the customs value of the goods.  
 Article 183.- Ancillary measures .- If a customs offence has been committed, without 
prejudice to payment of the taxes, duties and levies and application of the penalties provided, 
the judge shall order the confiscation  of the goods that are the subject of the offence and the 
objects used to commit it, including the means of transport, provide d that they are the property 
of the perpetrator  of the violation or his /her accomplice.  If the means of transport is not owned by 
the perpetrator  or accomplice, prior to its return, a fine corresponding to 20 % of the customs 
value of the goods shall be imp osed on its owner.  
 Article 184.- Aggravated offence .- If one or more of the following situations apply when 
any offence specified in this Code  has been detected , it shall be punishable by the ma ximum term 
of imprisonment provided in the preceding Articles , and the ma ximum fine applicable to the 
offence of customs fraud, as well as the other penalties provided for the offence in question:  
a. If a government official or civil servant is involved in the offence and abuses his /her position 
in the course of exe rcising his /her functions;  
b. if a sworn customs agent or authorized economic operator is involved in the offence and 
abuses his /her position in the course of exercising his /her functions;  
c. if discovery of the offence is prevented, rendered difficult or seizure, provisional retention , 
arrestment or confiscation of the goods that are the subject of the offence is obstructed by 
using violence, intimidation or force;  
d. if non -existent natural or legal persons appear as the recipients or suppliers or false 
domiciles are declared on the documents and procedures referring to the customs regimes;  
e. if persons who are minors or have no legal responsibility are used:  
f. if the taxes generated on the goods exceed three  hundred  (300) times the unified basic 
wage; or 
g. if the goods that are the subject of the offence have been counterfeited  or given a place 
of manufacture other than the real one in order to benefit from tariff preferences o r benefits 
in respect of origin.  
In the case of subparagraph (a), the penalty  shall include a permanent ban on exercising 
public office ; and in the case of subparagraph (b), it shall also be punishable by definitive 
annulment of the licence or authorization and a ban on acting as a customs broker or becoming 
an authorized economic operator again, either in person or through another natural or legal 
person.  
 Article 185.- Proceedings .- Criminal proceedings against customs offences are public and 
shall take place in accordance with the provisions of the Code of Criminal Procedure . For customs 
offences, the National Customs Service of Ecuador shall have the rights and powers given to 
private prosecutors by the Code of Criminal Procedure, which shall be exercise d through the 
competent official in the jurisdiction concerned, who shall par ticipate in the criminal proceedings 
both at the intermediate stage and when a sentence is pronounced . 
 Article 186.- Substantive precautionary measures .- Following initiation of the investigation 
stage, the criminal court judge may order substantive preca utionary measures against the 
property assets of the accused and of the legal person who allegedly benefited from the customs 
offence.  
 Article 187.- Ban on returning the goods investigated .- At no stage of the preliminary or 
criminal proceedings may retur n of the goods that are the subject of the offence or of the 
instruments used to commit it be ordered, including the means of transport, unless there is a le gal G/VAL/N/1/ECU/3  
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  decisio n ending the investigation or the criminal proceedings, with the sole exception provided  in 
the Article concerning ancillary measures in this Chapter.  
 For customs offences, as of the investigation stage, any public sector body, including the 
National Customs Service of Ecuador itself, may request the judge or court hear ing the case  to 
award it the goods indicated in the preceding paragraph where this is necessary for compliance 
with its institutional purposes.  The value of the goods shall be that declared or , where this rule 
does not apply to the goods, it shall be determined by the National Customs Service  of Ecuador . 
 Before signing the document awarding the goods, the requesting entity or, where applicable, 
the Ministry of Finance, shall certify that the value of the goods is  recorded in the corresponding 
budget of the institution receiving  them, and the  respective budget line shall be maintained 
throughout the duration of the criminal proceedings.  
 If an enforceabl e decisio n determines that no customs offence has been committed by the 
accused, the court shall order the transfer of the corre sponding proceeds to the owners  of the 
good sold off , if not, the court shall obligatorily notify the public body concerned so that it may 
remove the corresponding budget line.  
 Furthermore, the accused may request the judge hearing the case to auction off  the 
movable goods and fiduciary documents that are the subject of the substantive precautionary 
measure.  The procedure set out in this Article shall be followed for their valuation.  The sums 
generated by the auction shall be disposed of by the judicial au thority.  
 Article 188.- Support and collaboration of the Police and Armed Forces .- The Armed Forces 
and the National Police Force s hall assign permanently to the Customs A dministration and its 
authorit ies, as required, the personnel needed for control to p revent the offences defined  in this 
Code, who shall provide their services within the National Customs Service  of Ecuador , in 
accordance with the provision s in the implementing r egulations for this Title.  
 Article 189.- Duty of non -interference in the indi vidual competence of the National 
Customs Service  of Ecuador .- Judiciary bodies shall not intervene in the individual competence for 
customs clearance of goods that have been the subject of a criminal investigation, which is the 
task of the National Custom s Service of Ecuador pursuant to this Code.  
Chapter  III - Minor offences  
Art. 190. - Minor offences. - The following are minor customs offences:  
a. Allowing persons to enter primary customs zones without complying with the provisions in 
the regulations appro ved by the Director -General;  
b. late electronic forwarding of all or part of the cargo manifest by the carrier actually providing 
the means of transport;  
c. delivery of the goods to be unloaded beyond th e time-limit determined by the Customs 
Administration ; 
d. handing over information deemed confidential by the respective authorities on the p art 
of public officials in the Customs A dministration, without prejudice to other administrative 
sanctions applicable;  
e. failure by the carrier to forward  the list of passengers to the Customs A dministration before 
the arrival o r departure of the means of transport;  
f. failure by the c arrier to deliver to the Customs A dministration goods  shown  on the cargo 
manifest, unless t his has been authorized by the Customs A dminis tration, in which case the 
goods shall be handed over in the actual district of arrival, with the carrier being subject to 
the penalty applicable if it fails to deliver;  
g. preventing or impeding customs controls, either through action intended to hinder t he 
activities of the National Customs Service of Ecuador or by refusing to collaborate in 
investigations;  
h. failure by the owner, consignee, consignor or carrier to comply with the time-limits for 
trans-shipment or reloading;  G/VAL/N/1/ECU/3  
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  i. failure by the owner, cons ignee or consignor to present accompanying documents together 
with the customs declaration if this is required for the type of clearance attributed to the 
declaration, unless the documents can be backed up by s urety; 
j. failure by the owner, consignee or c onsignor to comply with the time-limits for special 
regimes;  
k. under - or over -valuation of goods established during subsequent controls.  The existence 
of undeclared goods discovered in the course of valuation , provided that this is not 
punishable in accor dance with preceding Articles;  
l. allowing the entry of goods into temporary warehouses without the documents in support 
of their storage ; or 
m. failure of those responsible for temporary warehouses to provide the inventory 
of warehouses when so requested by the National Customs Service of Ecuador.  
 Article 191.- Penalties applicable .- Without prejudice to payment of taxes, minor offences 
shall be punishable as follows:  
a. For subparagraph (a) in the  Article above, by a fine equivalent to one  (1) unified ba sic 
wage;  
b. for subparagraphs (b), (c), (d) and (e) in the Article above, by a fine equivalent to 
five (5) unified basic wages;  
c. for subparagraphs (f), (g), (h), (l) and (m) in the Article above, by a fine equivalent to 
ten (10) unified basic wages.  In the case of subparagraph  (g), if the offence has been 
committed by a customs agent auxiliary, it shall be punishable by annulment of his /her 
accreditation  in addition to the fine;  
d. for subparagraph  (i) in the  Article above, by a  fine equivalent to ten  percent (10%) of the 
customs value of the goods;  
e. for subparagraph  (j) in the  Article above, by a  fine equivalent to one  (1) unified basic wage 
for each day of delay ; and 
f. for subparagraph  (k) in the  Article above, by a fine equivalent to three  hundred  percent  
(300%) of the customs value of the undeclared goods o r the difference between the value 
declared and the customs value of the goods, as applicable.  
 Article 192.- Penalty for failure to provide information .- Any person who does not provide 
the infor mation requested by the National Customs Service of Ecuador shall be punish able by the 
official in charge of the Dis trict Directorates by closure of the establishment in which he conducts 
his/her economic activities and this penalty shall be lifted when th e information requested is 
forwarded.  
 If a person punished in accordance with the preceding paragraph fails to forward the 
information requested within 30 days, the National Customs Service of Ecuador shall request the 
criminal court judge urgently to order that the information requested by the National Customs 
Service  of Ecuador  be furnished within 48  hours ; the judge shall order the submissio n of the 
information together with the po lice officer and a copy of all the information shall be forwarded to 
the Prosec utor's Office so that the investigations required may be initiated.  
Chapter  IV - Breaches of regulations  
 Article 193.- Breaches of regulations. - The following constitute breaches of regulations:  
a. Mistakes by the carrier in the electronic transmiss ion of data on the manifest that cannot be 
rectified in ac cordance with the implementing r egulations for this Code;  
b. late forwarding of the cargo manifest by the international shipping agent, freight 
consolidator or deconsolidator, unless this is due to late forwar ding by the actual carrier;  
c. mistakes by the customs broker, the import er or exporter, as applicable, in the electronic 
transmission of data in the customs declaration that cannot be rectified in ac cordance with 
the implementing r egulations fo r this Code ; or 
d. failure to comply with the provisions  laid down in the implementing r egulations for this Title 
or the regulations issued by the Director of the National Customs Service of Ecuador and 
previously published in the Official Journal, provide d that this does not constitute a more 
serious violation . G/VAL/N/1/ECU/3  
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   Failure to comply with or non -observance of any  clause in the contract for which the penalty 
is not set out in the respective contract.  
 Article 194.- Penalties for breaches of regulations .- Breach es of regulations shall be 
punishable by a fine equ al to fifty percent of the unified basic wage.  With the exception 
of subparagraph  (c) in the  Article above, if the customs value of the export, re -export o r import 
declaration  is less than ten unified basi c wages, the penal ty shall be ten percent  of the unified 
basic wage.  
 Article 195.- Proce dure and penalties .- The National Customs Service  of Ecuador , prior to 
the procedure to be established in the regulations, shall punish minor offences and breaches 
of regulations.  It may notify any decisions taken in connection with such procedures through its 
computer system.  
Chapter  V - Administrative sanctions applicable to foreign trade operators  
 Article 196.- Functions .- The Director -General shall have competence for determining 
administrative responsibility and for punishing foreign trade operators, customs brokers and 
authorized economic operators through suspension or annulment of the relevant concession, 
authorization or permit, according to the provisions in t his Law  
 Article 197.- Proced ure.- If the Director -General has knowledge of a violation, he shall 
initiate an administrative procedure in accordance with the provisions in the rules regulating the 
Executive 's administrative legal regime.  
 Article 198.- Suspension sanction s.- The following shall be punishable by suspensio n of up 
to 60 days:  
1. Temporary warehouses if:  
a. Unauthorized a reas are used to store goods subject to customs authority;  
b. the owner or consignee has not been compensated for an amount equa l to the loss o r 
damage of the goods;  
c. the physical and electronic inventories of the goods  are not updated ; 
d. goods under their custody are delivered or disposed of without following the procedure laid 
down by the National Customs Service  of Ecuador ; or 
e. the customs authority is not notified of abandoned goods.  
 Following the suspension, the authorized firm may no  longer  enter goods using this means, 
although goods already entered may be cleared for import . 
2. Customs warehouses and facilities normally a uthorized to operate under the temporary 
import for inward processing regimes  if: 
a. Goods subject to customs authority are stored in areas not authorized as customs 
warehouses;  
b. unauthorized  or prohibited  goods or goods whose ownership is not proven are stored in their 
area authorized as a customs deposit;  
c. the use of goods for storage, transformation, processing  or repair is not substantiated ; 
d. the owner or consignee has not been compensated for the amount equal to the loss or 
damage of the goods ; or 
e. the goods under their custody are delivered or disposed of without authorization from the 
National Customs Service  of Ecuador . 
3. Duty-free stores if:  
a. Goods  covered by the special regime are sold for the benefit  of persons other than 
passengers enteri ng or leaving Ecuador or those in transit ; or 
b. the physical and electronic inventories of goods stored  are not updated . 
4. Express or courier services if:  G/VAL/N/1/ECU/3  
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  a. Consignments are split three ways; 
b. they have been punished for breach of the regulations owing t o non-compliance or non -
observance of any regulation, procedural manual, work instructions or customs 
administrative provisions that are obligatory but not classifi ed as offences or minor offences 
in connection with more than 10 percent  of the number of de clarat ions submitted during one 
month;  
c. they fail to keep the registers, documents and background information on customs clearance 
used as a basis for preparing the customs declarations submitted to the National Customs 
Service of Ecuador for the prescri bed period;  
d. they are not liable  to the owner for the damage or loss of his /her goods while they are in the 
care of the authorized firm ; or 
e. the physical and electronic inventories of the goods  are not updated . 
 Following the suspension, the authorized  firm may no  longer  import or export goods using 
this means , although goods already loaded for transport to Ecuador prior to notification of the 
suspension and those goods already loaded for transport abroad prior to the notification of the 
suspension  may be regularized.  
 In any event, after the sanction has expired, the foreign trade operator shall be authorized 
without any further procedure.  
 Article 199.- Annulment sanctions .- A concession , authorization or permit for temporary 
warehouses, in-bond wareho uses, facilities auth orized to ope rate normally under the temporary 
import for inward processing regime, express and courier services and duty -free stores shall be 
annulled, if:  
- They fail to comply or no longer comply with the requirements and criteria d etermined for 
their operation;  
- the authorized areas and sites  are used for purposes or functions other than those 
authorized;  
- the temporary warehouse h as been used by those in charge to commit a customs offence, 
launder money or for drugs trafficking, and an enforceable sentence has been pronounced;  
- the activities authorized have not been conducted for a consecutive period of  six months;  
- suspension has been pronounced more than two (2) times during the same financial year ; 
and 
- they fail to comply with the suspension sanction imposed by the National Customs Service 
of Ecuador.  
Chapter  VI - Prescription  
 Article 200.- Statute of limitations for criminal proceedings .- Criminal proceedings for 
customs offences are prescribed after a period of five (5)  years as of the date on which the 
violation or the latest offence was committed.  
 If criminal proceedings have been initiated before the aforementioned time-limit expires, 
they shall expire within the same period calculated as of the date of notification o f the 
investigation.  
 The power to impose sanctions for minor offences and breaches of the regulations expires in 
five years calculated as of the date on which the violation was committed or the date on which the 
latest such act was committed.  
 Article 201.- Expiry of sanctions .- The sanction of imprisonment expire s after twice the 
period for prescription of criminal proceedings, calculated as of the date on which judgement was 
passed if the of fender has not been imprisoned.  
Chapter  VII - Public auction , free award of the goods and destruction  
 Article 202.- Public auction .- Public auctions shall be subject to the rules determined for 
this purp ose, either in the implementing r egulations for this Code or in the provisions a dopted by 
the Customs A dministration . A third party may be employed for this purpose.  G/VAL/N/1/ECU/3  
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   Article 203.- Free a ward of the goods. - Goods that have been expressly or definitively 
abandoned, those subject to administrative or judicial confiscation, those in respect of which 
a public auction proced ure has been initiated, shall be disposed of free -of-charge within the 
time-limits and according to the provisions in this Code, its implementing r egulations and other 
rules of  the National Customs Service  of Ecuador , for the benefit of public sector organ izations and 
enterprises , including the Customs A dministration, if they request them in order to fulfil their 
purposes.  Banned imports may only be donated to public institutions, provided that they are used 
specifically for these institutions, or are destr oyed.  
 Moreover, goods are awarded free -of-charge to non -profit -making social welfare, charitable, 
education al or research institutions which request them in order to fulfil their purposes, 
in accordance with their s tatutory activities , in those cases and on the term s provided in the 
implementing r egulations for this Code.  
 Article 204.- Destruc tion of goods .- The official in charge of the District Directorate 
of Customs or his /her representative shall declare the destruction of the goods determined in the 
implementing r egulations for this Code.  
 Without prejudice to the foregoing, arms, their spare parts, ammunition and similar goods 
that have been abandoned or confiscated shall be placed at the disposal of the competent military 
authority respons ible for t heir control.  Medicines that have been abandoned and/or confiscated 
shall be placed at the disposal  of the Ministry of Public Health.  
