Volume 5, Number 23, Page 2
Brazil: Methods for the Custom Valuation Calculus
by Noronha Advogavos
Countries that signed the General Agreement on Customs Tariffs and Foreign Trade (GATT) are obligated to ratify the Agreement on Implementation of Article VII by January 1, 2000. Brazil has complied and implemented the Customs Valuation Agreement through the passage of Decree n. 2.498 on February 13, 1998. Previously, the Custom Valuation Agreement was enforced by Brazil’s Internal Revenue Service (here the “SRF”). The SRF used sampling techniques: based on values recorded on database, databanks provided by the importers, imports of similar merchandise, and data extracted from SRF’s and former CACEX’s (presently SECEX) computers. Now, custom officers of the signatories to GATT must observe six methods for the enforcement of custom valuation. This valuation must follow the order determined by the agreement, so that when the first method can not be used, the second will be used and so on. However, transport expenses, insurance incurred after clearing, as well as expenses related to construction, installation, assembling and technical support for the goods can not be excluded from the custom value assessment.
The Six Methods for the Enforcement of Custom Valuation
The first method involves considering the custom value, or the price effectively paid or to be paid for the imported goods plus the buyer’s expenses not included in the invoice price, to be corrected whenever necessary. The second and third methods (trade value, and identical and similar markets) are based on the trade value of goods identical or similar to the one under valuation, exported and destined to the same country, whenever possible, in the same period of the comparison. The fourth method (deductive) is used to determine the custom value by analyzing the resale price of the imported goods or similar or identical products. The fifth method, the production cost method, is based on the production cost for the goods to be valued plus an amount based on general profits and expenses. This method is based on values registered on exports of similar merchandise carried by other producers of the exporting country to the importing country. Other expenses such as transportation, loading and unloading, and insuring the merchandise until it reaches its destination, should also be included in the cost of the product in case of a CIF clause. The sixth method, the reasonable method, consists of assessing the customs value through the use of reasonable standards in compliance with the general provisions of the Agreement and GATT/94, article VII, and through information available in the importing country. Custom valuation is determined under Incoterms clauses and are comprised of international rules on interpreting trade terms with the purpose of avoiding disputes and litigation.
These rules provide subsidies for correct customs valuations, and determine the tax base for imports. Depending on which Incoterm clause is used, it may be necessary to add or subtract certain values corresponding to the import tax base. The primary Incoterms include: the EXW (Ex Works or From the production site); FAS (Free Alongside Ship); the FOB (Free on Board); and CIF (Cost, Insurance and Freight). Decree n. 2.498/98 determines the application of custom valuation systems to all imported goods, subject also to dumping investigations. For this purpose, the SRF has been preparing records with prices for each product in the international market, in order to verify compatibility between the value declared by the importer and the average prices practiced in the international market. In times of globalization, the Customs Valuation Code establishes an equitable, uniform, and neutral system of international trade rules.
Noronha Advogados is a international law firm based in São Paulo, Brazil, with offices in Rio de Janeiro, Brasilia, Miami, London, Lisbon and Buenos Aires.
