Trade policies and practices by measure introduction



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Customs valuation and clearance


      1. The Customs Act 1962 (Section 14), the Customs Valuation (Determination of Price of Imported Goods) Rules 1988, its amendments, and the Finance Act 2007 regulate customs valuation in India. The latest amendments to customs valuation legislation entered into force on 10 October 2007.26 Under Customs Notification No. 93/2007, Section 14 of the Customs Act was substituted by Section 95 of the Finance Act 2007. The amended section stipulates that the determination of value of imports should be based on the transaction value, i.e. "the price actually paid or payable for the goods when sold for export to India", including any amount paid or payable for costs and services (e.g. commissions and brokerage, royalties and licence fees, transport and insurance costs, and handling charges). The calculation is based on the exchange rate in force when the bill of entry is presented to Customs. For goods sold on "high‑seas" sale contracts, the price paid by the last buyer constitutes the transaction value.27 The transaction value method may be rejected if "reasonable doubt" arises on the accuracy of the declared value.28 There are six circumstances under which a customs officer may raise reasonable doubt.29 Raising reasonable doubt does not lead to an upfront rejection of the import value presented, which, if justified by the importer, is accepted. If the transaction value is not used, the value is determined according to other methods, in sequential order: transaction value of identical goods; transaction value of similar goods; deductive value; computed value; and residual method.30 The Rules 2007 also clarify that royalties and licence fees must be included in the transaction value, if not included in the price actually paid or payable (Rule 10(1)); and the transport cost includes the ship demurrage charges on charted vessels, and lighterage or barge charges (Rule 10(2)).

      2. A landing charge (for loading, unloading, and handling) of 1% of the c.i.f. value is added to the c.i.f. value, to calculate the transaction value (earlier known as "assessable value").31

      3. The Central Board of Excise and Customs is authorized, by notification in the Gazette of India, to fix "tariff values" (reference prices) for any type of imported (exported) good.32 At present, India uses "tariff values" to calculate customs duty applicable on imports of, inter alia, palm oil and palmolein oil (crude and RBD), as well as crude soybean oil, poppy seeds, and brass scrap.33 According to the authorities, "tariff values" are revised every two weeks and are adjusted to align with international market prices; however, "tariff values" for edible oil remain unchanged since 2006 (Table III.2).

      4. Importers may file an appeal against customs decisions on valuation matters to the Appeals Commissioner or the Customs, Excise, and Service Tax Appellate Tribunal (Customs Act 1962, Sections 128‑129).34 No data are collected on the number of appeals.

Table III.2

Tariff values (reference prices), 2006‑11

HS code

Description

Tariff value (US$/tonne)

2006

2007

2008

2009

2010

2011a

1511.10.00

Palm oil (crude)

447

447

447

447

447

447

1511.90.10

Palm oil (RBD)

476

476

476

476

476

476

1511.90.90

Palm oil (others)

462

462

462

462

462

462

1511.10.00

Palmolein (crude)

481

481

481

481

481

481

1511.90.20

Palmolein (RBD)

484

484

484

484

484

484

1511.90.90

Palmolein (others)

483

483

483

483

483

483

1507.10.00

Soyabean oil (crude)

580

580

580

580

580

580

7404.00.22

Brass scrap (all grades)

4,524

4,205

3,252

3,476

4,320

4,360

1207.91.00

Poppy seeds

n.a.

5,398

4,238

3,144

3,445

2,520

n.a. Not applicable.

a Up to 31 May 2011.



Note: "Tariff values" for poppy seeds were introduced through Customs (non‑tariff) Notification No. 116/2007, 3 December 2007. Reference prices are for end year.

Source: Customs (non‑tariff) Notifications Nos. 130/2006, 1 December 2006; 122/2007, 17 December 2007; 141/2008, 31 December 2008; 188/2009, 31 December 2009; 03/2010, 31 December 2010; and 37/2011, 31 May 2011.

            1. India maintains, in the WTO, the special and differential treatment provisions invoked under the Tokyo Round Agreement.35 Hence, India continues to maintain a reservation concerning the reversal of the sequential order of Articles 5 and 6, and a reservation to apply Article 5.2 whether or not the importer so requests.36 In 2009, India decided to lift the reservation on minimum values entered under paragraph 3 of the Protocol to the Agreement on Implementation of Article VII of the GATT 1994, and in paragraph 2 of the WTO Agreement.37 The authorities indicated that India did not apply minimum values despite the reservation maintained until 2009.