TITLE IV - Customs A dministration  
Chapter  I - Status and functions  
 Article 205.- Legal status .- The customs service is a public authority exercised by the State 
through the National Customs Service  of Ecuador , without prejudice to the exercise of function s by 
its duly authorized delegated bodies and t he coordination and cooperation of other government 
bodies or agencies, und er the present legislation, its implementing regulations, operating manuals 
and procedures, and other applicable rules.  
 The objective of the Customs is : to facilitate foreign trade and to control the entry and exit 
of goods, loading units and means of tra nsport through borders and customs zones in the 
Republic, and of persons directly or indirectly engaged in international goods traffic ; to determine 
and collect the tax obligations generated by the import  or export of goods, in accordance with the 
systems provided in the Tax Code ; to resolve  claims, appeals , petitions and questions by 
interested parties ; to prevent, prosecute and punish customs violations ; and, in general, to fulfil 
the functions specific to Customs Administrations in the provisions adopted  by Ecuador in 
international agreements.  
 Article 206.- Customs policy .- The National Customs Service  of Ecuador  shall be 
responsible for carrying out customs policy and for issuing the regulations for its application, 
through its Director -General.  
 Article 207.- Authority of the C ustoms .- The authority of the C ustoms consists of the series 
of rights and functions  given by supranational rules, legislation and regulations exclusively  to the 
National Customs Service of Ecuador for the purpose of fulfilling it s functions.  
 Article 208.- Submission to customs authority .- Goods or means of transport which cross 
the border and are involved in activities directly or indirectly related to international goods traffic 
are subject to customs authority.  
 Article 209.- Scope of the submission .- Submission  to customs authority includes 
compliance with all the formalities and requirements governing the entry or exit of persons, goods 
and means of transport ; the payment of taxes and other levies payable even if they are owin g to 
other central government bodies or other tax authorities but are controlled or collected by the 
National Customs Service pursuant to a legal mandate or regulations.  
 Article 210.- Customs service .- For the purpose of exercising customs authority, the 
National Customs Service of Ecuador shall have under its control the storage, valuation , control G/VAL/N/1/ECU/3  
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  and monitoring services for goods entering under its authority, as well as those determined by the 
body's Director -General ; the National Customs Servi ce of Ecu ador may enter into ag reements with 
government or private institutions for the supply of such services.  
 Such agreements shall co ntain the clauses and the penal ties applicable in cases 
of non-compliance with the terms of the agreement, without prejudice to  other civil and criminal 
liability that may arise, which may not be limited by the agreement.  
 Article 211.- Functions of the C ustoms .- The foll owing are the functions of the C ustoms 
exercised in the form and under the circumstances determined in the impl ementing r egulations:  
a. To monitor persons, goods and means of transport in the primary and secondary zones;  
b. to inspect and withhold goods, assets or means of transport for control purposes if it is 
presumed that the law has been violated in connection  with the entry or exit of goods into or 
from customs territory, and to request the Public Prosecutor 's Office for a search warrant;  
c. to inspect and apprehend persons and place them at the disposal of the competent authority 
whenever a flagrant offence  has been committed ; 
d. to conduct investigations, in coordination with the Ministry of Justice , when it is presumed 
that a customs offence  has been committed, for which purpose it may take any actio n 
provid ed in the implementing r egulations;  
e. to exercise credible coercive action for the benefit of the National Customs Service 
of Ecuador, either directly or by delegation.  
f. to coordinate its activities with other government or o utside  agencies and organizations, to 
request them for information and to provi de them with information, relating to the entry or 
exit of goods, means of transport or persons into or from Ecuador, and to economic 
activities by persons in Ecuador.  The recipient shall maintain the same reservation as the 
person or agency responsible fo r the information in respect of information furnished to or 
received from the National Customs Service of Ecuador;  
g. to request the list of persons entering and leaving the country from the National Police 
Force, in the form and at the intervals  determine d by the National Customs Service 
of Ecuador, which the National Police Force shall be obliged to provide;  
h. to take part  in criminal proceedings investigating matters relating to customs offences 
committed;  
i. to regulate and issue rules for customs oper ations related to the development 
of international trade and customs regimes, even if they are not specifically determined in 
this Code or its implem enting r egulations;  
j. to collaborate in  controlling the unauthorized exi t of works considered to be part o f the 
country 's artistic, cultural or archaeological heritage ; and of species of wild flora and fauna 
in the primary and secondary zones;  
k. to collaborate in the control of illicit traffic in narcot ics, psychotropic substances and 
precursors, arms, ammuni tion and explosives, in the primary and secondary zones ; and 
l. other functions attributed to it by the Law.  
Chapter  II - National Customs Service of Ecuador  
 Article 212.- National Customs Service of Ecuador .- The legal person under public law, for 
an ind efinite period, with technical, administrative, financial and budgetary autonomy, domiciled in 
the city of Guayaquil, and with competence throughout Ecuador.  
 Pursuant to this Code, it is a  body that has been given the technical and administrative 
competen ce necessary to advance  the planning and implementation of Ecuador 's customs policy 
and to exercise, in the prescribed form, responsibility  for determining  taxes , resolving, punishing 
and regulating customs matters, in accordance with this Code and its imp lementing r egulations.  
 Article 213.- Administration of the National Customs Service of Ecuador .- 
The Director -General shall be r esponsi ble for administering the National Customs Service of 
Ecuador and shall be the maximum authority and legal, judicial and  extra-judicial representative, 
and shall therefore exercise in customs territory the administrative and operational control and the 
monitoring provided in this Code through the authorities indicated in the preceding Article.  G/VAL/N/1/ECU/3  
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   Article 214.- Policy council .- The Director -General shall participate in the policy council(s) 
convened by the President of the Republic in connection with his /her functions.  
 Article 215.- Director -General .- An official freely appointed or removed, designated directly 
by the Presiden t of the Republic, and meet ing the following criteria:  
a. Be an Ecuadorian national and enjoy political rights;  
b. have a postgraduate professional diploma granted in Ecuador or abroad ; and 
c. be an experienced professional with competence in foreign trade , administration or related 
areas.  
 Article 216.- Functions .- The following shall be the functions and competence of the 
Director -General:  
a. To act as the legal representative of the National Customs Service of Ecuador;  
b. to administer the assets, materi al and human resources and funds of the Service;  
c. to hear and decide on complaints submitted by taxpayers against official s in charge of the 
District Directorates of Customs, as well as appeals for review of their decisions;  
d. to hear and decide on admi nistrative complaints against his/her  own acts;  
e. to define the area for the application of border traffic, in accordance with international 
agreements, this Code and its implementing r egulations;  
f. to establish special check -points in the secondary zone  and on border perimeters, subject to 
international agreements, this Code and its implementing r egulations;  
g. to grant, suspend, annul or declare expiry of licences for customs brokers, a function which 
may not be delegated;  
h. to respond to questions on import tariffs concerning the tariff classification of goods or 
application of this Code and its implementing r egulations, subject to the provisions of the 
Tax Code, the response being binding on the person posing the question ; 
i. to review his/her  own act s ex officio in the terms pr ovided in this Code and the Tax  Code, 
and to annul them provided that annulment is not contrary to legislation and does not cause 
prejudice to the taxpayer;  
j. to authorize the operation of industrial facilities in which the tem porary admission for inward 
processing regime functions, firms which operate under the express or courier services 
customs regime, in -bond warehouses, duty -free and special stores and the international 
fairs regime;  
k. to act as the appointing authority in  the National Customs Service of Ecuador;  
l. by means of decisions, to issue the regulations, manuals, instructions and office circulars 
needed to apply the operational, administrative, procedural  and customs valuation aspects 
and for the creation, cancell ation and regulation of fees for customs services, together with 
the regulations required for  the proper functioning of the Customs A dministration and other 
operational aspects not covered in this Code and its implementing r egulations ; and 
m. any other fun ctions determined in the law.  
 All the functions described above may be delegated, with the exception of those in 
subparagraphs (k) and (l).  If the Director -General is absent or has a temporary impediment, the 
official specified in the organic and administ rative structure of the National Customs Service 
of Ecuador shall replace him/her.  
 Article 217.- District Directorates of Customs .- The District Directorates cover the areas in 
which the National Customs Service of Ecuador exercises all the operational an d other functions 
assigned to it by this Code and its implementing r egulations.  
 The District Directorates shall be created, dis solved or modified by a decisio n of the 
Director -General, which shall be published in the Official Journal.  
 Article 218.- Funct ions of the District Directorates .- Officials  in charge 
of District  Directorate s of Customs shall have the following functions:  
a. To comply with and enforce the legislation, its implementing regulations, and other foreign -
trade related rules;  G/VAL/N/1/ECU/3  
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  b. to verify , accept or comment on customs declarations, to authorize customs operations and 
to control goods entering or leaving Ecuador, as well as passengers in ports, international 
airports and at approved border crossings and to provide for the inspection, examin ation 
and registration of international means of transport entering or leaving customs territory;  
c. to grant the tax exemptions applicable in accordance with the provisions in the 
implemen ting r egulations for this Code;  
d. to resolve administrative compla ints and undue payment  claims ; 
e. to revi se their own acts ex officio in the terms laid down in this Code and the Tax Code, 
provided that no prejudice is caused to the taxpayer  
f. to punish minor offences and breaches of regulations pursuant to this Code;  
g. to issue  order s for collection and payment of taxes, securit ies and credit notes;  
h. to exercise coercive action on behalf of the National Customs Service of Ecuador;  
i. to declare administrative confiscation and to accept the express abandonment of goo ds, and 
to put them up for auction where applicable, in accordance with the provisions in this Code 
and its implementing r egulations;  
j. to carry out the administrative decisions and judicial rulings within their scope;  
k. to take part in criminal proceedi ngs investigating matters relating to customs offences 
committed and to make the goods seized available to the Public Prosecutor 's Office;  
l. to appear before the competent judge as special prosecutor, on behalf of the National 
Customs Service of Ecuador, in criminal proceedings against punishable acts that affect the 
interests of the institution;  
m. to authorize the customs regimes indicated in this Code and in the regulations issued by 
supranational customs organizations;  
n. to authorize a change in regim e in accordance with this Code and its implementing 
regulations;  
o. to control goods imported under special customs regimes;  
p. to conduct a public auction of goods that have been abandoned;  
q. to authorize direct customs clearance of goods ; and 
r. other f unctions determined in the law, as well as those delegated by the Director -General by 
means of a decision.  
 Article 219.- Notifications .- Notifications by the National Customs Service of Ecuador 
through its computer system shall have full legal effect.  
 Article 220.- Customs officials .- Public official s of the National Customs Service of Ecuador 
shall be governed by the Organic Law on Public Service . Where the needs of the institution  so 
require , officials fulfilling functions in any administrative area may  fulfil the operation al functions 
required, without this involving an administrative change or transfer.  Overtime may be worked 
outside the normal working day and shall be compensated in accordance with the law governing 
government service and the provisio ns laid down in the implementing r egulations for this Code.  
 Article 221.- Respons ibilities .- The National Customs Service of Ecuador is responsible for 
efficient and flexible treatment throughout the customs clearance proce dure, its responsibility 
ending if the goods are placed at the disposal of the judicial authority.  If unjustified delays in 
customs clearance of goods attributable to the National Customs Service of Ecuador ar e 
determined, the cost of storag e and/or demurrage shall be refunded by the Ser vice to those 
suffering prejudice.  The amounts concerned shall in turn be passed on to the official whose 
negligence or malice led to the delay up to a maximum of one unified monthly salary of the said 
official, without prejudice to any administrative sanc tions.  The refund of the sums and their 
attribution to the official shall comply with the procedure determined in the regulations.  
 Customs procedures shall be conducted with due diligence and care on the part of officials of 
the National Customs Service o f Ecuador, preventing any deterioration of the goods to be 
inspected.  
 The Director -General and other officials of the National Customs Service of Ecuador, wh en 
exercising any of the powers of the tax administration provided by the Law, shall act with the 
responsibilities defined in the Tax Code.  
 In determining responsibilities for the exercise of their functions, the Director -General and 
his/her replacement shall be under the jurisdiction of the National Court of Justice.  Likewise, senior 
official s shall be under the jurisdiction of the Provincial Court.  G/VAL/N/1/ECU/3  
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   Article 222.- Customs Monitoring U nit.- An administrative unit of the National Cus toms 
Service of Ecuador responsi ble for conducting operations to prevent customs offences and for their 
investigation thro ughout Ecuador, in support of the Ministry of Justice, pursuant to the 
Law regulating public service and the regulations issued by the Director -General, in coordination 
with the Ministry of Labour Relations, for which it may obtain permits for posses sing or bearing 
arms from the competent authorities.  
 The Director -General of the National Customs Service of Ecuador i s the highest authority in 
the Customs Monitoring Un it and shall be responsible for issuing the regulations required for its 
functioning.  
 Article 223.- Organic and administrative structure. - The Director -General shall determine 
the organic and administrative structure of the National Customs Service of Ecuador, together with 
the responsibilities of its administrative units.  
Chapter  III - Informa tion 
 Article  224.- Information on foreign trade .- Statistical information on foreign trade 
processed by the National Customs Service of Ecuador shall be published free -of-charge and 
without restrictions other than those provided in the Intellectual Proper ty Law on the website  of 
the National Customs Service of Ecuador and may be consulted freely, in accordance with the 
provisions in the Organic Law on Transparency and Access to Public Information.  
 Information to be generated by the National Customs Servic e of Ecuador in formats other 
than those published on its website, at the request of third parties, shall be subject to a fee in 
accordance with the relevant provisions adopted by the Director -General.  
 At any time, the National Custom s Service of Ecuador may require  importers, exporters, 
carriers, entities or legal persons under public or  private law to furnish any information concerning 
import or export activities that facilitate efficient monitoring of compliance with the tax obligations 
they entail, giv ing a non -renewable period of not more than fifteen days in which to respond.  
 Article 225.- Database .- The National Customs Service of Ecuador and the Internal 
Revenue Service, when they so request, shall have free unrestricted a ccess, either via computer  or 
physically, on a permanent and continuous basis , to all information on foreign trade activities to be 
found in the archives and databases of the Central Bank of Ecuador, the Immigration Polic e, the 
Civil Register, the Ecuadorian Social Security Institu te, Supervisory Authorities, the Agricultural 
Quality Institute, the Ecuadorian Standardization Institute, the Commercial Register, the Financial 
Intelligence Unit and other bodies directly or indirectly involved in Ecuador 's foreign trade.  
Government offi cials who fail to provide the information or hinder or interfere with obtaining it 
shall be punishable by dismissal from their functions.  
 The content of the databases of the National Customs Service of Ecuador is protected 
information, unauthorized access  or improper utilization of the information therein shall be 
punishable in accordance with the Criminal Code.  
Chapter  IV - Financing of the customs service  
 Article 226.- Financi ng of the National Customs Service of Ecuador .- All the movables and 
immovable s it has acquired or may acquire under any title constitute the property of the National 
Customs Service of Ecuador.  
 The National Customs Service of Ecuador shall be financed by:  
a. Allocations from the national budget;  
b. all the sums collected as fees f or customs services, which shall be paid into the single 
Treasury account and then distributed according to the national budget;  
c. the amounts received for contracts, licences and royalties;  
d. non-repayable funds from international organizations ; and 
e. other income lawfully received not specified in this Code.  G/VAL/N/1/ECU/3  
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  TITLE V - Customs A dministration auxiliaries  
Chapter I - Customs brokers  
 Article 227.- Customs broker .- The natural or legal person licensed by the Director -General 
of the National Customs Service  of Ecuador regularly to manage customs clearance of goods on 
behalf of another person, signing the customs declaration for this purpose in those cases 
determined in the regulations, with the obligation to invoice its services according to the scale 
of minimum fees set by the Director -General of the National Customs Service of Ecuador.  The 
licence shall have a term of five years and be renewable for the same term.  
 A customs broker may enter into an agreement with any operator engaged in internati onal 
trade  and shall be responsi ble to the National Customs Service of Ecuador for the information 
furnished in the documents.  
 A customs broker shall have the status of public notary and auxiliary so that the customs 
shall be assured that the data contained in the customs declarations drawn up are consistent with 
the information and documents which shall legally serve as the basis for the customs declaration, 
without prejudice to any verification by the National Customs Service of Ecuador.  
