ABSTRACT

Customs valuation is a customs procedure applied to determine the value of imported goods. Duties can be expressed in the ad valorem basis, the specific or compound basis. Customs duties have been collected since the beginning of international trade. A few attempts have been made toward creation of a common valuation system especially regarding the initiatives of the GATT contracting parties to begin to assess the conformity of the different valuation systems then in use with Article VII principles. The objectives of this work include: To examine the role of origin dimensions in custom valuations, to assess the relationship between the old and new standards of custom valuation and to investigate the difficulties involved in customs valuation from origin to present. This work employed the descriptive research design which portrays an accurate profile of persons, events or situation. This design provides relevant aspects of the issue of interest from individual, organizational and even state oriented perspectives. Therefore, this design enabled the researcher to gather information from a wide range of sources. Findings revealed that the compound rate of valuation is the outstanding method because it is flexible. Also, there is a high relationship between old and new standards of custom valuation since the indicator for disagree is opposite its level of significance and that challenges are far important and are greatly faced in customs valuation. It was then concluded that Custom valuation is an important aspect of international trade The rules of origin in customs valuation is a very important aspect There is a high relationship between old and new standards of customs valuation in every economy. It was highly recommended that the harmonization of customs and income tax requirements is recommended. This is for customs administrations to use information contained in transfer pricing studies.

CHAPTER ONE

GENERAL INTRODUCTION

1.1. Background to the Study

Customs valuation is a customs procedure applied to determine the value of imported goods. If the rate of duty is ad valorem, the customs value is essential to determine the duty to be paid on an imported good. Customs valuation becomes an issue where import duties are calculated on an “ad valorem” basis.

An “ad valorem” duty rate is one that is expressed as a percentage of the value of the imported goods. Duties may also be assessed on “specific” basis, where a fixed amount is charged on the quantity of goods imported – such as 0.2 cents per liter of imported alcohol. Or, a duty rate on a particular import might be a combination of ad valorem and specific rates (a “compound rate”). Nevertheless, ad valorem rates are the most prominent in international trade (WTO, 2012). 

Governments have collected customs duties since the beginnings of international trade. It is recorded that Athens applied 20 percent import duties on corn and other goods, while the Romans, from well before the time of Julius Caesar, depended upon customs revenues to support the expansion and maintenance of their empire. And, where a tax must be collected, there will be disputes over rates and methods – the Roman customs collector was accused of “unfair conduct and vexatious proceedings” against the Roman merchants who, in all fairness, were said to have been commonly engaged in smuggling to avoid customs duties (WTO, 2012).

In 1947, the average tariff rate applied by industrial countries was between 20 and 30 percent. Fifty-eight years later the General Agreement on Tariffs and Trade (GATT) rounds of tariff negotiations later, the average tariff rate applied by industrial countries on non-agricultural goods was about 5.5 percent. With implementation of the 1994 Uruguay Round, for example, the US average tariff on non-agricultural goods is just 3.2 percent, and nearly half the tariff lines applicable to such goods are duty free. Given these diminishing tariffs, one might ask how important is customs valuation? If import duties are reduced to trivial levels or disappear altogether, what use will remain for the rules that are used for their calculation (Harris, 2015)?

Despite the successes of the GATT rounds, import duties stubbornly remain a factor in international trade. This is particularly true in developing countries, where the average applied rate for all goods is 16.9 percent. Even in industrial countries, where average rates are low, some industrial products and sectors, and many agricultural products, remain protected by tariffs of 20 percent or higher.7 Moreover, a number of developing countries continue to depend upon import duties for a significant portion of the national budget (Estevadeordal et al, 2007). Even if import duties were completely eliminated, the need for customs valuation rules likely would still exist. One important reason is the use by a number of countries of Value Added Tax (VAT), excise, or sales taxes on imported products; these taxes, unlike customs duties are not subject to GATT/WTO (World Trade Organization) tariff reductions .8 Customs authorities commonly apply the same customs valuation rules to calculate these kinds of taxes on imports as they do for customs duties, although they are not obligated by GATT rules to do so (WTO, 2012).

