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WCO - Knowledge Academy Brussels, 2 July 2014. Customs Valuation and the World Trade Organization. Roy Santana Market Access Division World Trade Organization. World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / [email protected]

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WCO - Knowledge Academy

Brussels, 2 July 2014

Customs Valuation and the World Trade Organization

Roy Santana

Market Access Division

World Trade Organization

World Trade Organization / Market Access Division / 154 Rue de Lausanne, 1211 Geneva 21, Switzerland / [email protected]

Structure of this presentation:
  • The CVA in the WTO context
  • The Committee on Customs Valuation and ongoing issues
  • WTO disputes in general
  • Disputes on Customs Valuation
Most WTO Agreements seek to regulate NTMs



Multilat. Trade Agrs. on Goods

GATT 1994

Marrakesh Protocol


Multilateral Agreements on:



Customs Valuation

Sanitary and Phytosanitary measures

Preshipment inspection


Rules of origin

Technical Barriers to Trade

Import Licensing Procedures

Trade-related investment measures

Subsidies and countervailing measures

How much should I pay?

It is normally necessary to know at least 3 things:

WCO - Technical Committee

CVA, Article 18.2 and Annex II

Task: To ensure the uniform application of the agreement at the technical level

WTO - Committee

CVA, Article 18.2 and Annex II


  • “Afford Members the opportunity to consult on matters relating to the administration of the customs valuation system by any Member” (CVA, Art. 18.1)
  • Oversee the operation of the Agreement
    • Review of notifications, e.g. national legislation

All information is publicly available: (Document symbol: “G/VAL/”)

treatment of software and data
Treatment of Software and data?
  • 1995 “Carrier Media” decision (“Decision 4.1”)
  • Should it be amended to take account of technological developments? (Proposal by Uruguay: G/VAL/W/241/Rev.1)
article 8 1 b iv of the agreement on customs valuation

Agreement to rectify a “serial comma” problem:

Article 8

1. In determining the customs value under the provisions of Article 1, there shall be added to the price actually paid or payable for the imported goods:

(b) the value, apportioned as appropriate, of the following goods and services (… ):

(iv) engineering, development, artwork, design work, andplans and sketches, undertaken elsewhere than in the country of importation and necessary for the production of the imported goods;

workshop on the use of customs valuation databases
Workshop on the use of customs valuation databases?
  • Issue originally raised by the ICC
  • Proposal by Australia, Canada, Chinese Taipei, the European Union, and the United States (G/VAL/W/231/Rev.1)
1 introduction
1. Introduction

Disputes in general



A dispute arises when a Member believes that another Member is not complying with a covered Agreement or a specific commitment made in the WTO.

The Dispute Settlement Body(DSB) has the ultimate responsibility for settling disputes.

The Dispute Settlement Understanding (DSU)is the main WTO agreement on settling disputes. → One of the cornerstones of the multilateral trading system.

2 interpretation of the wto agreements
2. Interpretation of the WTO Agreements

Disputes in general

Art. 3:2 of the DSU: “in accordance with customary rules of interpretation of public international law.”

Appellate Body (US – Gasoline): Vienna Convention on the Law of Treaties (because it had attained the status of customary or general international law).

3 steps of a wto dispute
3. Steps of a WTO dispute

Disputes in general






Panel Composed


Establish. of Panel

Req. to establish Panel


The Parties to a Dispute can reach a

“Mutually Agreed Solution” (MAS)

at any time.




examples of recent cases
Examples of recent cases

Disputes in general

Example: EC – Chicken Cuts

The facts: EU began reclassifying frozen boneless chicken cuts impregnated with salt under:

- heading 02.07("Meat and edible offal, of the poultry of heading 0105, fresh, chilled or frozen") → 02.4€/100kg/net , or

- heading 02.10("Meat and edible meat offal, salted, in brine, dried or smoked…") → 15%The issue: Whether the tariff classification under tariff heading 02.10 resulted in treatment that is less favourable than provided for in the EU’s tariff Schedule?

Warning!: The task of the Panel was to interpret the EU’s Schedule, which is part of the WTO Agreement, andnot the Harmonized System!

1 ordinary meaning 1
1. “Ordinary meaning” (1)

Article 31(1) VCLT: Ordinary meaning

  • “[D]ictionariesare a ‘useful starting point’ for the analysis of ‘ordinary meaning’ of a treaty term, but they are not necessarily dispositive.”
  • “The ordinary meaning of a treaty term must be ascertained according to the particular circumstances of each case.”
  • “Importantly, the ordinary meaning of a treaty term must be seen in the light of the intention of the parties as expressed in the words used by them against the light of the surrounding circumstances”
1 ordinary meaning 2
1. “Ordinary meaning” (2)

Article 31(1) VCLT: Ordinary meaning

“[W]e see no reason to disturb the Panel's conclusion concerning the ordinary meaning of the term ‘salted’


‘in essence, the ordinary meaning of the term ‘salted’ when considered in its factual context indicates that the character of a product has been altered through the addition of salt’


"there is nothing in the range of meanings comprising the ordinary meaning of the term ‘salted’ that indicates that chicken to which salt has been added is not covered by the concession contained in heading 02.10 of the EC Schedule."

2. “Context” (1)

“It is clear from [Article 31 of the Vienna Convention] that the context of the term ‘salted’ in heading 02.10 consists of the immediate, as well as the broader, contextof that term.”

  • Immediate context
  • Other terms of the product description contained in Heading 02.10 of the EC Schedule
  • Broader context
  • Other headings in Chapter 02 of the EC Schedule
  • Other WTO Member Schedules
  • The Harmonized System, including GIRs, Chapter notes, explanatory notes, etc.
2. “Context” (2)


is the

meaning of “salted”?