 In addition to the perpet rators themselves, customs brokers who, in exercise of their 
activities, have acted part as perpetrators, accomplices or accessories shall be subject to the 
criminal liability determined for the offence  of counterfe iting of documents in general and no prior 
judicial ruling in civil proceedings shall be required in order to bring criminal proceedings, 
as provided in Article 180 of the Code of Civil Procedure.  In any event, for the purposes of liability, 
customs brokers shall be considered public notaries.  
 For customs clearance of goods involving a customs broker, the latter shall be jointly 
responsible for customs tax obligation s, without prejudice to the administrative or criminal liability 
specified in the law.  Without prejudice to the foregoing, a customs  broker shall not be liable for 
valuation of the goods.  
 Article 228.- Rights and obligations of customs brokers .- Customs brokers shall have the 
right to be recognized as such at the national level.  The principal obligation of a customs broker is 
to compl y with this Code, its implementing r egulations and the provisions adopted by the National 
Customs Service of Ecuador, and to advise those who use his/her services regarding  compliance.  
 The granting of licences to customs brokers, the latters ' rights, obli gations and the 
regulations governing their activities shall be determined in the implementing r egulations for this 
Code and in the relevant provisions adopted by the National Customs Service of Ecuador.  
 Article 229.- Sanctions.- Provided that no offence or minor offence has been committed, 
customs brokers shall be subject to the following sanctions:  
1. Suspensi on of the licence .- Customs brokers shall be punishable by suspens ion of their 
licence for up to sixty (6 0) calendar days for any of the following rea sons:  
a. They have been punished on three occasions for a breach of the regulations, non-compliance 
with the regulations under this Title or the regulations issued by the Director -General of the 
National Customs Service of Ecuador, over a 12 -month period;  
b. they have been punished on three occasions within a 12 -month period f or a minor offence 
such as : 1. hindering or preventing  customs controls, either by action intended to impede 
the activities of the National Customs Service of Ecuador or by refusing to  collaborate with 
investigations being conducted ; 2. F ailing to  submit the accompanying documents together 
with the customs declaration if this is required for the type of clearance attributed to the 
declaration, on the part of the owner, consignee or cons ignor; or 
c. failure to comply with the obligations determined for custo ms brokers in the implementing 
regulations for this Code and in the regulations governing the activities of customs brokers 
issued by the Director -General.  G/VAL/N/1/ECU/3  
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  2. Annulment of the licence. - Customs brokers shall be punishable by annulment of their 
licence for any of the following reasons:  
a. Renewed suspension of their licence within a 12 -month period;  
b. a conviction for a customs offence;  
c. failure to keep files on the customs clearance ope rations for the period prescribed in the 
implementing r egulations for this Code ; or 
d. death of the licence -holder or dissolution of the legal person.  
 Article 230.- Auxiliaries of customs brokers .- Customs brokers may employ auxiliaries for 
exercising the ir activities and these shall be approved by the National Customs Service of Ecuador 
in accordance with the relevant provisions adopted by the Director -General.  The accreditation 
of the auxiliary shall have the same term as the accreditation of the customs  broker and he /she 
shall provide his /her services to the broker.  
 Customs brokers ' auxiliaries may act on behalf of the customs broker in any of the latter 's 
actions with  the Customs A dministration, except for signature of the declaration.  
 The principal o bligation of customs brokers ' auxiliaries is to comply with this Code, its 
implementing r egulations and the provisions adopted by the National Customs Service of Ecuador.  
 The accreditation of customs brokers ' auxiliaries shall be annulled in the following  cases:  
- A conviction for a customs offence ; 
- death of the auxiliary ; or 
- other reasons to be determined in this Code.  
Chapter  II - Authorized economic operators  
 Article 231.- Authorized economic operator s.- Natural or legal person s involved in the 
international movement of goods, irrespective of the function adopted, and who comply with the 
equivalent supply chain security standards established by the National Customs Service of Ecuador 
and hence benefit from simplified customs procedures.  
 Authorized operators include, inter alia, manufacturers, importers, exporters, carrie rs, 
consolidators, deconsolidators, international freight forwarders,  ports, airports, in -bond 
wareh ouses, temporary warehouse s, courier services and terminal operators, and shall be  
regulated in accordance with the relevant provisions adopted by the Director -General.  
 In order to be accredited as an authorized economic operator, the requirements  specified in 
the implementing r egulations for this Code shall be met. 
 Persons who have b een punished for a customs offence or legal persons whose 
representatives, partners or shareholders have been so punished may not be authorized as 
economic operators.  Any person who uses any type of pretence in order to become an authorized 
economic operat or shall be liable to the ban provided in this Article and shall lose his/her status, as 
shall any natural or legal person who has helped in obtaining an authorization on such terms, and 
they may not be given any new authorization.  
 In cases of non -complia nce with customs regulations and without prejudice to the 
corresponding penalty, the Director -General may suspend or withdraw the authorization 
of authorized economic operators in accordance with the provi sions in the implementing 
regulations for this Code  and in the regulations adopted by the National Customs Service 
of Ecuador governing activities by authorized economic operators.  G/VAL/N/1/ECU/3  
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  BOOK  VI - SUSTAINABLE PRODUCTION AND ITS RELATIONSHIP TO THE ECOSYSTEM  
TITLE I - Eco-efficiency and sustainable production  
 Article 232.- Defini tion.- For the purposes of this Code, efficient production process es mean 
the use of environmentally clean technologies and non -polluting low -impact alternative energies, 
adopted in order to lessen the negative effects and damage to human  health and the environment.  
Such measures shall include those whose design and implementation help to enhance production, 
taking into account the life cycle of products, as well as sustainable use of natural resources.  
More efficient and competitive produ ction processes shall also include the implementation 
of advanced technologies that improve the management and rational use of resources and prevent 
and control environmental pollution as a result of the production processes, the supply of services 
and fin al use of the products.  
 Article 233.- Sustainable development .- Natural and legal persons and other associative 
forms govern ed by this Code shall develop all their production processes in accordance with 
the sustainable development principles set out in t he Constitution and in international agreements 
to which Ecuador is party . 
 Article 234.- Cleaner technology .- When replacing technology, companies shall adopt 
measures to achieve cleaner production processes, for example:  
a. Use non -toxic raw materials th at are not dangerous and have a low environmental impact;  
b. adopt sustainable processes and use efficient equipment that helps to prevent pollution 
when utilizing resources;  
c. apply in an effective, responsible and timely manner the universally accepted principles 
of environment al management adopted in international agreements and in domestic 
legislation, in particular, the following:  
1. reduce, reuse and recycle;  
2. adopt the best available technology;  
3. integral responsibility when using certain products, espec ially chemicals;  
4. prevent and control environmental pollution;  
5. the polluter pays;  
6. progressive use of alternative sources of energy;  
7. sustainable management and proper assessment of natural resources ; and 
8. intra- and inter -generational responsibility.  
 Article 235.- Incentives for cleaner production .- In order to boost clean production and 
energy efficiency, the State shall provide the following incentives:  
a. The tax benefits created in this Code ; and 
b. economic benefits obtain ed from transfers such as "tradable emissions permits ". 
The implementing r egulations for this Code shall determine the parameters to be met by 
companies seeking such benefit s and the way in which the trad able emissions permits 
market or pollution rights shall be regulated according to th e national regulations and those 
of decentralized autonomous governments, with their respective terms, the transfer 
mechanism for such rights and the environment quality goal sought in the long term.  
 Article 236.- Adapta tion to climate change .- In order t o facilitate Ecuador 's adaptation to 
the effects of climate change and minimize them, natural or legal persons and other associative 
forms governed by this Code shall acquire and adopt appropriate environment technologies to 
ensure the prevent ion and contr ol of pollution, clean production and the use of alternative sources.  
GENERAL PROVISIONS  
 FIRST .- In order to regulate the various subjects that form an integral part of this Code, 
specific regulations shall be issued for each Book within a period of 90 da ys, in accordance with 
the Constitution of the Republic . G/VAL/N/1/ECU/3  
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   SECOND .- The rights, obligations and responsibilit ies of natural or legal persons in 
accordance with the legislation, regulations, concessions, ministerial authorizations or agreements 
lawfully conc luded prior to this Code shall continue for the period for which they were granted.  
 THIRD .- In all legal or regulatory provisions, any reference to the "Ecuadorian Customs 
Corporation "; "CAE" or the "Ecuadorian Customs Corporation, CAE " shall be replaced by "National 
Customs Service of Ecuador ". 
 In all legal or regulatory provisions, any reference to the "customs military police " or 
"customs monitoring service " shall be replaced by "Customs Monitoring Unit ", except in the Special 
Law reintegrating the per sonnel o f the former customs military po lice into the customs monitoring 
service.  Likewise, in all legal provisions at the same or a lower level which grant the customs 
military polic e or the customs monitoring service power s or responsibilit ies, it shall be understood 
that these shall be exercise d by the National Customs Service of Ecuador.  
 FOURTH .- In all administrative regulations, any reference to "Directorate of the Ecuadorian 
Customs Corporation ", "CAE Directorate " or simply "Directorate " referring t o this collegiate body, 
shall read "Director -General of the National Customs Service of Ecuador " or "Director -General ", 
as applicable.  Likewise, reference s to "the General Administrat or" or "the General Administration " 
shall read "the Director -General ". 
 FIFTH .- The National Customs Service of Ecuador assumes  all the rights and obligations 
of the Ecuadorian Customs Corporation.  Pursuant to this provision, all the assets of the Ecuadorian 
Customs Corporation shall be taken over by the National Customs Servic e of Ecuador, and if they 
are subject to registration, the corresponding registration shall be made ex officio by those in 
charge of the said register s without payment of any fees, costs or levies.  
 SIXTH .- Concessionaires of temporary storage services, po rt and airport operators shall, 
within a period of ninety days, submit their control regulations for entry into the primary zone for 
approval by the Director -General.  
 SEVENTH .- As of publication of this Code, all plantation s of bananas, plantains (barraga nete 
variety ) and other musacea e planted in Ecu ador shall be registered with the Ministry 
of Agriculture, Livestock , Aquaculture and Fisheries.  
AMENDING PROVISIONS  
 FIRST .- At the end of Article 72 of the General Law on Financial System Institutions, add 
the following new paragraph:  
 "... The Supervisory Authority for Banks shall introduce a special guarantee regime for 
micro, small and medium -sized enterprises to enable  them to attain satisfactory levels of economic 
capacity, and it shall be designed in su ch a way as to incorporate generally applicable up -to-date 
instruments such as col lectable invoices, patents, and other instruments to b e included in the 
implementing r egulations for this Law  …". 
 SECOND .- Amendments to the Organic Law on the Domestic Tax Regime . 
2.1.- Amend Article 9 as follows : 
1. Replace no. 15 by the following : 
 "15.- The income earned by com mercial trusts, provided that they not engage in business 
activities or operate businesses in activity, in accordance with the definition given in Art icle 42.1 
of this Law.  Likewise, the income earned by investment funds and complementary funds shall be 
exempt.  
 To be eligible for this exemption, it is a mandatory requirement for the aforementioned 
companies to benefit from this exemption that , when  distributing benefits, earnings, or profits, the 
trustee or fund manager, ha s withheld income tax at source - in the same percentages as those 
determined for the distribution of dividends and profits, in accordance with the provisions in the G/VAL/N/1/ECU/3  
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  implementi ng regulations for this Law - for the ben eficiary, founder or participant in each 
commercial trust, investment fund or complementary fund and, moreover, submits information to 
the In ternal  Revenue Service, on magnetic media, for each com mercial trust, investment fund and 
complementary fund it manages, containing the information and at the intervals indicated by the 
Director -General of the IRS by means of a general resolution.  
 If it is found that the commercial trusts, investment funds or complementary funds do no t 
comply with the aforementioned requirements, taxes shall be paid without any exemption. " 
2. Replace the unnumbered paragraph following paragraph  15 by the following:  
 "15.1. - Revenue from fixed term deposits paid by national financial institutions to natura l 
persons and companies, with the exception of institutions in the financial system, as well as 
revenue earned by natural persons or companies from investment in fixed -income securities 
traded on Ecuador 's stock exchanges and the profits or earnings of nat ural persons and companies 
distributed by commercial investment trusts, investment funds and complementary funds, 
provided that the investment is in fixed -term deposits or fixed -income securities traded on the 
stock exchange.  In all the aforementioned case s, the investment or deposits shall originally have 
been issued for a term of one year or more.  This exemption shall not apply if the beneficiary of the 
revenue is a direct or indirect debtor of the institution in which he /she keeps the deposit or 
investme nt, or any of its related institutions ; and …" 
3. Add the following number after number  16: 
 "17. The interest paid by workers for loans from their employers to enable the m to buy 
shares or stock in the employer, while the employee retains ownership of such s hares. " 
 "18. Economic c ompensation for a decent wage. " 
2.2.- Add the following Article after Article  9: 
 "Article 9.1.- Exemption from payment of income tax for the development of new and 
productive investment. - Companies established as of the entry into force of the Production Code, 
as well as new companies set up by existing companies, for the purpose of making new and 
productive investment shall be given exemption from payment of income tax for five years 
calculated as of the first year  in which income directly and solely attributable to the new 
investment is generated.  
 For the purposes of applying the provision in this Article, new and productive investment 
shall be made outside the urban jurisdictions of the cantons  of Quito or Guayaquil and in the 
following economic sectors deemed priorities by the State:  
a. Producti on of fresh, frozen or processed food;  
b. forestry and agro -forestry and their manufactures;  
c. engineering;  
d. petrochemicals;  
e. pharmaceuticals;  
f. tourism;  
g. renewable energy, includi ng bioenergy or biomass energy;  
h. logistics services for foreign  trade;  
i. applied biotechnology and software ; and 
j. strategic import substitution and export promotion sectors determined by the President 
of the Republic.  
A mere change of ownership of pro duction assets already functioning or operating does not 
imply new investment for the purposes of this Article.  
If the requirements determined in this Article for application of the exemption are not met, 
the Tax Administration, in exercise of its legally established powers, shall determine and collect the 
amounts corresponding to income tax, without prejudice to any sanctions applicable.  G/VAL/N/1/ECU/3  
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  No registration, authorization or requirement of any type other than those set out in this 
Article shall be required in order to be eligible for this benefit. ". 
2.3.- Amend Article  10 as follows:  
1. Insert the following numbered paragraph:  
 "17)  In order to calculate income tax, for a period of 5 years, medium -sized enterprises 
shall have the right to  deduction of the addi tional 100 % for costs incurred under the following 
headings:  
1. Technical training for research, development and technological innovation to raise 
productivity, provided that the incentive does not exceed 1 % of the cost of wages and 
salaries during the year i n which it applies:  
2. Costs incurred to raise productivity through the following activities : technical 
assistance for the development of products through market surveys and ana lysis and 
competitiveness ; technological assistance by recruiting  professi onal ser vices to design 
processes  and products, to adapt and implement processes, to design packaging, to 
develop special software and  provide  other business development services to be  
specified in the implementing r egulations for this Law, provided that the incen tive 
does not exceed 1 % of sales ; and 
3. Costs incurred for travel, accommodation and trade promotion for access to 
international markets, for example, negotiating rounds, participation in international 
fairs, and other costs and expenses of a similar nature,  provided that the incentive 
does not ex ceed 50 % of the total value of the costs and expenses for promotion and 
advertising.  
 The regulations implementing this law shall establish the technical and formal parameters  
that taxpayers are required to fulfil in  order to be eligible for this concession."  
 
2. Add the following paragraph to paragraph 7: 
 "Depreciation and amortization for the acquisition of machinery, equipment and technology 
for the implementation of cleaner production mechanisms, mechanisms to ge nerate energy from 
renewable sources (solar, wind or similar energy) or to lessen the environment al impact 
of production activities and to reduce the emission of greenhouse gases, shall be given 
an addition al 100% deduction, provided that they are not nece ssary for compliance with the 
provisions of the competent environmental authority on lessen ing the impact of a work or as 
a requirement or condition for the issue of the corresponding environmental licence, profile or 
permit.  In any event, authorization fr om the competent authority shall be required . 
 This additional cost may not exceed an amount equal to 5 % of total income.  Costs incurred 
in order to obtain the results indicated in this Article shall also be eligible for this incentive.  
The implementing r egulations for this Law shall determine the technical and formal parameters to 
be met in order to be eligible for this additional deduction.  This incentive does not constitute 
accelerated depreciation. " 
3. Add the words "where applicable " to the second para graph under number  9, after the words 
"mandatory social security ". 
