. /.  WORLD TRADE  
ORGANIZATION  G/VAL/W/148 
18 April 2005 
 (05-1592) 
Committee on Customs Valuation Original:   English 
  
  
NOTIFICATIONS UNDER ARTICLE 22 OF THE CUSTOMS  
VALUATION AGREEMENT 
 
Replies to questions raised by the United States as a follow-up 
 
to India's response in G/VAL/W/133  
 
    The following communication, dated 11 April 2005,  is being circulated at the request of the 
delegation of India. 
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Q.1 India’s responses to Question 2 states that the amendment in Rule 4(2) of the Indian Customs 
Valuation Rules “seeks to specify in clearer terms th e situations in which a customs officer may reject 
the declared value”.  Please confirm whether this  means that the amendment makes clear that a 
customs officer must automatically reject the decl ared value for transactions between related party 
transactions, by their very nature, do not involve  a generally understood  definition of “fully 
competitive conditions”.  If such rejection is not mandatory, please clarify how discretion is exercised 
under the amendment to Rule 4(2), and indicated the criteria utilized by a customs officer to make the 
determination as to whether the transaction was conducted under “fully competitive conditions”.  
 
Answer:     Attention is once again invited to the answer to question 2 in India’s response contained in 
G/VAL/W/133.  The Rule 4(2) clearly indicates the pro cedure to be followed in  case of valuation of 
goods pertaining to related persons.  It is very clear ly mentioned that the value indicated is to be 
normally accepted and can only be rejected on grounds which are also spelt out in the Customs Valuation Rules.  
 
Q.2. Regarding related party transactions, U.S. exporters have reported recent experiences with 
regard to a valuation practice on imports into India that involves a certain ad-valorem  tariff add-on 
(e.g. one per cent ) that is automatically applied to related party transactions.  Could India please 
confirm this practice regarding the  transaction value involving related party transactions, and 
elaborate on its domestic legal basis as well as its  consistency with the WTO Agreement on Customs 
Valuation.    Answer: The question posed is not very clear as to what ad-valorem  tariff add-on is be ing referred to.   
It is, however, clarified that no special add-on tari ff is imposed on any related party transactions.   
 
Q.3  In Question 9, the United States asked, with regard to India’s amendment in Rule 4(2), who 
determines “abnormal discount or reduction” from th e ordinary competitive price?  What are the 
criteria?  What types of prices ar e used for comparison as an “ordinar y competitive price”/  Is there a 
difference from “normal discount or reduction”?  In th e context of their applicability to the operation 
of the amendment in question, the United States again asks India to provide specific elaboration of (a) 
the criteria for determining “abnormal discount or re duction” from ordinary price; (b) the difference 
between “ordinary competitive price” and “normal discount or reduction”.   G/VAL/W/148 
Page 2  
 
Answer:     Attention is once again invited to the answer to question 9 in India’s response contained in 
G/VAL/W/133.  The expressions “abnormal discount or reduction/ordinary competitive price/normal 
discount or reduction have the same mean ing as used in Article VII of GATT.  
 
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