“… we need to determine whether the context of the term ‘salted’ … require or permit a reading of the term ‘salted’ in heading 02.10 of the EC Schedule more narrowly than the ordinary meaning of that term suggests…”

“… that is to say, that the customary rules of treaty interpretation other than ‘ordinary meaning’ indicate that ‘salting’ under heading 02.10 contemplates exclusively the notion of ‘preservation’.”

2. “Context” (3)

Panel’s conclusion:

“the Harmonized System and the relevant Chapter and Explanatory Notes thereto do not support the view that heading 02.10 is characterised exclusively by the concept of preservation”

… Specifically, for resolving this dispute, heading 02.10 doesnot contain a requirement that salting must, by itself, ensure ‘preservation’”

3. “Object and purpose” (3)
  • Of the treaty “on the whole” (i.e. the WTO Agreement)
  • Not of specific provisions, paragraphs or subparagraphs of the WTO agreements, or tariff headings in Schedules

What is the object and purpose of the WTO Agreement?

“the security and predictability of 'the reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade' is an object and purpose of the WTO Agreement, generally, as well as of the GATT 1994.”

1 the disputes
1. The disputes

Disputes on Customs Valuation

  • WTO: 15 disputes where the complainant mentioned a provision of the Agreement on Customs Valuation

GATT 1947: 3 disputes involving valuation. Only one of them resulted in a report (Exports of potatoes to Canada, BISD 11S/88)

1 the disputes cont
1. The disputes (cont’)

Disputes on Customs Valuation

2 the provisions
2. The provisions

Disputes on Customs Valuation


Colombia – Ports of Entry (DS366)





Colombia – Ports of Entry (DS366)

If DP > IP → DP

  • Indicative
  • Price (IP)
  • Based on:
  • past imports,
  • AVG prod. Costs;
  • lowest price for import into Colombia

If DP < IP:

Importer had 3 options:

1. To “correct” the



Price (DP)

2. To re-ship goods

3. To abandon goods

Measure: List of indicative prices

Colombia – Ports of Entry (DS366)

Panama alleged that :

  • 2. Sales tax:
    • Imported products: Indicative prices
    • Like domestic products: Transaction value

1. Customs duties & other duties and charges: based on indicative prices, rather than on the six valuation methods.

Colombia – Ports of Entry (DS366)

Colombia’s defence:

It is not the payment of a duty;

It is rather a system for a guarantee allowed by Article 13 of the CVA.

Colombia – Ports of Entry (DS366)

1. It is a system to determine the payment of a duty, not do determine a guarantee.

2. System is based on choosing the maximum of two values (Prohibited by Article 7:2(b)+(f) CVA).

3. System does not reflect any of the 6 methods. Therefore, in violation of Arts. 1, 2, 3, 5 and 6 CVA.

4. Recommended Colombia to bring its measures into conformity with the CVA.

Panel Findings:

Thailand – Cigarettes (Philippines) (DS371)





Thailand – Cigarettes (Philippines) (DS371)

Products at issue: Cigarettes

Complaint: The Philippines claimed that:

Thailand – Cigarettes (Philippines) (DS371)

The Philippines argued that (1):

  • Systematic rejection of transaction value just because importer and seller were “related”, in violation of Art 1.1 and 1.2(a) of the CVA.
  • Failed to follow the procedural steps:
  • To examine the circumstances of the transaction
  • To follow the sequential order of the methods
  • To inform the importer of the grounds for rejecting the transaction value
Thailand – Cigarettes (Philippines) (DS371)

The Philippines argued that (2):

2. Thai Customs applied the deductive method inconsistently with Articles 5 (failed to make deductions for sales allowances, internal transpor-tation costs, and provincial taxes) and 7 of the CVA.

3. Thailand violated obligations under Article 10 (not to disclose confidential information) and Article 16 (to provide an explanation for the determination of the final customs value)

Thailand – Cigarettes (Philippines) (DS371)

Thailand replied that :

The burden of establishing that the relationship did not influence the price is on the importer.

Thai Customs act consistently with the CVA, because the importer failed to provide sufficient information to prove that the relationship did not influence the price.

Explanation was provided

Thailand – Cigarettes (Philippines) (DS371)

Panel Findings: (1)

Procedural steps to determine Transaction Value

  • Importer declares a transaction value
  • Customs examines the circumstances of the sale (only if it has doubts about the validity)
  • Customs examines information provided by importer; obligation to communicate grounds for doubts
  • Customs gives reasonable opportunity to respond; importer submits further information
  • Customs makes a final decision on the value; provides written explanation if importer requires (it is not only a formal, but also a substantive obligation)
Thailand – Cigarettes (Philippines) (DS371)

Panel Findings: (2)

  • Thai Customs failed to “examine” the circumstances of sale (Art. 1.2(a))
  • Thai Customs did not “consult with the importer” for any further relevant information as required under article 7 of the CVA.
  • Thai Customs “explanation” was insufficient to reject the importer’s declared transaction value and to give a different customs value to the transaction.
Thailand – Cigarettes (Philippines) (DS371)

Panel Findings: (3)

Article 5 of the CVA

Thailand failed to deduct certain expenses (sales allowances, provincial taxes and transportation costs) that should have been deducted in accordance with

Thailand – Cigarettes (Philippines) (DS371)


Thailand appealed to the Appellate Body. However the reason they appeal did not concern with the panel's conclusion on valuation matters. Therefore the Panel's conclusion would be accepted by the WTO.

thank you
Thank you!

Roy Santana

Market Access Division

World Trade Organization

[email protected]