4. Add the following text to the fourth paragraph under number  9, following the words 
"of the respective financial year ": 
"For new investment in economically depressed or border areas and when workers reside nt 
in these a reas are recruited, the deduction shall be the same and be for a period 
of five years.  In the latter case, the specific aspects for its implementation shall be 
determined in the implementing r egulations for this Law. " G/VAL/N/1/ECU/3  
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  5. Add the following paragraph at the end of number 9:  
 "Economic compensation in order to provide a decent wage for workers shall also be 
deductible. " 
2.4.- Amend Article 13 as follows:  
1. Delete number 2 ; 
2. Replace number 3 by the following text:  
"3.- Payment of interest on external loans and lines of credit opened by foreign financial 
institutions legally established as such, as well as interest on external loans from 
government to gover nment or from multilateral organizations.  In such cases, the 
interest m ay not exceed the ma ximum interest rate s of reference set by the 
Directorate of the Central Bank of Ecuador on the date of registration of  the loan or its 
novation ; if the rate s are exceeded, the corresponding excess amount shall be 
withheld so that th e payme nt may be deductible.  Failure to register in accordance with 
the provisions issued by the Directorate of the Central Bank of Ecuador shall mean 
that the financial costs of the loan may not be deducted.  Interest on loans from 
financial institutions domicile d in tax havens or in lower tax jurisdiction s may not be 
deducted. " 
2.5.- Amend  Article 36  as follows : 
1. In subparagraph  "b", after the words "shall pay the single tariff ", delete the words 
"twenty  five percent  (25%)" and add the words "provided for co rporat ions". 
2. In subparagraph  "c", after the words "… shall pay the single tariff ", delete the words 
"of 25%" and add the words "provided for co rporations ". 
3. In subparagraph  "e", after the words "which in no case shall be more ", delete the 
words "at 25%", and add the words "at the income tax rate provided for 
corporations ". 
2.6.- Regarding the lower income tax rate for co rporations , replace Article  37 by the following:  
 "Article 37.- Income tax rate for corporations .- Corporations  established in Ecuador, as well 
as branches of foreign co rporations  domiciled in Ecuador and permanent establishments of foreign 
corporations  not domiciled there, which have taxable earnings, shall be subject to the tax rate 
of twenty  two percent  (22%) of the taxable base.  
 Corporations  which reinvest their  profits in Ecuador may receive  a 10 percentage point 
reduction in the rate of income tax on the amount reinvested in production assets, provided that 
these are to be used to acquire new machinery or equipment, irrigation  plant and equipm ent, plant 
material, seedlings or any plant input for agricultural, forestry, livestock or flower production , that 
they are  used in their production activities, or to acquire material for research and technology to 
raise productivity, diversi fy production and increase employment, for which purpose they shall 
increase their capital accordingly and shall meet the requirements determined in the implementing 
regulations for this Law.  Private financial institu tions, savings and loan associations or similar 
entities may also be eligible for this reduction provided that it is used to grant loans to the 
production sector, including small and medium -sized producers, under the conditions determined 
in the regulations and that they increase their capital accordingly.  The increase in capital shall be 
made through registration in the respective Commercial Register up to 31  December of the tax 
year after that in which the profits reinvested were generated and for saving s and loan 
associations and similar entities, it shall  be made according to the relevant rules.  
 In exceptional and duly justified cases, following a technical report from the Production and 
Economic Policy Council, the President of the Republic of Ecuador, in an Executive Decree, may 
determine other producti on assets in respect of which profits may be reinvested thereby obtaining 
the 10  percentage point deduction.  Production assets shall be defined  in the implementing 
regulations for this Law.  G/VAL/N/1/ECU/3  
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   Companies engaged in hydrocarbons exploration and exploitation sh all be subject to the 
minimum tax rate determined for co rporations  on their taxable base in accordance with the first 
paragraph of this Article.  
 If a co rporation  gives its partners, shareholders, participants or beneficiaries cash loans, 
they shall be con sidered advance dividends or profits from the co rporation and the rate applicable 
to corporations  shall be withheld from the amount.  The amount withheld shall be declared and 
paid the following month and within the time-limits provided in the regulation s, and shall 
constitute a tax credit for the co rporation  in its income tax declaration.  
 For all the purposes provided in the la w on the tax regime, any refer ence to the general rate 
of corporation tax means the 22 % rate, in the terms set out in the first par agraph of this Article. " 
(CONTINUES).  
2.7.- Insert the following unnumbered Article after Article  37: 
 "Article (...).- As of the entry into forc e of the Production Code, obligees who are managers  
or operators of a Special Economic Development Zone shall b e eligible for an addition al 
five percentage point reduction in the rate of income tax. " 
2.8.- Amend  Article 39 as follows:  
1. After the words "shall pay the single tariff " in the first paragraph, delete the words 
"of 25%" and add the words "provided for co rporations ". 
2. After the words "shall pay the single tariff " in the second paragraph, delete the words 
"of 25%" and add the words "provided for co rporations ". 
2.9.- Insert the following unnumbered Article after Article  39 of the Law on the Internal Tax 
Regime:  
 "Article 39.1. - Any co rporation  not less than 5 % of whose shares are transferred against 
payment to at least  20% of its employees may defer payment of its income tax and advance 
payment for up to five  tax years, with the corresp onding payment of interest , calculated on the 
basis of the statutory rate  of corporation tax , in the terms prescribed in the implementing 
regulations for this Law.  This benefit shall apply provided that such shares remain the property 
of the employees.  
 If the said employees transf er their shares to third parties or other partners in such a way 
that they do not comply with any of the min imum limits provided in these regulations , the deferral 
shall cease immediately and the co rporation  shall pay the remaining income tax in the month 
following that on which non -compliance with any of these limits has been verified.  The benefit thus 
recognized shall apply for the time-limit established as long as the percentage of the enterprise 's 
registered capital in favour of the employees remains th e same or increases, as indicated in this 
Article.  The implementing r egulations for this Law shall determine the parameters and 
requirements to be met in order to be eligible for these incentives.  
 This provision  shall not apply to employees to whom shares  have been offered if, outside 
labour relations, they have any conjugal relationships, are blood relations to the fourth degree or 
relations by affinity to the second degree of any of the parties involved or who are related to 
owners or represen tatives of the company, in the terms prescribed in the tax legislation. " 
2.10. - Amend Article 41 as follows:  
1. Replace the last paragraph of letter (b) of Article 41 by the following : 
 "Corporations recently created , new investment recognized in accordance with the 
Production Code, natural persons or undivided successions obliged to keep accounts, which 
initiate activities shall be subject to payment of advance tax as of the fifth year of effective 
operation, meaning the initiation of their production and busine ss activities.  If the 
production process so requires, this time-limit may be extended subject to authorization G/VAL/N/1/ECU/3  
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  from the Technical Secretariat of the Sectoral  Council for Production and the In ternal  
Revenue Service. " 
2. Insert the following letter s (j), (k), (l) and (m) after letter (i) in number 2 of Article  41: 
 "(j) For dealers and distributors of fuel in the automobile sector, the coefficient 
corresponding to the total taxable earnings for the purpose of income tax shall be 
replaced by zero  point four percent  (0.4%) of the corresponding total marketing  
margin." 
 "(k) taxpayers whose economic activities are solely related to agroforestry or forestry 
agricultural production  projects for forest species with a growth stage exce eding one 
year shall be exempt from  advance payment of income tax during the tax years in 
which they do not receive any taxable income derived from a principal harvesting 
stage. " 
 "(l) taxpayers whose economic activities are solely related to the development of softwar e 
projects or technology  with a development stage exceeding one year shall be exempt 
from advance payment of income tax during the tax years in which they do not earn 
any taxable income. " 
 "(m) for the purpose  of calculating advance pay ment of income tax, the amount of 
incrementa l costs incurred for generating new jobs or upgrading the labour force shall 
be excluded, together with the acquisition of new assets intended to raise productivity 
and technological innovation and, in general, investment and costs actually incurred 
and re lated to the tax  incentives for payment of income tax recognized in the 
Production Code for new investment, in the terms prescribed in the regulations. " 
2.11. -  Insert the following Article following Article  42: 
 "Article 42.1. - Payment of income tax by co mmercial trusts and investment funds.  
 Pursuant to this Law, commercial trusts engaged in business activities or running businesses 
shall declare and pay the income tax applicable on the profits earned, in the same way as other 
corporations . 
 Commercial tr usts not engaged in business activities or running businesses, investment 
funds or complementary funds shall be exempt from payment of income tax provided that they 
meet the requirements prescribed in number  15 of Article  9 of this Law.  Without prejudice t o the 
foregoing, they shall only submit a statement of income tax showing the financial situation of the 
fund or com mercial trust.  
 For tax purposes, it shall be understood that a commercial trust is engaged in business 
activities or running a business whe n its purpose and/or activities are of an industrial, commercial 
or agricultural nature or supply services, or involve any other profit -making activity, and which are 
regularly conducted through another type of co rporation . Likewise, for the purpose of app lying 
advance payment of income tax, in the case of real estate commercial trusts, reaching the 
break -even point of the real estate project or of any of its stages shall be taken into account when 
determining the time at which the actual operations commenc ed." 
2.12. -  Amen d Article 55 as follows:  
- Insert the following letter (e) after letter (d) in number (9): 
"(e) Managers  and operators of Special Economic Development Zones (ZEDEs), provided 
that the goods imported are intended solely for the authorized z one or are incorporated into any of 
the production transformation processes taking place there ." 
2.13. -  Insert the following two paragraphs in Article 57:  
 "Likewise, taxpayers whose business includes carrying freight abroad and who have paid 
VAT on the p urchase of fuel for aircraft, have the right to a tax credit exclusively for such 
payments.  After the transport service has been supplied, the taxpayer shall reques t a refund from G/VAL/N/1/ECU/3  
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  the Internal Revenue Service in the form and on the terms p rescribed in the corresponding 
resolution.  
 Operators and managers  of Special Economic Development Zones (ZEDEs) have the right to 
a tax credit for the VAT paid on the purchase of raw materials, inputs and services from national 
territory and incorporated into the producti on process of the operators and managers  of Special 
Economic Development Zones (ZEDEs).  The taxpayer shall request a refund from the Internal 
Revenue Service in the form and on the terms prescribed in the corresponding resolution after the 
operational tech nical unit responsible for supervising and controlling ZEDEs certifies, under its 
responsibility, that the said goods are part of the production process in the purchasing firm. " 
2.14. -  Replace the reference to "FOB value " or "CIF" value  in all the provisi ons in the Law on the 
Domestic Tax Regime  by the words "customs value ". 
2.15. -  In the penultimate paragraph of the unnumbered Article following Article  4, delete the 
words "may be based for this purpose  on information from the Organis ation for Economic 
Co-operation and Deve lopment - OCDE and the Financial Action Task Force - FATF. ". 
 THIRD .- Amendments to Ecuador 's Tax Equity Reform Law:  
3.1.- Add the following paragraphs to Article  159: 
 "Payments made abroad in order to amortize capital and interest gene rated on loans 
granted by international financial institutions for a term of over one year to be used to finance 
investment covered by the Production Code shall also be exempt.  In such cases, the interest rate 
for the operations shall be l ower than the ass et interest rate of reference on the date the loan was 
registered.  Institutions belonging to Ecuador 's financial system and payment s relating to loans 
granted by related parties or financial institutions established or domiciled in tax havens or, in 
genera l, in lower tax jurisdictions, shall not be eligible for this incentive.  
 Likewise, payments made abroad by managers  and operators of Special Economic 
Development Zones (ZEDEs) , either for imports of goods and services related to their authorized 
activitie s or to amortize capital and interest generated by loans granted to them by international 
financial institutions for a term of over one year in order to develop their investment in Ecuador , 
shall also be exempt.  The interest rate for such operations shall be lower than the asset interest 
rate of reference on the date the loan was registered.  This incentive shall not apply to loans 
granted by related parties or financial institution s established or domiciled in tax havens or, in 
general, in lower tax jurisdi ctions. " 
3.2.-  Replace Article 177 by the following:  
 "Article 177.- Taxable base .- Calculation of the tax shall take into account  as the taxable 
base the total a rea corresponding to all rural property owned or in the possession of the obligee at 
the nati onal level, as determined in the land register drawn up for this purpose jointly by 
municipalities and the Ministry of Agriculture, Livestock, Aquaculture and Fisheries or its 
equivalent.  This information shall be forward ed to the Internal Revenue Service and updated 
annually in accordance with the provisions in the regulation s on application of the rural land tax. " 
3.3.- Amend Article 180 as follows:  
a. Replace the text of subparagraph  (a) by the following : "(a) Property situated in upland 
ecosystems, duly  defined by the Ministry of the Environment. " 
b. in subparagraph  (g) following the words "priority ecosystems ", replace the full stop "." 
by a comma "," and add the words "duly qualified by the Ministry of the Environment ". 
c. Add the following subparagrap h at the end of Article 180:  
"(i) Farms that have suffered events as a result of  an act of God or force majeure duly 
substantiated  and certified by the Ministry of Agriculture, Livestock, Aquaculture and 
Fisher ies that seriously affect their yields and pro ductivity; " G/VAL/N/1/ECU/3  
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  3.4.- Replace Article 181 by the following:  
 "Article 181.- Settlement and payment .- The Internal Revenue Service shall determine the 
tax on the basis of the land register drawn up jointly by municipalities and the 
Ministry  of Agriculture, Live stock, Aquaculture and Fisheries or its equivalent.  Obligees shall pay it 
in the form and on the date s determined in the regulations on application of this tax. " 
 FOURTH .- Add the following additional paragraph to Article 2 of the Law on the Regime for 
the Electricity Sector:  
"The State may delegate supply of the generation, transmission, distribution and marketing 
stage of the electricity service to public -private enterprises in which it has a majority holding.  
On an exceptional basis, it may delegate to p rivate initiative and the mutually supportive people 's 
economy the supply of the public electricity service in any of the following situations:  
1. If necessary and appropriate in order to meet the public, collective or general interest ; 
or 
2. If demand for the s ervice cannot be met by public enterprises. " 
 FIFTH .- Amend the following provisions of the Labour Code:  
1. Add the following paragraphs in Article 81:  
"Basic wage means the mi nimum economic payment  by an employer to a person for his/her 
work and is part of r emuneration ; it does not include earnings in cash, kind or services 
received for special work and overtime, commission s, profit -sharing , reserve funds, the legal 
percentage of profits, occasional accommodation costs and subsidies, additional 
remuneration o r any other usual or conventional payment or those determined by the Law.  
The amount of the basic wage shall be determined by the National Wages  Council CONADES, 
or by the Ministry of Labour Relations if there is no agreement in the aforementioned 
Council.  
The basic wage  shall be reviewed annually and progressively until it reaches the decent 
wage in accordance with the provision in the Constitution of the Republic and in this Code. " 
2. Add the following unnumbered Article after Article 105:  
 "Article 105.1 .- Subject to the agreement of the employee and the employer, all or some 
of the profits accruing to the employee may be paid in the form of shares in the company where 
he/she works, provided that the company is registered on a stock exchange and complies with the 
protocol for compliance with business ethics defined by the State and the requirements prescribed 
in the implementing r egulations for the Code of Production, Trade and Inves tment. " 
3. Add the words "or discontinuous " after the word "continuous " in the second paragraph 
of Article 17 of the Labour Code, and at the end of this paragraph, add the following : 
"The wage or salary paid under temporary contracts shall be 35% higher than the hourly 
basic wage  for the sector in which the employee works. ". 
Add the following at the end of the third paragraph : "The wage or salary paid under casual  
contracts shall be 35% higher than the hourly basic wage for the sector in which the 
employee works. ". 
4. Add the following Article after Article 23 : 
"Article 23.1 .- The competent Ministry may regulate special labour relations that are not 
regulated in this Code, in accordance with the Constitution of the Republic. ". 
5. Add the following text to the second paragraph of Article  95 of the Labour  Code after the 
words "thirteenth and fourteenth remuneration ": "economic compensation for a decent wage. ". G/VAL/N/1/ECU/3  
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   SIXTH .- Amendments to the Social Security Law : 
1. Add the following number to Article  14 of the Social Security Law : "Economic compensation 
for a decent wage .". 
2. Add the following  at the end of the second paragraph of Article 11 of the Social Security 
Law: "Economic compensation to achieve a decent wage shall not be taxable. ". 
 SEVENTH .- Amend Article  165 of the L aw on the Promotion of Investment and Participation 
by Citizens, publ ished in the Supplement to Official Journal No. 144 of 1 8 August  2000, as follows : 
replace "National Vocational Training Council " by "The Governi ng Body for Vocational Training ". 