            2. The transaction value is generally used to assess the additional duty on imports.38 However, it is not used to assess the additional duty on imports of packaged goods, which, if produced domestically, would be subject to a maximum retail price (MRP).39 In this case, to assess the additional duty, the value of the goods is determined using the MRP declared on the package minus an "abatement" for the like domestic goods.40 The "abatement" takes into account taxes payable on goods and freight, which are included in the MRP. In March 2011, 143 items were subject to a MRP‑based excise duty payment and the "abatement" ranged from 20% to 40% of the retail price.41 If more than one retail sale price is declared for the imported good, the highest price is used to assess the duty. MRP‑based valuation is not applicable to products sold in bulk to industries, and to packages containing more than 25 kg or litres (excluding cement and fertilizer sold in bags of up to 50 kg.
      1. Rules of origin


            1. India does not apply non‑preferential rules of origin.42 Preferential rules of origin are applied under regional and bilateral trade agreements (Table III.3); these have not changed since the last Review of India. Maximum foreign‑content requirements range from 30% to 70%; other criteria to determine origin are sufficient transformation and change in tariff classification. There are also product‑specific rules of origin under the SAFTA (180 products), and agreements with Korea, Rep. of (1,780 products)43, and Singapore (380 products).44

Table III.3

Rules of origin under preferential trade agreements, 2011

Agreements

Maximum foreign‑content requirements

Minimum cumulative local‑content requirements

Regional







Asia‑Pacific Trade Agreement (APTA)

55% of the f.o.b. value (LDCs: 65%)

60% of the f.o.b. value (LDCs: 50%)

Global System of Trade Preferences (GSTP)

50% of the f.o.b. value (LDCs: 60%)

60% of the f.o.b. value (LDCs: 50%)

South Asian Free‑Trade Areas (SAFTA)a

60% of the f.o.b. value (LDCs: 70%; Sri Lanka: 65%) and change in tariff classification

50% of the f.o.b. value, 20% of the f.o.b. valueb and change in tariff classification

South Asia Preferential Trade Arrangement (SAPTA)

60% of the f.o.b. value (LDCs: 70%)

50% of the f.o.b. value (LDCs: 40%)

Bilateral







Afghanistan

50% of the f.o.b. value and change in tariff classification

40% of the f.o.b. value and 30% of the f.o.b. valueb

ASEANa

65% of the f.o.b. value and change in tariff classification

65% of the f.o.b. value and change in tariff classification

Bhutan

n.a.

n.a.

Chile

60% of the f.o.b. valuec and change in tariff classification

60% of the f.o.b. value and change in tariff classification

Korea, Rep. ofa

65% of the f.o.b. value and change in tariff classification

65% of the f.o.b. value and change in tariff classification

MERCOSUR

40% of the f.o.b. valuec

40% of the f.o.b. value

Nepal

70% of the f.o.b. value and change in four‑digit tariff classification

n.a.

Singaporea

60% of the f.o.b. value and change in tariff classification

60% of the f.o.b. value and change in tariff classification

Sri Lanka

65% of the f.o.b. value and change in tariff classification

35% of the f.o.b. value and 25% of the f.o.b. valuec

Thailandd

60% of the f.o.b. value and change in tariff classification

40% of the f.o.b. value and change in the tariff classification

Table III.3 (cont'd)

Other preferential areas







Mauritius, Seychelles, and Tonga

50% of ex‑work price of five specific itemse and 75% ex‑work prices for others

50% of ex‑work price of five specific itemse and 75% ex‑work prices for others

Least‑developed countries

70% of the f.o.b. value and change in tariff classification for not wholly produced or obtained category

70% of the f.o.b. value and change in tariff classification for not wholly produced or obtained category

n.a. Not applicable.

a Product‑specific rules of origin apply.

b Domestic value content in the exporting country.

c Foreign contents should not exceed 15% of the f.o.b. value for sets, as defined in General Rule 3 of the Harmonized System.

d Not notified to the WTO.

e Manual sewing and knitting machines (and parts thereof) or those which require less than one quarter of one brake‑horsepower for their operation; cycles (other than motor cycles) and parts and accessories thereof, excluding rubber tyres and tubes; motor cars including taxi cabs and articles (other than rubber tyres and tubes) to be used as parts and accessories thereof; motor omni‑buses, chassis of motor omni‑buses, motor vans and motor lorries, and parts of mechanically propelled vehicles and accessories excluding rubber tyres and tubes; and motor cycles and motor scooters and articles (other than rubber tyres and tubes) adapted for use as parts and accessories thereof.



Note: Rules of origin are not covered under the India‑Bhutan preferential trade agreement.

Source: Department of Commerce online information, "International Trade: Trade Agreements". Viewed at: http://www.commerce.nic.in/trade/international_ta.asp?id=2&trade=I; Customs General Exemption Nos. 70 and 71. Viewed at: http://www.cbec.gov.in/customs/cst-809/cs-gen66-90.pdf; and information provided by the Indian authorities; and information provided by the authorities.
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