A few attempts were made toward creation of a common valuation system. Although ultimately inconclusive, these initiatives triggered the GATT contracting parties to begin to assess the conformity of the different valuation systems then in use with Article VII principles. The results of this early work on valuation led to and informed the GATT’s later valuation initiatives. There is also a direct link in the present WTO Valuation Agreement to this early history: the “prohibited methods” listed in Article 7 of the Agreement (the “fall back” method of valuation) references one or another of these older valuation systems. The earliest attempt at a harmonized valuation system within the GATT came in 1951, when the International Chamber of Commerce (ICC) proposed that the GATT contracting parties develop standard worldwide valuation rules. This ICC proposal was a reaction to the BDV which, at that time, had just been completed and opened for signature. The ICC – as the representative of business – had opposed the BDV, because it was based on the use of a “normal” price as determined by customs administrations. Instead, the ICC favored a simpler

“rule-of-thumb method,” whereby customs would be required to use the invoice price for the goods presented by the trader, absent a reason to suspect fraud (Matoo et al, 2013).

The last major GATT initiative on valuation in these early years came in the Kennedy Round of 1964–1967. In that round, for the first time, non-tariff barriers were included in negotiations. One such non-tariff barrier nominated for negotiation by a number of countries was “customs valuation including use of arbitrary or excessive values.”22 The “arbitrary” valuation practice that attracted most criticism was the use by the United States of its “American Selling Price” (ASP) method of valuation (Harris, 2015).

At the Sixth WTO Ministerial Conference held in Hong Kong, China, in December 2005, member States agreed that developed and developing countries in a position to do so would, by 2008 or no later than the implementation of the Doha Round negotiations, provide duty-free and quota-free market access on a lasting basis for all products originating from Least Developed Countries (LDCs) in a manner that ensures stability, security and predictability (Trade Preferences for LDCs, 2014)). As a result, developing countries were permitted flexibility in coverage and implementation. All members who faced difficulties in supplying this degree of effective market access agreed to at least initially provide duty free and quota-free market access for 97 percent of originating LDC exports defined at the tariff-line level. Members of WTO also agreed to “ensure” that the applicable rules of origin would be transparent and simple, and would facilitate market access (Harris, 2015).

1.2. Delimitation and Scope of the Study.

This deals with the extent coverage of the work in relation to space (spatial), time and theme. In such context, it measures the degree of validity of specific aspects that suit the study, thereby cutting of some other aspects that can make the work cumbersome. This implies that it tries to explain the focus of the work keeping aside ideas or aspects for reasons of pertinence. Delimitation of this study covers the following aspects

1.2.1 The Time Delimitation

This gives a description of the time that this study will cover. Based on the topic of the study, it shall use a historical perspective and for the sake of convenience, the study shall cover three time frames. These include colonial times, postcolonial and present times. This shall be between 1884-present. 

1.2.2 Area Delimitation

This refers to the extent of area coverage. In this study, Cameroon shall be the area coverage.

1.2.3 The Contextual Delimitation

This refers to the specific dimensions of the problem under study. This study focuses on the role of origin (history) in customs valuation. This implies that in valuing import merchandise, custom agents need to consider the past trends cognizant of the present situations. It is therefore delimited to a comparison between what happened and what is happening to custom valuation. In addition, some difficulties involved in such activities are also part of the study. In general, this study is delimited to three aspects: origin or history, custom valuation and difficulties involved.

1.3 Statement of the Problem

The value for customs purposes of imported merchandise should be based on the actual value of the imported merchandise on which duty is assessed, or of like merchandise, and should not be based on the value of merchandise of national origin or on arbitrary or fictitious values. The use of widely differing methods of valuing goods is important especially by the roles of origin (history). In addition, ‘grandfather clauses’ permitted continuation of old standards which did not even meet the very general new standard.

It is useful to recall the conditions of the pre-1979 trading environment. As will be apparent from the retelling, this history also demonstrates that many of the difficulties of customs valuation that are discussed today – valuation of used goods, questionable invoices, (mis)use of alternative valuation methods, etc. – are by no means new or unique. It is for these considerations in the statement of the problem that the following questions and objectives have been set for the study.

1.4 Research Questions

Main Research Question

• What is the role of origin dimensions in custom valuation in Cameroon?

Specific Research Questions

• What is the relationship between the old and new standards of custom valuation?
• What are the difficulties involved in custom valuation from origin to present?