 EIGHTH .- Replace Article 2 of the Law on Development of the Port at Manta by  the 
following:  
 "Article 2.- The Special Interinstitutional Commission of the Port of Manta, with legal 
status, shall be an advisory body of the Directorate of the Port Authority of Manta, and shall be 
responsible for promoting the project to make the por t of Manta Ecuador 's international cargo 
transfer port.  In order to achieve these objectives, the Commission shall have administrative, 
economic and technical autonomy.  
 The Commission shall be composed of the following members:  
 (a) the mayor of Manta, as  chair;  
 (b) a representative of Manta 's legally established chambers of production ; and 
(c) the President of the Directorate of the Port Authority of Manta.  The Municipality 
of Manta shall provide the administrative facilities for the Commission 's functio ning. 
Furthermore, the Commission shall be financed with resources obtained from national 
and international organization s, to be used to achieve its objectives.  
 The Directorate of the Port Authority of Manta shall obligatorily consult the Commission 
when taking decisions relating to the development of Ecuador 's international cargo transfer port 
project in the port of Manta.  The Commission 's decisions shall be in the form of tec hnical advice 
and shall not be b inding. ". 
 NINTH .- Amend the Law on the Ecuadori an Quality System as follows:  
1. Delete the words "and private " in the first paragraph of Article 7.  
2. Replace subparagraph  (a) of Article  8 and add subparagraph  (e) as follows:  
"(a) Interministerial Committee  on Quality "; 
"(e) Ministry of Industry and Producti vity (MIPRO) ". 
3. Add the following final paragraph to Article 8:  
"The Ministry of Industry and Producti vity (MIPRO) shall be the governing body for the 
Ecuado rian Quality System. " 
4. Replace Article 9 by the following:  
 "Article 9.- An Interministerial Committe e on Quality is hereby created as a body for 
coordination and collaboration of intersectoral quality policy and shall be composed of the following 
government bodies:  
1. The Minister responsible for coordinating production, employment and competition;  
2. the Minister of Industry and Producti vity, or his/her permanent delegate, as chair;  
3. the Minister of the Environment or his/her permanent delegate;  
4. the Minister of Tourism or his/her permanent delegate;  
5. the Minister of Agriculture, Livestock Aquacult ure and Fisheries;  
6. the Minister of Public Health or his/her permanent delegate;  
7. the Minister of Transport and Public Works or his/her permanent delegate;  G/VAL/N/1/ECU/3  
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  8. the Minister of Electricity and Renewable Energy or his/her permanent delegate.  
 The Under -Secretariat or the Under -Secretar y for Quality in the Ministry of Industry and 
Producti vity shall act as the Committee 's Secretariat.  
5. Add the following unnumbered Article after Article  9: 
- The Interministerial Committee shall have the following functions:  
1. To approve the National Quality Plan;  
2. to develop policies for implementation of this Law and compliance with the objectives 
therein;  
3. to develop policies on the basis of which the goods and products whose import shall 
mandatorily comply with technical regula tions and conformity assessment procedures 
shall be defined ; to coordinate activities with bodies belonging to the Ecuadorian 
quality system;  
4. to receive the management report on the activities of the Ecuadorian Standardization 
Institute (INEN), as well as that of the Ecuadorian Accreditation Organization (OAE) , 
and to make any recommendations needed to government bodies belonging to the 
Ecuadorian quality system;  
5. to be the ultimate  forum for settling disputes arising in connection with this Law 
caused by ac tion or omission on the part of bodies belonging to the Ecuadorian quality 
system;  
6. to issue guidelines for conformity assessment procedures rela ting to the mandatory 
certification of products, systems and persons engaged in specialized work;  
7. to coordinate and facilitate integrated implementation of national policies on quality;  
8. to prom ote and request preparation of i nvestigations, studies and technical and legal 
input for the development and adaptation of the policy on quality;  
9. to request the preparation an d endorsement of parameters to promote awareness of a 
culture of quality as regards both goods and services;  
10. to request participation, advice and the establishment of working groups with 
institutions and organizations required for fulfilment of its functio ns; 
11. to foster training, technical assistance, specialization and dissemination of issues 
relating to quality of goods and services;  
12. to encourage the search for additional and complementary resources for assistance 
and interministerial cooperation on climat e change issues through the institutional 
structure established for this purpose ; and 
13. to issue the rules required for its functioning and to regulate the exercise of its 
responsibilities.  The relevant provisions in the Statutes of the Executive 's Legal and  
Administrative Regime shall apply to all matters relat ing to its functioning not already 
regulated . 
An Advisory Council for the Interministerial Committee shall be established composed 
of representatives of the production sector, academia and consumers.  
The INEN and the OAE shall have their own technical advisory committees in which the 
production sector, universities and experts in their spheres participate.  
These advisory committees shall mandatorily be consulted and their rulings shall be for 
reference purposes and shall not be binding. " 
1. Delete Articles 10 and 11;  
2. Replace Article 12 by the following:  
 "Article 12.- In order to implement the policies adopted by the Interministerial Committee 
on Quality, the Ministry of Industry and Product ivity shall have the following functions:  
(a) To advis e the Interministerial Co mmittee  on Quality on the study, design and 
feasibility of programmes and projects so as to fulfil the objectives of this Law;  
(b) to comply  with and enforce  the provisions of the Intermi nisterial Co mmittee  on 
Quality;  G/VAL/N/1/ECU/3  
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  (c) to enter into any type of deed, contract  or mutual recognition agreement with 
international institutions and agreement s on technical assistance and/or financial 
cooperation with the appr oval of the Interministerial Commi ttee on Quality;  
(d) to impose the sanctions applicable for violation of the provisions in this Law , on the 
basis of a report submitted by the INEN or the OAE;  
(e) to appoint temporarily laboratories, conformity assessment organizations or other 
organizati ons needed for specific topics, provided that they do not already exist in 
Ecuador;  
(f) other functions assigned to this body in order to implement the policies adopted by 
the Committee ." 
 
8. Add the following unnumbered Article after Article 12:  
 "The Nat ional Qu ality Plan shall remain in force  for one year calculated as of its approval in 
January by the Interministerial Committee on Quality, and shall be evaluated twice during its term.  
 The content of the  National Quality Plan shall fo cus on the followin g aspects:  
a. The promotion of quality;  
b. the preparation and revis ion of the list of products or services subject to quality 
control;  
c. guidelines for preparing technical regulations;  
d. guidelines to promote and execute the designation  and accreditatio n of conformity 
assessment bodies including : local and foreign laboratories, certification and 
inspection bodies , on the b asis of the products and services indicated in 
subparagraph  (a) of this Article;  
e. conformity assessment procedures (CAPs). " 
9. Delete Article 13.  
10. After the words "Public Law " in Article 14 , add "attached to the Ministry of Industry and 
Productivity ". 
1. Delete Article 16.  
2. Amend Article 17 as follows:  
 Replace the first paragraph by the following:  
 "Article 17.- With regard to th e INEN , the Ministry of Industry and Productivity shall have 
the following duties and functions ." 
- Replace subparagraph f) by the following "approve the proposed standards or 
technical regulations  and conformity assessment procedures within its scope.  
The voluntary technical standards issued by the INEN (NTE INEN standards) are 
official and shall comply with the Code of Good Practice for the Preparation, 
Adoption  and Application of Standards of the World Trade Organization 's 
TBT Agreement "; 
- in subparagra ph g), replace the words "propose to the CONCAL " by "propose t o the 
Interministerial Committee on Quality "; 
- in subparagraph j) replace the word "CONCAL " by "Minist er of Industry and 
Productivity ". 
13. Replace Article 18 by the following : 
 "Article 18.- The Director -General of the INEN shall be freely appointed and dismissed by 
the Minister of Industry and Productivity ; he/she shall be a graduate with a degree in the exact 
sciences, have a doctorate and proven experience and technical and profes sional expe rtise in 
areas related to the scope of this Law.  
 The Director shall be the legal, judicial and extrajudicial representative of the INEN.  
He/she  shall be responsible for the proper functioning of the Institute, in accordance wit h the law G/VAL/N/1/ECU/3  
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  and its implementi ng regulations.  In coordination with the sectors involved, he/she shall establish  
technical committee s to prepare standards and technical regulations.  
 Either ex officio or at the request of the Minister of Industry and Productivity, 
the Director -General s hall present draft standards and technical regulations to the Minister for 
approval, together with studies and other documents deemed appropriate, according to the 
approved plans and programmes.  
 The Director -General shall be responsible for conducting inv estigations into alleged 
violations of this Law and shall prepare the pertinent report, to be forwarded to the 
Minister  of Industry and Productivity for information and registration.  
 The Director shall be responsible for the organization of the INEN and s hall therefore recruit 
and dismiss the officials, employees and workers serving the Institute.  He/she shall enter into any 
deeds or contracts required for conducting its activities and fulfilling its objectives, and shall 
prepare its draft annual budget. " 
14. Add "attached to the Ministry of Industry and Productivity " in the first paragraph 
of Article  20 after the words "Public Law ", and delete paragraphs 2, 3, 4, 5 and 6.  
14.4. Replace the first paragraph of Article 22 by the following:  
 "Article 22.- With regard to the OAE, the Ministry of Industry and Productivity shall have 
the following functions :" 
16. Replace the  word "CONCAL " in subparagraph a) of Article  22 by "Interministerial Committee 
on Quality " and replace the word "CONCAL " in subparagraph (i) by "Ministry of Industry and 
Productivity ". 
17. Replace the sentence "shall remain in office for four years and may be re -elected " 
in Article  23 by "shall be freely appointed and dismissed by the Minister of Industry and 
Productivity "; replace the words "Directorat e of the OAE " in subparagraphs (f), (g) and (h) by 
"Minister of Industry and Productivity "; delete the words "at the request of the Directorate " and 
"to be presented to and signed by the Directorate "; and replace "National Council for Quality " 
by "Ministry  of Industry and Productivity ". 
18. Replace the w ord "CONCAL " in Article  26 by "Ministry of Industry and Productivity ". 
19. Replace the w ord "CONCAL " in the second paragraph of Article 28 by "Interministerial 
Committee on Quality " and the words "Directorate of the  OAE" by "Ministry of Industry and 
Productivity ". 
20. Replace the words "National Council for Quality " in the second paragraph of Article  29 by 
"Ministry of Industry and Productivity " and delete the word "policies ". 
21. Replace the word "CONCAL " in Article  34 by "Ministry of Industry and Productivity ". 
22. Replace the words "of its Directorate " in the second paragraph of Article  40 by 
"Ministry  of Industry and Productivity ". 
23. Replace the  word "CONCAL " in subparagraph (c) of Article  46 by "Ministry of Industry and 
Produc tivity"; replace the words "Directorate  of the INEN " in subparagraphs (k) and (l) by 
"Minist er of Industry and Productivity "; 
24. Replace the words "Directorate of the INEN " in the last paragraph of Article  47 by 
"Ministry  of Industry and Productivity ". 
25. Replac e the words "Directorate of the INEN " in Article  48 by "Ministry of Industry and 
Productivity ". G/VAL/N/1/ECU/3  
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  26. Replace the word "CONCAL " in Article  50 by "Ministry of Industry and Productivity ". 
27. Replace the word "CONCAL " in the first and second paragraphs of Article  52 b y 
"Ministry  of Industry and Productivity ". 
28. Replace the words "National Co mmittee  for Quality " in subparagraph  b) of Article  53 by 
"Ministry  of Industry and Productivity or the Interministerial Committee on Quality ". 
29. Replace the word "CONCAL " in Article  57 by "Ministry of Industry and Productivity ". 
30. Replace the word "CONCAL " in the first paragraph of Article  58 by "Ministry of Industry and 
Productivity "; "National Council for Quality, whose President " in the second paragraph by 
"Minist er of Industry and Prod uctivity who"; replace the word "CONCAL " in the sixth paragraph by 
"Ministry  of Industry and Productivity "; replace the words "National Council for Quality " in the 
seventh paragraph by "Ministry of Industry and Productivity ", and replace the word "CONCAL " 
by "Ministry of Industry and Productivity ". 
31. Delete the first and second General Provisions.  
 TENTH .- Amendments to the Law on the Promotion and Control of the Production and 
Marketing of Bananas and Plantains (Barraganete variety) and Other Similar Musacea e for Export, 
codified in RO -S315 of 16  April 2 004. 
10.1 Replace the first and second paragraphs of Article  1 by the following:  
 "Article 1.- Minimum support price .- The Executive, by means of an agreement adopted by 
the Minister of Agriculture, Livestock,  Aquaculture and Fisheries, shall determine , in United  States 
dollars , the mi nimum support price to be paid  mandatorily to banana producers (at the boat) 
for each of the various types of box and specifications of bananas, plantains (Barrangete variety) 
and other musaceae for export, under any transaction or trade arrangement  allowed under this 
Law. For this purpose, the Ministry of Agriculture, Livestock, Aquaculture and Fisheries shall 
organize negotiations.  If the se do not result in an agreement, the Mini stry of Agriculture, 
Livestock, Aquaculture and Fisheries shall set the respective prices by means of a ministerial 
decision.  It shall also set the minimum reference prices (f.o.b.) to be declared by the exporter  
according to the various types of box and t heir specifications.  The price fixing mechanism shall be 
determined in the regulations. " 
10.2 Replace the word "intermediary " by "dealer, i.e. the associations of banana and plantain 
producers " in the fifth paragraph of Article  1, and in the same paragraph  replace the words 
"thirty  days" by "one year ". 
10.3 Add the following text after the fifth paragraph of Article  1: "Dealers who buy fruit from 
producers shall be exempt from the s urety. Subject to a technical analysis, the 
Ministry  of Agriculture, Livesto ck, Aquaculture and Fisheries shall determine which exporters are 
exempt from providing surety ." 
10.4 Replace the words "for the benefit of the producer " in the sixth paragraph of Article  1 by 
"for the benefit of the Ministry of Agriculture, Livestock, Aqu aculture and Fisheries ". 
10.5 Add the following text after the sixth paragraph of Article  1: 
 "All producers, dealers and exporters shall sign sales contracts for the fruit and shall abide 
by the clauses freely and voluntarily agreed by the parties, provid ed that they are not contrary to 
this Law an d its implementing r egulations.  Any exporter who does not sign a contract with 
producers and/or dealers may not export. " 
10.6 Replace the first paragraph of Article  4 by the following:  
 "Article 4.- Sanctions for  non-compliance and its repetition. - The Ministry of Agriculture, 
Livestock, Aquaculture and Fisheries, through the competent administrative authority, either 
ex officio or following a written complaint, shall check that exporters and/or dealers pay produc ers G/VAL/N/1/ECU/3  
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  the minimum support price determined for boxes of bananas, plantains (Barrang ete variety) and 
other musaceae.  
 If non -compliance is determined, the administrative authority dealing with the proceedings, 
after having received the technical report and he ard the interested parties orally and summarily, 
shall impose a fine equal to twenty -five to fifty times the amount of the evasion or 
non-compliance, shall order repayment and refund to producers of the amount evaded or not paid , 
and shall order the suspen sion of exports for fifteen days, without prejudice to any civil or criminal 
proceedings.  
 If there is a repetition of non -compliance, exports shall be suspended for thirty days.  If the 
producer does not receive the minimum support price for the third time , the exporter shall be 
punishable by suspension of exports for sixty days and, if non -compliance occurs for a fourth time, 
the exporter shall be definitively suspended.   
 Repetition means repeated failure to comply within a twelve -month period. " 
10.7 Add the following text after the third paragraph of Article  4: 
 "Exporters shall mandatorily pay for the purchase of boxes of bananas, plantains 
(Barrang ete variety) and other musaceae of different types within a period of eight calendar days 
calculated as of the date of definitive shipment, by transferring funds through the Interbank 
Payments System (SPI) at the Central Bank of Ecuador, from the exporter 's current and/or savings 
account into the bank account of the producer and/or dealer.  Failure to pay throug h the Interbank 
Payments System (SPI) shall lead to the competent administrative authority imposing a fine equal 
to the amount evaded or not paid through the SPI. " 
10.8 Delete the fourth paragraph of Article  4. 
10.9 Add the following after the words "prese nt Law " in the first paragraph of Article  8: 
"that have not previously been authorized by the Ministry of Agriculture, Livestock, 
Aquaculture and Fisheries ". 
