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Meaning of Customs Valuation

Meaning of Customs Valuation

  • Customs valuation is the procedure applied to determine the value of imported goods for the purpose of levying ad valorem customs duties. 
  • Customs duties are instruments of fiscal and trade policy. 
  • The duties may be based on specific rates, ad valorem rates, or a combination of the two. 
  • The objective may include and not limited to;
    • Raise revenue
    • Facilitate trade
    • Protect domestic industry
    • Encourage importation of certain products
    • Collect trade statistics.

Ad Valorem Duties

  • Are taxes, duties or fees that vary depending on the value of products, services or property on which they are levied. 
  • They are expressed as a percentage of the value and most of the countries apply this system e.g. 25% of CIF. 
  • Ad valorem duty rate is not a recent invention but dates back to the middle ages and what seems to have been lacking at that time was the application of precise, standard methods of valuation. 

Specific duties

  • These are duties, taxes or fees levied based on specific measures of goods such as number, weight, volume, area, capacity etc. Here, a specific sum is imposed on each article regardless of its individual value e.g. price per litre of fuel. 

Importance of Customs Valuation

  • Enhances International Trade 
  • Protects domestic industry 
  • Encourages the importation of certain products 
  • Facilitates the collection of revenue 
  • Forms the taxable base for customs revenue 
  • Facilitates the compilation of trade statistics 
  • Facilitate the implementation of Tariff preferences 
  • Helps in Origin determination