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Previous Customs Valuation Systems

Previous Customs Valuation Systems

  • Tokyo Round

    • The Tokyo round was a multiyear and multi trade negotiation of one hundred and two member countries of the General Agreement on Tariffs and Trade (GATT).
    • The Tokyo Round was hailed to be “the most comprehensive of all the seven rounds of negotiations held within the GATT since its founding in 1948.“
    • Negotiations in this round came about as a result of increasing Customs valuation concerns that hampered the smooth flow of trade among nations. 
    • This round was characterised by hard-line stances from the European Economic Commission (EEC), North American Countries of (USA and Canada) and the developing countries led by India. 
    • The EEC group were vouching for the contents provided in the European Union Study Group and using the Customs Cooperation Council they rooted for the adoption of the Brussels Definition Value (BDV) at a time when more than one hundred nations were using the system. 

Uruguay Round

The Uruguay round is regarded as the largest trade negotiation of any kind in history as it took almost twice the intended original schedule with one hundred and twenty-three countries participating. 

    • This round was launched in Punta del Este in Uruguay in September 1986 and concluded in 1995 in Geneva Switzerland where the Agreement took effect and the World Trade Organization formed. 
    • The Tokyo Round Code was replaced by the WTO Agreement on Implementation of Article VII of the GATT 1994 following conclusion of the Uruguay Round. 
    • The basic principle adopted and ratified was the use of the transaction value method and provided for other five alternate valuation methods if transaction value is rejected.

Tokyo Round

  • In summary the conclusion of the Uruguay round resulted in the following:
    • Creation of World Trade Organization (WTO), which came into force 1995.
    • Requirement that all signatories to the WTO accept all GATT instruments, including the Agreement on implementation of Article VII.
    • Some slight amendments to the text of the GATT Agreement on Customs Valuation.
    • Review of Annex III to the Agreement
    • Adoption of decisions regarding, Burden of proof, Minimum Values and sole agents, sole distributors and sole concessionaires.

The Brussels Definition of Value (BDV)

  • After Second World War, some countries of Europe formed Customs Cooperation Council (CCC) by signing the instruments in 1950 with headquarters at Brussels with the Cooperation Council coming into force in 1952.  
  • The Council has now grown into a full-fledged international organization World Customs Organization with more than 150 country members.  
  • Among the various aspects looked at by the Council, uniform valuation code was one of the important assignments. 
  • The Council developed a valuation method commonly called Brussels Definition of Value and abbreviated as BDV.
  • BDV is based on a notional concept, which treats Customs value as the price at which, the goods would be sold (the price which goods would fetch) in the course of international trade, the essential elements being price, time, place, quantity and commercial level.  
  • The emphasis was on the intrinsic value of the goods. Over 100 countries were applying BDV by 1970 before the deliberations of the Tokyo Round.

Positive Valuation Systems

  • The Positive Valuation Systems were being used by the USA, Canada, Australia, New Zealand among other countries. 
  • Under these systems, customs value was generally based on the actual price paid for the goods, rather than an abstract or notional price that might be paid under perfect competitive conditions. 
  • Typically, these systems provided for use of secondary valuation methods, in a ranking order, where the actual invoice price could not be found or used (such as where the goods were imported under a lease, and therefore a sale price did not exist).