TRANSITIONAL PROVISIONS:  
 FIRST .- The reduced rate of corporation tax mentioned in the amendment t o Article  37 
of the Law on the I nternal Tax Regime shall be applied progressively  as follows:  
The tax rate shall be 24 % during the 2011 fiscal year and 23 % during the 2012 fiscal year.  
From the 2013 fiscal year onwards, it shall be 22 %. 
 SECOND .- In order to bring about civil action and processes among companies, diversify 
share ownership and open up the capital of companies in which the State has a holding, within 
one hundred  and eighty days of the date of entry into force of this Code, the State shall define the 
terms and mechanisms for deinvestment in such companies, provided that they do not belong to 
the strategic sectors of the economy determined in the Constitution.  Over this period, therefore, 
the Sectoral Council for Production, within its scope, sh all develop financing mechanisms and sales 
procedures for the shares or companies in question for the benefit of Ecuadorian citizens and 
investors in general, giving pr iority for their purchase to employees of the said  companies . 
 THIRD .- Free zones for wh ich concessions have been granted under the Law on Free Zone s 
shall continue to operate according to the terms in effect when they were authori zed, for the 
duration of the concession.  Management companies and users of the current free zones shall, 
however,  be administratively and operationally subject to the provisions of this Code.  
 FOURTH .- As of the enactment of this Code and for the purposes of approving them, 
companies wishing  to register as new users of free zones still operating shall comply with the  
requirements prescribed in these regulations for operat ors of Special Economic Development 
Zones, and shall be approved provided that they are consistent with the investment plans 
submitted fo r the Free Zone prior to being approved . G/VAL/N/1/ECU/3  
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   FIFTH .- Free zone man agement c ompanies which wish to become eligible for the special 
economic development zones regime may do so provided that the y submit their application to the 
competent authority within  six months before the end of the concession as a free zone.  Wherever 
possible, the Sectoral Council for Production shall give priority to the entry of existing free zones 
into the new scheme determined in this Code.  
 SIXTH .- As of the publication of this Code in the Official Journal, it is provided that the 
official planning  and implementation of activities to promote exports and non -financial 
investments, both in Ecuador and abroad, which was the responsibility of CORPEI pursuant to the 
provisions in Tit le IV, Chapter I, of Law No.  12: the Foreign Trade and Investment Law (L EXI), 
published in the Official Journal of 9  June 1 997, shall become the responsibility of the Ministry 
of Foreign Affairs, Trade and Integration, in coordination with the other government bodies and 
institutions r esponsible until the President of the Repu blic, in exercise of the powers given by 
paragraph 5 of Article 147 of the Constitution of the Republic, organizes and regulates the 
functioning of the Export and Foreign Investmen t Promotion Institute.  
 Pursuant to Title XXX of the Civil Code, the Export and Investment Promotion Corporation 
(CORPEI) will continue as a non -profit -making legal entity under private law, contributi ng to the 
country 's development through private action to promote exports and investment in Ecuador  and 
abroad.  
 Accordingly, in li ne with this provision, within a maximum period of ninety days calculated as 
of the publication of this Law in the Official Journal, the CORPEI shall amend its Statutes in respect 
of its functions, activities, members, administrative bodies, Directorate, r esources and assets ; the 
competence, functions and responsibilities assigned to the government agency specializing in 
promoting exports and foreign investment under these provisions  shall be eliminated . 
The Ministry  of Foreign Affairs, Trade and Integratio n shall decide on the amendments to the 
CORPEI 's Statutes within thirty days of submission of the corresponding project for its information 
and decision.  
 Inasmuch as  it is a strategic policy and objective of the Ecuadorian State covered by the 
Fundamental  Charter, the Government 's current representation on the CORPEI as member of the 
Assembly and of the Directorate shall continue so as to coordinate joint foreign trade policies and 
make the best use of human and economic resources.  Accordingly, the Ministr y of Foreign Affairs, 
Trade and Integration shall draw up agreements on collaboration with the CORPEI so as to take 
advantage of its experience and technical capacity in promoting exports and investment.  
 SEVENTH .- The following concerns the redeemable quo tas paid to CORPEI:  
1. Without prejudice to the provision in the previous Transitional Provision, the redeemable 
quotas created by Law No.  24, published in Official Journal No.  165 of 2  October 1 997, shall 
continue to be collected by the CORPEI until 31  Decem ber 2 010, after which the obligation 
to pay this redeemable quota shall cease.  
2. For the purpose of guaranteeing refund of the redeemable quotas, certificates and coupons 
of contributors within the corresponding time-limits, the Export and Investment Promoti on 
Corporation (CORPEI) shall, within the strict deadline of 90 days, create the trust funds 
deemed necessary and sufficient for refund of the sums to contributors.  These trust  funds  
shall be created  in a public sector financial institution using the resou rces retained statutorily 
and technically for the refund concerned.  The general features of th ese trust funds , and any 
other aspect related to CORPEI 's assets generated prior to 31  December 2 010, shall be 
incorporated into the amendment of its Statutes pro vided in the Sixth Transitional Provision.  
3. In order to ensure that contributors which have accumulated US$500.00 in coupons cash  
them in for CORPEI contribution certificates for the purpose of the corresponding refund ; the 
CORPEI shall issue a notification  in a national newspaper once every quarter as from the 
date of publication of this Code in the Official Journal.  Contributors shall have a period 
of two (2) years in which to cash in the coupons for CORPEI contribution certificates and the 
time-limit for payment of the se certificates shall be 10 years as of the date of issue of the 
last coupon paid to the CORPEI.  
4. Likewise, contributors wh ich have not accumulated US$500 in coupons shall be notified by 
means of a national newspaper so that, within a period o f two years, they convert them into 
CORPEI contribution certificates.  In turn, the se certificates shall be paid within five  years G/VAL/N/1/ECU/3  
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  calculated as of the date of issue of the last coupon paid to the CORPEI in the same terms as 
indicated in the preceding parag raph. 
5. Sums remaining in the trust fund from coupons and certificates that have not been claimed 
by the contributors shall be used to finance joint export promotion and investment projects 
by the Ministry of Foreign Affairs, Trade and Integration and the CO RPEI, taking into account 
the particular features of the trust  fund's establishment.  
 EIGHTH .- The current Directorate of the Ecuadorian Customs Corporation shall remain in 
function for a period of nine days as of enactment of this Code so as to wind up ma tters still to be 
resolved.  After this period, the continuation and resolution of procedures that have not been 
concluded shall become the responsibility of the Director -General.  
 NINTH .- Officials in post in the current Directorate of the Ecuadorian Custo ms Corporation 
shall be employed in the National Customs Service of Ecuador.  
 Civil servants belonging to the Customs Monitoring Service at the  time this Code comes into 
force shall be transferred to the National Customs Service of Ecuador under a reclassi fication 
process, either to the Customs Monitoring Unit or to other operational units of the Service, 
retaining their remuneration and duration of contract in accordance with the Law on the Civil 
Service.  
 TENTH .- Until the new Director -General takes offic e, the General Manager of the Ecuadorian 
Customs Corporation shall carry out the functions of the Director -General of the National Customs 
Service of Ecuador.  
 ELEVENTH .- Goods that are being stored under  the custody of the Ecuadorian Customs 
Corporation o r in warehouses it has rented, for any reason, shall be subject to an inventory and 
valuation by the institution, unless an expert valuation already exists as part of judicial 
proceedings, in which case this shall serve as the value of the goods.  
 After th e goods have been valued, three notices shall be published in two national 
newspapers at an eight -day interval giving a period of 20 days as of the date of the last notice to 
allow those who believe they have rights to the goods to prove their rights in le gal and due form.  
 If during this period it is found that the goods are subject to judicial  proceedings, they shall 
be auctioned off, and the proceeds of the public auction shall be deposited in the name of the 
National Customs Service of Ecuador, as provi ded in the regulations, until the end of the 
proceedings concerned ; if the judge or court rules that the goods should be returned, the 
administration shall hand over the proceeds of the public auction;  if confiscation of the goods is 
decided, the proceeds shall be deposited in the Treasury 's Single Account.  
 The same procedure shall be followed for goods that are not under the orders of the judicial 
authority but under the custody of the National Customs Service of Ecuador , In such cases, 
if no person prov ides evidence of a right to the goods, the proceeds of the public auction shall be 
deposited in the Treasury 's Single Account ; if, on the other hand, a person proves a legitimate 
right to the goods, the matter shall be dealt with in each case according to the provisions of the 
legislation applicable.  
 If it is determined that the goods are of no commercial value and , within the period 
indicated in this provision , no person provides evidence of a right to the goods, their destruction 
shall be ordered without further delay.  Clothing whose import is banned shall be donated to the 
Ministry responsible for social policy.  
 The private sector may be contracted for the purpose of carry ing out the procedure 
described in this provision.  
 TWELFTH .- Administrative or jud icial p roceedings brought against the authorities of the 
Customs Administration up to 2000 inclusive or brought by it against those liable to customs tax in 
respect of amount s not exceed ing two thousand  United States dollars shall be closed ex officio by 
the judicial or administrative authority and the amount of the tax shall be deleted from the 
account s, whether they are amount s claimed by the taxpayer or payable to the Treasury.  G/VAL/N/1/ECU/3  
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   THIRTEENTH .- Until such time as the planned a mendments to the implementing 
regulations for the Organic Customs Law have been adopted and/or the respective administrative 
provisions concerning consumables, live animals, perishable or easily degradable goods have been 
issued, Article  157 of the General Regulations for the Organic Cu stoms Law, published in Official 
Journal No.  158 of 7 September 2 000, shall apply, together with the relevant internal manuals.  
For other matters, until the implementing r egulations for this Code have been  adopted, the 
Directorate of the Ecuadorian Customs  Corporation, while it remains in existence, and thereafter 
the Director -General of the National Customs Service of Ecuador , may issue technical rules for 
their implementation.  
 FOURTEENTH .- After this Code has come into force, the Director -General of the National 
Customs Service of Ecuador, subject to the Law and in accordance with institutional needs and 
purposes, may decide on the administrative transfer of civil servants belonging to the institution, 
including those wh o belonged to the Customs Monitorin g Service  
 FIFTEENTH .- The relevant amend ing agreements with concessionaires of customs services 
shall be concluded within 90 days of the entry into force of this Code in order to adapt to the new 
rules.  
 SIXTE ENTH .- The Director of the National C ustoms Se rvice shall issue the r egulations for 
the Customs Monitoring Unit determining its functions, responsibilities and organic structure, 
within 90 days of the entry into force of this Code . 
 SEVENTEENTH .- The institution with competence for administrative cont rol of Special 
Economic Development Zones shall be composed of civil servants, with the financial and 
administrative resources and infrastructure of the National Free Zones Council (CONAZOFRA).  
 EIGHTEENTH .- The President of the Republic, in an Executive D ecree, shall appoint the 
"Governing Body for Vocational Training ", and decide on its composition and structure, within 
a period of 90 days of the enactment of this Code.  Until the Executive Decree appointing the 
Governing Body for Vocational Training has b een adopted, the National Vocational Training Council 
shall continue to be in charge.  
 In order to comply with the provisions in this Code on vocational and technical training, the 
Governing Body for Vocational Training shall, within a maximum period of ei ghteen months as of 
the entry into force of these regulations, build up a vocational training system based on labour 
skills, making the necessary structural and managerial changes in such a way that its financing 
leads to the creation of academic curriculu ms based on profes sional profiles in order to develop 
vocational training and recognition of labour skills through evaluation and certification.  
 For this purpose, the Governing Body for Vocational Training may finance all activities and 
direct and indirec t costs to bring about a labour -skills-based system, for example, studies, 
identification of profes sional profiles, development of standards and rules, preparation 
of curriculums, training programmes, evaluation and certification of labour skills, inter al ia. 
 NINETEENTH .- The resources generated as a result of applying Article  1 of the law 
amending the Law on the Development of the Port of Manta, published in Official Journal No. 323 
of 22 May 1998, shall be distributed as follows  until entry into forc e of this Code:  
- 10% of the resources shall be handed over to the Special Interinstitution al Commission 
of the Port of Manta, to be invested in complementary studies and projects on promotion 
of development of the Port and the airport of Manta , for the purpos e of setting u p a logistics 
services centre in this canton, without prejudice to their use also to fulfil contractual 
obligations entered into prior to the entry into force of this Code ; and 
- The remaining 90 % of the resource s shall be transferred  to the Manta Port Authority and 
shall be used to finance works in the Port of Manta to be paid by the Authority, and to 
implement Ecuador 's international cargo transfer port project at the Port of Manta.  
This institution shall be responsi ble for th e planning, org anization and ex ecution of Ecuad or's 
international cargo transfer port project at the Port of Manta.  The project shall be promoted 
in coordination with the Special  Interinstitutional Commission of the Port of Manta.  G/VAL/N/1/ECU/3  
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  Subsequently, the resources generated on  the basis of the legal provision mentioned in this 
Article shall be attributed to the Manta Port  Authority in order  to carry out the international 
cargo transfer port project.  
 TWENTIETH .- Economic compensation to reach the decent wage based on the provis ions 
of Article 8 of this Code shall be paid for as long as the sum of the unified basic wage plus the 
components mentioned in Article  8 amount to less than the decent wage or until the unified basic 
wage alone equals the decent wage.  The temporary compens ation shall, under no circumstances, 
be converted into an acquired right for workers.  
 TWENTY -FIRST .- The time-limit for declaring and paying the tax on rural land for the 2010 
fiscal year shall be up to 31  December of this fiscal year.  
 TWENTY -SECOND .- For real estate in the Amazon Region, for the fiscal periods between 
2010 and 2015 inclusive, the trigger for the tax shall be ownership or possession of land exceeding 
70 hectares, pursuant to the terms of Article  174 of Ecuador 's Tax Equity Reform Law.  Persons 
having paid the tax for the year  2010, however, but not owning or possessing land exceeding 
70 hectares shall have the right to refund of the exce ss payment in accordance with the Tax Code.  
 If the obligee owns and/or possesses land in the Amazon regi on and in other regions in 
Ecuador at the same time, all these areas shall be added together in order to calculate the tax and 
the land in the Amazon Region subtracted up to the maximum allowed for each fiscal year.  
The surplus resulting from this calculat ion shall be the taxable base.  If the obligee owns less than 
25 hectares in the Amazon Region, however, the taxable base shall be the amount exceeding 
25 hectares in the total amount of his /her rural land at the national level.  
 From 2016 onwards, the numb er of hectares set out in the table below shall apply when 
calculating the tax on rural land in the Amazon Region.  
- FISCAL YEAR LIMIT (HECTARES)  2016 61, 2017 52, 2018 43, 2019 34, 2020 .... 
ONWARDS,  25. 
In any event, for payment of the rural land tax, as  long as no national disaster has been 
proclaimed and the In ternal  Revenue Service informed accordingly , as provided in this Law and its 
implementing Regulations, obligees shall declare and pay this tax in the authorized financial 
institution, using the fo rm prepared for this purpose by the In ternal  Revenue Service.  
 If the tax administration finds evidence of a case of force majeure  or an act of God , payment 
facilities may be granted according to the terms laid down in the Tax Code for a period of  up to 
five years.  
 TWENTY -THIRD .- Within 60 days of the entry into force of this Code, the administrative 
resources and personnel currently with the Foreign Trade and Investment Council (COMEXI) shall 
be transferred to the ministry appointed as the Technical Secre tariat for the governing body for 
trade policy.  Likewise, all decisions adopted by COMEXI shall remain in force and shall have their 
respective legal effects until explicitly or tacitly repealed.  
 TWENTY -FOURTH .- Within 60 days of the entry into force of t his Code, the administrative 
resources and personnel currently with the National Council for Quality, the Directorate of the 
INEN and the Directorate of the OAE shall be transferred to the Ministry of Industry and 
Productivity . Likewise, all decisions adop ted by these bodies shall remain in force and shall have 
their respective legal effects until explicitly or tacitly repealed  by the Interministerial Council 
on Quality or by the Ministry of Industry and Productivity, whichever is applicable.  
 TWENTY -FIFTH .- Fines for breaches of regulations recorded up to 30  October 2 010 in the 
Interactive Foreign Trade System (SICE) of the Ecuadorian Customs Corporation under the Organic 
Customs Law, except for those recorded because of late submission of the customs decla ration or 
failure to provide facilities for customs control, and not paid, in respect of which the Ecuadorian 
Customs Corporation has not brought any legal proceedings for their payment, shall be 
automatically deleted from the Customs A dministration 's comp uter system by the Director -General 
of the National Customs Service of Ecuador.  G/VAL/N/1/ECU/3  
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   REPEAL PROVISIONS  
 Unless otherwise specified in the Transitional Provision s, as of the date of entry into forc e 
of this Code, all regulations that are contrary to its provisi ons are hereby repealed.  In addition, 
the following regulations are explicitly repealed:  
a. Codification No. 2006-004 to the Industrial Promotion Law, published in Official  Journal  
No. 269 of 12 May 2 006; 
b. The Law to Promote Small I ndustry, contained in Supreme Decree No. 921, published in 
Official Journal No. 372 of 20 August 1 973; 
c. The Law on Tax and Loans for Industries Established in the Province of Esmeraldas, 
published in Official Journal No. 130 of 14  August 1 997; 
d. Law No. 35 on Agroindustrial and Tourism Development in the Province of Manabí , published 
in the Supplement to Official Journal No. 194 of 14 November 1 997; 
e. Law No. 45 on the Promotion of Industry  in the Province of Bolívar, published in 
Official  Journal No. 218 of 18  December 1 997; 
f. Law No. 48 on the Promotion of Industry and Agroindustry in the Province of  Imbabura 
published in Official Journal No. 223 of 26 December 1 997; 
g. Law No. 51 on the Promotion of the Production of Goods and Development of the 
Agricultural Sector in the  Province of Chimborazo , published in Official Journal No.  227 
of 2 January 1 998; 
h. Law No. 65 on the Promotion of Industrial, Handicrafts and Tourism Development in the 
Province of Cañar, published in Official Journal No. 269 of 5 March 1 998; 
i. Law No. 136 on the Promotion of Production and Prevention of the Population Exodu s from 
the Province of Loja, published in Official Journal No. 1 of 12 August 1 996; 
j. Law No. 46 on Investment Promotion and Guarantees, published in Official Journal No.  219 
of 19 December 1 997; 
k. Foreign Trade and Investment Law, published in the Supplement to Official Journal No.  82 
of 9 June 1 997; 
l. Article  7 of the Law on the Promotion and Development of Agriculture, published 
in Official  Journal No. 792 of 15 March 1 979; 
m. Article 15 of the Law on Agricultural Development, published as Codification No. 2004-02, 
published in the Supplement to Official Journal No. 315 of  16 April 2 004; 
n. Law on Free Zone s, published as Codification No. 4, published in Official Journal No.  562 
of 11 April 2 005; 
o. The second chapter of Law No. 90 on the Maquila Regime and Hiring of Part -Time Labour , 
published in the Supplement to Official Journal No.  493 of 3  August 1 990. Where applicable, 
the regulation s repealed by this provision may be incorpo rated into the customs regulations, 
in the temporary admission for inward processing regime, taking into account the special 
features of the maquila system which remain in force in the aforementioned Law;  
p. Article s 3 and 5 of the Law on the Development o f the Port of Manta are repealed, together 
with the unnumbered Article following Article  3, introduced by Law No. 28, published 
in Official Journal No. 231 of 12  December 2 003. The second paragraph of  Article  1 of the 
Interpretative Law No. 2006-51, publis hed in Official Journal No.  344 of 29  August 2 006 is 
also repealed;  
q. The Organic Customs Law ; and 
r. The Industrial Parks Law, published in Official Journal No. 137 of 1  November 2 005, and 
amendments thereto.  
 The provisions in this Code and the repeal p rovisions shall enter into force as of the date 
of their notification  in the Official Journal.  
 Done and signed at the seat of the National Assembly in the Metropolitan District of Quito, 
Pichincha Province, on the sixteenth  day of December two  thousand  and ten. 
(signed ) Fernando  Cordero  Cueva . President. (signed ) Dr. Francisco  Vergara  O., Secretar y-General . G/VAL/N/1/ECU/3  
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  ANNEX 7 
RAFAEL CORREA DELGADO  
PRESIDENT  OF THE REPUBLIC  
WHEREAS : 
 Ecuador 's Constitution provides that Ecuador is a constitutional State with rights an d justice 
whose principal duty is to guarantee the effective enjoyment of the rights enshrined in the 
Constitution and in international instruments without discrimination;  
 One of these fundamental rights to be guaranteed is : "The right to ownership in any  form, 
bearing in mind social and environmental functions and responsibilities ", recognized in Ecuador 's 
Constitution and in international human rights instruments;  
 The Organic Code of Production, Trade and Investment was published in Official Journal 
No. 351 of 29  December 2 010 and Book V thereof concerns "Systemic competiti veness  and 
customs facilitation "; 
 Executive Decree No.  758, published in Official Journal No.  452 of 1 9 May 2 011 issues the 
"Regulation s on the Title 'Customs facilitation for trade ' of Book V of the Organic Code 
of Production, Trade and Investment "; 
 The legal responsibilities conferred on the National Customs Service of Ecuador by the 
Organic Code of Production, Trade and Investment shall be exercised by the former observing 
constitu tional rights;  
 The customs regulations shall ensure the maximum facilitation of foreign trade to make it 
a pillar for revitalizing production ; and 
 In legitimate exercise of his attributions and in compliance with his Constitutional duty , 
HEREBY DECREES:  
AMENDMENTS TO EXECUTIVE DECREE No. 758 CONTAINING THE REGULATION S ON 
THE TITLE "CUSTOMS FACILITAT ION FOR TRADE " OF BOOK V OF THE ORGANIC 
CODE  OF PRODUCTION, TRADE AND INVESTMENT  
Article 1: Replace Article  249 by the following : 
 "The occurrence of any of th e grounds for definitive abandonment implies tacit admission 
of the owner 's desire to aban don the goods in favour of the Customs A dministration.  
The administrative act by which the competent District Director of Customs declare s 
definitive abandonment shal l mean the loss of ow nership of the goods to the Customs 
Administration.  
 Notwithstanding the foregoing, the administrative act may be annulled on the grounds 
of lapse of time if, within the eviden tial stage of the administrative appeal , the individual 
concerned remedies  the omission that led to the declaration of definitive abandonment.  
 If it is sought to obtain release of the goods once the omission has been remedied  in the 
course of the appeal  for review , a request shall be made before the initiation of  the 
procedure to auction off or award the goods free of charge.  
 The Director -General of the National Customs Service of Ecuador shall determine the cases 
and the forms in which s urety  has to be lodged for application of this Article. " G/VAL/N/1/ECU/3  
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   TRANSITIONAL PROVI SION .- All importers who currently have a decision pending on 
an administrative claim or review procedure against an administrative act declaring the definitive 
abandonment of their goods may remedy  the omission that led to the declaration up until the 
decision on the review is taken.  If they do so, the administrative act contest ed shall be validly 
annulled for reason s of expediency . 
 This Executive Decree shall enter into force as of its publication in the Official Journal.  
 Done in the National Palace in Quito on the eleventh day of June 2 012. 
Rafael Correa Delgado  
PRESIDENT  OF THE REPUBLIC  G/VAL/N/1/ECU/3  
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  ANNEX 8 
Resolu tion No. S ENAE -DGN-2012-0231-RE 
Guayaquil, 2 9 June 2 012 
NATIONAL CUSTOMS SERVICE OF ECUADOR  
WHEREAS  
 Paragraph 3 of Article 225 of the Constitution of th e Republic of Ecuador specifically provides 
that the public sector is comprised of bodies and institutions crea ted by the Constitution or by law 
to exercise the powers of the State, to provide public services or to carry out economic ac tivities 
entrust ed to the State.  
 The Supplement to Official Journal No.  351 of Wednesday, 29  December 2 010, published the 
Organic Code of Production, Trade and Investm ent, whose Title II on Customs F acilitation for 
Trade contains the rules to regulate legal relations between  the State and natural and legal 
persons engaged directly or indirectly in international goods traffic, specifically repealing the 
Organic Customs Law . 
 Article 17 et seq. of Decision No. 571 of the Andean Community on the customs valuation 
of imported goo ds provides the following : "Doubts concerning the truth or accuracy of the value 
declared : When a declaration has been submitted and the Customs Administration has reason to 
doubt the truth or accuracy of the value declared or the data or documents submitt ed in support 
of the declaration, the Customs Administr ation shall request the importers to provide written 
explanations, additional documents or proof to show that the value declared represents the total 
amount actually paid or payable for the imported go ods, adjusted in accordance with the 
provisions in Article  8 of the WTO Customs Valuation Agreement  (…)". 
 Article 18 ibid states : "Burden of proof : In determining the customs value, as well as in 
checks and enquiries by Customs Admin istrations of Andean C ommunity m ember countries, 
concerning valuation, the burden of proof shall, in principle, lie with the importer or buyer of the 
goods . If the importer and buyer are not the same person, the burden of proof shall lie with both 
the importer and the buyer of the imported goods ; if the importer or buyer is a legal person, with 
its legal representative and the person authorized to act on its behalf. ". 
 By means of Executive Decree No. 934 of 1 0 November 2 001, the undersigned was 
appointed Director -General of the  National Customs Service of Ecuador.  
 In exercise of the powers and responsibi lities conferred by subparagraph  (l) of Article  216 
of the Organic Code of Production Trade and Investment : "by means of decisions, to issue the 
regulations, manuals, instructio ns and office circulars needed to apply the operational, 
administrative, procedural  and customs valuation aspects (…) ", the Director -General of the 
National Customs Service of Ecuador.  
HEREBY DECIDES : 
REGULA TIONS FOR THE REASONABLE DOUBT PROCEDURE  
 Article  1: The period given to the d eclarant to furnish the Customs A dministrati on with 
evidence of the price actually paid or payable shall be five (05) working days, solely renewable by 
another two (02) days to be calculated as of receipt of the corresponding n otification.  
 Article  2: To a dopt and update the format for notification of reasonable doubt, in  
accordance with the customs regulations currently in force, attached as the single annex to this 
resolution.  G/VAL/N/1/ECU/3  
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   SINGLE  PROVISION .- This resolution shall enter in to force as of its signature, without 
prejudice to its publication in the Official Journal.  The Directorate of the SENAE General Secretariat 
shall be responsible fo r its dissemination on the institution 's website, publication in and 
transmission to the Off icial Journal.  G/VAL/N/1/ECU/3  
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  ANNEX 9  
DIRECTORATE OF THE ECUADORIAN  
CUSTOMS CORPORATION  
WHEREAS : 
 It is the task of the Ecuadorian Customs Corporation to administer customs services ' flexibly 
and transparently, focusing on efficient collection of taxe s, facilitation an d control of c ustoms 
administration in foreign trade, based on integrated and computerized procedures, with a strong 
culture of competition, to guarantee the excellence of the service for external and domestic users, 
making an active contri bution to Ecuado r's development;  
 Decision No. 571 of the Andean Community deals with the customs valuation of imported 
goods, stating in its "Article 1  - Legal basis . - For the purposes of customs valuation, the 
member countries of the Andean Community shall be gov erned by the provisions in the 
'Agreement on Implementation of Article VII of the General Agre ement on Tariffs and Trade 1994 ', 
hereinafter 'the WTO Customs Valuation Agreement ', attached to this Decision, by this  Decision 
and by its Community i mplementing regulations to be adopted for this purpose in a Resolution by 
the General Secretariat. "; 
 RESOLUTION  No. 846, Community implementing r egulations for Decision  No. 571 - Customs 
valuation of imported goods, deals with application of customs valu ation to goods imp orted into 
Community Customs Territory, providing details and procedures for the implementation of Decision 
No. 571. 
 Decisi on No. 574 of the Andean Community deals with the Andean Customs Control Regime, 
determining:  
 Article 2.- The objective of this Dec ision is to deter mine the regulations which the Customs 
Administrations of Andean  Community member countries shall apply for the control of foreign 
trade operations.  
 Customs control means the ser ies of measures adopted by the Customs A dministration for 
the purpose of ensuring compliance with customs legislation or any other provisions whose 
application or implementation are within the competence or responsibility of the customs.  
 Article 3.- Customs control shall apply to the  entry, stay, transfer, movemen t, storage and 
exit of goods, loading units and means of transport to and from Community customs territory.  
 Likewise, customs control shall be exercised over persons engaged in foreign trade 
transactions and those who enter or leave customs territory ; 
 Article 4.- Customs control may be exercised at the following stages:  
(a) Post-entry  control, exercised by the Customs A dministration prior to acceptance 
of the customs declaration for the goods;  
(b) Concurrent control , exercised from the time of accept ance of the declaration by the 
Customs up to the time when the goods are released or loaded;  
(c) Post-clearance control , exercised as from release or loading of the goods cleared 
for a specific customs regime ; 
 Article 16.- The Customs A dministration s shall be authorize d to carry out such controls in 
respect of any importer or exporter declaring goods that are subject to control ; any person directly 
or indirectly involved for profes sional reasons in customs transactions subject to control ; any other 
person posse ssing or having available information, documents or data concerning transactions 
subject to customs control ; or any person in possession of goods subje ct to customs control;  
The p ost-clearance control  unit may inspect books, documents, files, magnetic medi a, 
computer data and any other information concerning foreign trade transactions . It may also G/VAL/N/1/ECU/3  
- 288 - 
  require the submission of such information even if it is to be found outside the scope of its 
territorial control. ; 
 Article 53 of the Organic Customs Law states the following : "Verification and rectification. - 
Within three years as of the date of payment of foreign trade taxes, customs declaration s shall be 
subject to random checks by the General Manager of the Ecuadorian Customs Corporation.  
If errors in payment are found either to the benefit or detriment of those subject to tax 
obligations, the corresponding settlement shall be made without prejudice to other action legally 
applicable, provided that there is no presumption of an offence.  If the settlement result s in 
a difference to the benefit or detriment of the obligee, the respective note or entitlement to credit 
shall immediately be issued. "; 
 Article  56 of the General Implementing Regulations for the Organic Customs Law, amended 
by Executive Decree No.  855, published in Official Journal No.  260 of 2 5 January  2008, states  
"Random selection mechanism:  The random selection mechanism shall operate on the basis of the 
risk profiles determined by the Customs Corporation. "; 
 Pursuant to the foregoing, in accordance with the last paragraph of Article  46 in accordance 
with the responsibilities given by paragraph 7 of Article 109 of the Organic Customs Law,  
HEREBY DECIDES : 
 ARTICLE  1.- To authorize the General Manager of the Ecuadorian Customs Corporation to 
adopt the p rocedure concerning control of th e value of imported goods, base d on a selection by 
risk profile.  
 For this purpose, the General Management shall take the following into account, inter alia: 
 a. Concurrent con trol: 
- The reasonable doubt procedure may only  be initiated in respect of goods subject to 
the single customs d eclaration (DAU) and the physical i nspection c hannel with 
monitoring of value, in accordance with supranational rules and the manuals  or 
instructions issued or to be issued for this purpose.  
- Once the documents have been inspected by the official concerned, goods subject to 
the single customs d eclaration (DAU) and the inspection channel without monitoring 
of value shall not result in any notes in the documents as a result of action by the 
person conducting the physical inspection . If doubts are raised in the administrative 
act determining the tax or there are inconsistencies in the declared value of the 
goods, the official in charge shall include a warning in the inspection report, a nd this 
information shall be transmitted to t he general intervention coordination department  
through the computer system before the inspection concludes, in accordance with 
supranational rules and the manuals or instructions issued or to be issued for this 
purpose.  
- The s ingle customs d eclaration (DAU) and the documents inspection channel shall be 
reviewed by the official in charge in accordance with the procedures in effect.  
Only if doubts are raised or there are inconsistencies concerning the declared value of 
the goods, shall a warning be included in the report containing information on value , 
which shall be transmitted to the general intervention coordination department  
through the computer system before the inspection concludes, in accordance with 
supranational rules and the manuals or instructions issued or to be issued for this 
purpose.  
If the physical or documentary  inspection reveals further new elements other t han the value 
of the goods , the official in charge shall abide by the respective customs declaratio n and 
comply with the procedures established for this purpose.  
 b.- Post- clearance control  
- Using  properly and technically substantiated risk -analysis -based selection 
mechanisms, the general intervention coordination department , through the sectoral G/VAL/N/1/ECU/3  
- 289 - 
  risk analysis division, shall consider the warnings reported by the district divisions 
together with the risk variables for each declaration, in order to select the single 
customs declaration s to be subject to a non -participatory review . This selection and 
the resulting identification of cases to be reviewed shall lead to initiation 
of a non-participatory review , in accordance with the supranational rules and the 
manuals or instructions issued or to be issued for this purpose . The non -participatory 
review divis ion of the general intervention coordination department  shall be the body 
responsible for the proper conduct and conclusion of such reviews.  The selection is 
without prejudice to the other cases determined in the Organic Customs Law and its 
General Impleme nting Regulation s. 
- The general intervention coordination department , through the sectoral risk -analysis 
division, shall determine the single customs declarations (DAU) to be subject to 
post-clearance control using  properly and technically substantiated r isk-analysis -based 
selection mechanisms for those single customs decl arations (DAU) that have 
previously been subject to non -participatory review . This selection process and the 
ensuing identification of cases shall be carried out every two  (2) months and the 
post-clearance control division of the general intervention coordination department  
shall be the administrative unit responsible for the proper conduct and conclusion 
of such investigations.  The identification of cases shall be without prejudice to the  
other cases determined by the general intervention coordination department . 
TRANSITIONAL PROVISION  
 In order to comply with this delegation of authority, the General Management of the 
Ecuadorian Customs Corporation shall take the necessary administrative measures to establish the 
general coordination department (s), draw up appropriate plans for ensuring the operational 
efficiency of foreign trade operators, and approve the technological to ols needed for this purpose.  
 Until procedures solely applicable to control of the value of imported goods exist, procedures 
shall continue in accordance with the regulations and methods presently in effect.  
FINAL PROVISION  
 The Office of Operations, the Regional Office, General Coordination Departments , District 
Divisions , the General Secretariat of the Ecuadorian Customs Corporation have been informed 
of this provision, for notification.  
 This resolution shall come into force as of the date of its signature, without prejudice to 
notification in the Official Journal.  For p ublication and dissemination on the website of the 
Ecuadorian Customs Corporation.  
 Done and signed in the city of Guayaquil, on 15 March 2 010. G/VAL/N/1/ECU/3  
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  ANNEX  10 
Resolu tion No. S ENAE -DGN-2012 -0353 -RE 
Guayaquil, 2 1 October 2 012 
NATIONAL CUSTOMS SERVICE OF ECUADOR  
THE DIRECTOR GENERAL  
WHEREAS  
 Article 226 of the Constitution of the Republic of Ecuador enshrines the legal principle of due 
process as a limit on all action by persons belonging to Ecuador 's government sector, indicating 
that: "State institutions, bodies,  agencies, public servants and persons who act by virtue of a state 
power granted to them shall perform only those duties and wield those powers that are given to 
them by the Constitution and the law . They shall coordinate actions for the fulfilment of the ir 
purposes and enforce the enjoyment and exercise of the rights recognized in the Constitution. "; 
 Article 212 of the Organic Code of Production, Trade and Investment provides that the 
National Customs Service of Ecuador is the body which has been given t he technical and 
administrative competence necessary to advance the planning and implementation of Ecuador 's 
customs policy and to exercise, in the prescribed form, responsibility for determining taxes, 
resolving, punishing and regulating customs matters ; 
 Article 11 of Decision No. 571 of the Commission of the Andean Community 
"Customs  valuation of imported goods ", published in Official Gazette No. 1023 of the 
Cartagena  Agreement of 15  December 2 003 and published in Ecuador in Official Journal No. 317 
of 20 April 2004, provides that : "The Andean Customs Value Declaration shall be completed and 
signed by the importer or buyer of the goods ; and if the domestic legislation of the member 
country so provides, by their legal representative or the person authorize d to do so on their behalf.  
The Andean Customs Value Declaration shall be submitted to the customs authority, together with 
the customs declaration of the imported goods, by the importer or by the person authorized to act 
on his /her behalf, as provided i n domestic customs legislation  (…)."; 
 Article 13 of the aforementioned Decision No. 571 on "Customs valuation of imported goods " 
determines the responsibilities of persons drawing up and sign ing the Andean Customs Valuation 
Declaration as follows : "Article 13.- Responsibilities.  Pursuant to Article 11 of this Decision, any 
person completing and signing the Andean Customs Value Declaration shall be responsible for : 
(a) the truth, accuracy and completeness of the particulars given in the declaration of value ; 
(b) the authenticity of the documents submitted in support of these particulars ; and (c)  the supply 
and submission of any additional information or document  necessary to establish the customs 
value of the goods. (…)."; 
 Article 12 of the aforementioned Dec ision No.  571 on "Customs valuation of imported goods " 
provides for the possibility of su bmitting the declaration in electronic form, specifically : 
"(…) Electronic declaration. - The Andean Customs Value Declaration may be submitted to the 
competent customs  authority using an electronic data transmission system, in accordance with the 
provisions in domestic legislation. "; 
 The First Transitional Provision  of the Regulation s in the Title "Customs facilitation for trade" 
in Book V of the Organic Code of Produc tion, Trade and Investment, fixes 3 0 April 2 013 as the 
deadline for the Customs A dministration to implement the modules for the new computer serv ice 
of the National Customs Service of Ecuador, whi ch is intended to computerize, improve the 
transparency and streamline all customs procedures, inc luding the electronic submission 
of supporting documents such as the Andean Customs Value Declaration ; 
 Article 2020 of Ecuador 's Civil Code determines the stipulative definition of a n agency  
contract, providing that . "(..) a mandate is a contract by which one person entrusts another 
person with managing  one or more business transactions and assumes the risk on behalf of the 
former.  The person giving the mandate is the principal and the person accepting the mandate the 
agent, proxy or representative . (…). "; G/VAL/N/1/ECU/3  
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   Subparagraph (d) of Article 73 of the Regulation s in the Title "Customs facilitation for trade" 
in Book V of the Organic Code of Production, Trade and Investment, states that the 
Director -General of the National Cus toms Service of Ecuador may determine the submission of the 
supporting document s required to control transactions and t o verify compliance with the 
regulations applicable;  
 The Director -General of the National Customs Service of Ecuador, in exercise of his /her 
power s granted in subparagraph (l) of Article 215 of the Organic Code of Production, Trade and 
Investment, HEREBY DECIDES to issue the  following;  
GUIDELINES CONCERNING  PERSONS THAT MAY SIGN THE ANDEAN  
CUSTOMS VALUE DECLARATION (DAV)  
 Article 1: Prepa ration of the DAV : The dat a required for the Andean Customs Value 
Declaration (DAV) shall be taken from the data entered and forward ed in the Customs Import 
Declaration (DAI).  After the Customs Import Declaration (DAI) has been forwarded, the computer 
system may generate the corresponding Andean Customs Value Declaration (DAV) electronically, 
where necessary, and it shall be fully legally effective.  
 Article 2: Obliga tion to conclude a n agency  contract : In order to be able to submit 
a customs declaration on  behalf of a third party importer, customs brokers or persons acting in 
their stead or place shall have previously concluded the corresponding agency  contract with the 
principal in order to submit and sign the DAV.  In the agency  contract concluded by the p arties, 
the consign ee shall delegate to the customs broker or the person acting in his/her stead or place 
the signature of the DAV, in the name and on behalf of the importer and at the latter 's risk.  
 Article 3: Termination of the mandate : The agency  contract referred in the previous 
Article shall be for an indefinite period and shall be valid for the submission of an indefinite number 
of customs declarations.  If for any r eason, however, the importer, whether a natural or legal 
person, wishes to annul the m andate given to the customs broker or the person acting in his/her 
stead  or place, he/she  shall inform the Customs A dministration of the deed by which the 
contractual relationship is terminated.  
 Artic le 4: Principal : Only an importer who has his/her domic ile or residence in Ecuador and 
who is aware of the data required for the Andean Customs Value Declaration (DAV)  and has them 
available  may appear as a principal in the agency  contract with the customs broker.  
 Importers who are natural persons shall enter  into contracts jointly with their customs 
brokers, but if they are legal persons the mandate shall be signed by their legal representative.  
In both cases, the contract shall be concluded in the  proper format set out in Annex  I to this 
resolution  
 Article 5: Administrative responsibility : Conclusion of an agency contract in favour 
of a customs broker does not alter the administrative responsibility incumbent upon the importer 
legally obliged to forwar d the An dean Customs Value Declaration.  Consequently, the  only person 
administratively responsible for the tru th, accuracy and completeness  of the data in the DAV is the 
importer.  
 Article 6: Control : If post -clearance control reveals  that this document is missing, a fine 
shall be imposed on the customs broker w ho forwarded the customs declaration for breach of the 
regulations.  In such cases, a customs broker who completed a Customs I mport Declaration 
without having previously entered into an agency contract shall be fully responsible for the 
information therein.  
 Article 7: Conserva tion of the contractual instrument : The customs broker and the 
importer shall conserve the agency contract for up to five years after payment of the taxes in 
respect of the latest customs declaration forwarded under the aforesaid agenc y contract.  
This specific and written contractual instrument is th e only proof ac ceptable to the Customs 
Administration for the purpose of proving the relationship between the principal and the agent.  G/VAL/N/1/ECU/3  
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  GENERAL PROVISION  
 Add the following subparagraph (o) t o Article 26 of the "Regulations governing the activities 
of customs brokers " (Resolu tion DGN-0409) : "(o) Obtain from any importer the broker declares 
that he/she represent s, the mandate to sign the Andean Customs Value Declaratio n on behal f and 
in the nam e of the former and at his/her risk, under the terms and conditions provided in the 
corresponding resolution. ". 
 FINAL PRO VISION : Resolution No. 0723 "  Guidelines concerning persons that may sign 
the Andean Customs Value Declaration (DAV)"  is hereby repeal ed. 
 This resolution shall enter into forc e as of its signature, without prejudice to its publication in 
the Official Journal.  
Document  signed electronically  
Econ. Pedro Xavier Cárdenas Moncayo  
DIRECTOR -GENERAL  
ANNEX I 
Mandat e to sign and submit the Andean  Customs Value Declaration  
 In the city of (___) on (dd/mm/ year), appearing as party of the first part ( ____________ ) 
identity card number  (_______________ ), [(in his/her own right )/(having the right to represent 
the company (___________________) identifie d by RUC (__________________)], hereinafter 
called "the principal ". Appearing as party for the second part (______________) identity card 
number (___________), [ (in his/her own right)/(having the right to represent the company 
(___________________) identif ied by RUC (__________________)] having the status 
of (customs broker) duly authorized by the National Customs Service of Ecuador to exercise this 
activity, hereinafter called "the agent ". 
 The principal declares that he/she is acting with sufficient right s and confers a special 
mandate on the agent so that in the name and on behalf of the principal, and at the latter 's risk, 
he/she may sign the Andean Customs Value Declaration, pursuant to Article  8 of Decision No.  571 
of the Commission of the Andean Commu nity on the Customs Valuation of Imported Goods . 
The Andean Customs Value Declaration signed by the agent in exercise of this instr ument shall be 
used by the agent  for customs clearance of the goods imported by the principal.  
 The parties declare that they  are aware that the administrative responsibility which public 
law provisions confer on the importer in respect of the completion and signature of the Andean 
Customs Value Declaration may not be transferred to a third party under a contractual 
arrangement  between individuals.  Consequently, the parties declare that they are aware that the 
principal alone shall be responsible, in accordance with Article 13 of Decision No. 571 of the 
Commission of the Andean Community, for the truth, accuracy and completeness of the particulars 
given in the Andean Customs Value Declaration (DAV).  
 This contract shall be for an indefinite period and shall be valid to enable the agent to sign 
an indefinite number of Andean Customs Value Declarations on behalf of the principal.  
The principal may, however, annul this mandate at his/her discretion at any time, although the 
parties declare that such annulment shall not have any legal effect until it has been transmitted to 
the National Customs Service of Ecuador.  
Import er  Customs bro ker 
Principa l Agent  
 
__________  G/VAL/N/1/ECU/3  
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  Translation of pages 16 4-165 
KEY TO THE TABLE  
ANDEAN 
COMMUNITY  Andean Customs 
Value Declaration  LOGO CUSTOMS 
AUTHORITY OF 
THE COUNTRY  COUNTRY CODE  
Official use  No. of form  
 
1. No. of additional sheets attached to the DAV  
2. No. of customs declaration of the goods - Date 
3. Decision - Type - Specify - Number - Year 
4. Decision - Type - Specify - Number - Year 
5. Decision - Type - Specify - Number - Year 
6. Decision - Type - Specify - Number - Year 
 
Between 7 and 56 vertically on the left -hand side  
I. General information  
Between 1 and 12 - Importer  
Between 17 and 20 - Supplier  
Between 26 and 33 - Commercial transaction  
Between 39 and 43 - Intermediation  
Between 49 and 56 – Requirements  
 
7. Name or trade name  
8. Type and no. of identity document  
9. Commerc ial level code  
10. Specify  
11. Address  
12. City 
13. Country code  
14. Telephone  
15. Fax 
16. Email  
17. Name or trade name  
18. Code function  
19. Specify  
20. Address  
21. City 
22. Country code  
23. Telephone  
24. Fax 
25. Email  
26. No. of invoices  
27. No. contract or other document - Date 
28. Specify  
29. Form of payment  
30. Specify  
31. Method of paym ent 
32. Specify  
33. Code form of consignment  
34. Code nature of transaction  
35. Specify  
36. Terms of delivery INCOTERMS - Place 
37. Specify  
38. Total value  G/VAL/N/1/ECU/3  
- 294 - 
  39. Any intermediation?  
40. Code type of intermediary  
41. Specify  
42. Name or trade name  
43. Address  
44. City 
45. Country code  
46. Telephone  
47. Fax 
48. Email  
49. Any restr iction?  
50. Code type of restriction  
51. Any conditions or considerations?  
52. Code condition or consideration  
53. Specify  
54. Can they be determined?  
55. Any royalties and/or licence fees?  
56. Any accruals to seller?  
57. Any relationship between buyer and seller?  
58. Code relationship  
59. Influence of relationship on price  
60. Any test values?  
61. No. customs declaration - Date 
62. Total f.o.b. value  
 62.1 Price actually paid or payable  
63. Total transport costs  
64. Total insurance costs  
65. Total other additions  
66. Total deductions  
67. Total transaction value declared  
 
Betwe en 68 and 120 vertically on the left -hand side  
II. Detailed description and determination of the customs value  
 
68. Item 
69. Subheading  
70. No. commercial invoice - Date of invoice  
71. Designation of goods  
72. Trademark  
73. Type 
74. Class 
75. Model  
76. Condition  
77. Specify  
78. Year of manufacture  
79. Quant ity 
80. Commercial unit  
81. Other features  
82. Price per item on invoice  
83. Deductions or additions - f.o.b. value per item  
84. F.o.b. value per item  
85. F.o.b. value per unit by product  
86. Indirect payments per item  
87. Retroactive discounts per item  
88. Other payments per item  
89. Total pric e paid or payable per item  
90. Transport costs per item  
91. Insurance cost per item  
92. Adjustment code  
93. Adjustment value per item  
94. Adjustment code  
95. Adjustment value per item  G/VAL/N/1/ECU/3  
- 295 - 
  96. Adjustment code  
97. Adjustment value per item  
98. Adjustment code  
99. Adjustment value per item  
100.  Adjustment c ode 
101.  Adjustment value per item  
102.  Adjustment code  
103.  Adjustment value per item  
104.  Adjustment code  
105.  Adjustment value per item  
106.  Adjustment code  
107.  Adjustment value per item  
108.  Adjustment code  
109.  Adjustment value per item  
110.  Adjustment code  
111.  Adjustment value per item  
112.  Customs value pe r unit by item  
113.  Customs value per unit by product  
114.  Estimated or provisional values  
115.  Currency code  
116.  Rate of exchange - Date 
117.  Box no.  
118.  Currency code  
119.  Rate of exchange - Date 
120.  Box no.  
121.  Currency code  
122.  Rate of exchange - Date 
123.  Box no.  
124.  Code country of origin  
125.  Code country o f shipment  
126.  Code valuation method used  
 
Between 127 and 132 vertically on the left -hand side  
 
III. Declarant  
127.  Name or trade name  
128.  Type and no. of identity document  
129.  Address  
130.  City 
131.  Telephone  
132.  Surnames and first names of signatory  
133.  Type and no. of identity document  
134.  In si gning this document, I  hereby  confirm the accuracy and completeness of the 
information furnished on this form, on all the attached sheets accompanying it, and the 
authenticity of all the supporting documents. I also hold myself responsible for supplying 
any additional documents required to determine the customs value of the goods.  
135.  Signature and stamp of the declarant