Abstract: I used the invoice taptap点点 to declare the taptap点点 of the import and export goods to the Customs , isn’t invoice taptap点点 the transacted taptap点点? Why does the Customs still query and check the taptap点点 I declared? Isn't the transacted taptap点点 method the priority when Customs determine the taptap点点?

This confusion often occurred in practice, which is actually a misunderstanding of the Customs valuation method using transacted taptap点点. The note will help you accurately understand the Customs valuation method using transacted taptap点点 through three questions:

1. What is the transacted taptap点点 in the context of Customs supervision?

2. What are the circumstances for the transacted taptap点点 to be accepted by Customs? 

3. Which factors should be included in the transacted taptap点点 and which factors should be deducted when Customs determine the taptap点点?

Keywords: Customs taptap点点 determination, Transacted taptap点点, Adjustment factors

In the case of Customs duties ad valorem, valuation method using transacted taptap点点 is the first method to be applied by the Customs to determine the dutiable value, but the transacted taptap点点 in the context of the Customs is not necessarily equal to the taptap点点 stated in invoice or contract in international trade. Only when the taptap点点 stated in the invoice or contract declared by enterprises conforms to the provisions of the Measures of the PRC Customs on Determination of Dutiable Value for Imports and Exports (hereinafter referred to as the “taptap点点 Determination Measures”), the declared taptap点点 may be accepted by Customs and used as the transacted taptap点点 to determine the dutiable value of import and export goods.

Considering that most goods are not tax-related when exported, and the regulations on the dutiable value of exported goods are relatively simple, the following takes imported goods as an example to introduce.

(I) The transacted taptap点点 of imported goods shall mean the total amount of actual payment made by the buyer or payable to the seller which is adjusted in accordance with the provisions of taptap点点 Determination Measures for such imports at the time of sale of such goods by the seller within China, including amounts paid directly and indirectly.

(II) Analysis of key points 

1. The transacted taptap点点 shall mean the paid or payable taptap点点 which is adjusted in accordance with the provisions

The transacted taptap点点 in the Customs taptap点点 determination has a specific meaning. It must be the paid or payable taptap点点 adjusted according to the “taptap点点 Determination Measures”, and at the same time it must meet certain conditions.

2. The paid or payable taptap点点

The form of payment can be direct payment or indirect payment.

3. The transacted taptap点点 is not exactly the same as the invoice or contract taptap点点 that actually occurs in the trade

It should be noted that the taptap点点 in invoice or contract in trade is often agreed by the buyer and the seller, and the agreed taptap点点 may be the paid or payable taptap点点, or it may also include the transportation and related expenses and insurance premium of the goods prior to unloading at the place of arrival of the goods in the People’s Republic of China, or may even include other factors that need to be adjusted.

According to provisions of the “taptap点点 Determination Measures”,the transacted taptap点点 of imports shall satisfy the following criteria shown in the picture. We will interpret them as follows:

(Ⅰ) There is no restriction on disposal or use of imports by the buyer

The criteria should be set based on the requirement that the transaction be fair. If a transaction is based on a restriction, the taptap点点 may be affected and therefore the valuation method using transacted taptap点点 is not applicable.

We think that the restrictions here shall not be interpreted broadly, it is more appropriate to understand the restrictions that have substantive impact on the taptap点点. Then, what are the restrictions on disposal or use of imports by the buyer?

The “taptap点点 Determination Measures” made enumerative provisions for this (as shown in the figure):

(II) The taptap点点 of imports shall not be affected by the criteria or factors which cause the transacted taptap点点 of the goods to be undeterminable.

The circumstances or factors mentioned here could be understood in conjunction with the Article 10 of the “taptap点点 Determination Measures”. This article stipulates that Under any of the following circumstances, the taptap点点 of imports shall be deemed to have been affected by the criteria or factors which cause the transacted taptap点点 of the goods to be undeterminable:

(1) the taptap点点 of imports is determined in accordance with the criterion that the buyer shall purchase a certain quantity of other goods from the seller;

(2) the taptap点点 of imports is determined in accordance with the criterion that the buyer shall sell other goods to the seller; and

(3) it is ascertained upon examination by the Customs that the taptap点点 of the goods is affected by the criteria or factors which cause the transacted taptap点点 of the goods to be undeterminable.

The aforementioned (1) is what we usually call tie-in sales, that is, the seller’s sales taptap点点 depends on the buyer purchasing a specific quantity of other goods at the same time. Once such a circumstance is found, Customs will consider that the sales or taptap点点 is affected by certain criteria or factors, therefore, the valuation method using transacted taptap点点 is rejected .

(III) The seller shall not obtain any gains directly or indirectly through sale, disposal, or use of the imports by the buyer, or where there are gains but adjustments can be made in accordance with the “taptap点点 Determination Measures”.

According to paragraph 1(4) of article 11 of “taptap点点 Determination Measures”, when the dutiable value of imports is examined and determined on the basis of the transacted taptap点点, the following expenses or value which have not been included in the actual taptap点点 or payable taptap点点 of the goods shall be included in the dutiable value: gains derived by the seller directly or indirectly from the buyer’s income from sale, disposal, or usage of such goods following importation.

In practice, there is a buyer who, in addition to paying the taptap点点 of the goods, returns part of the resale and use profits of the imports. In this circumstance, if there is no objective and quantitative data, adjustments cannot be made in accordance with the “taptap点点 Determination Measures”. Customs can refuse to use the valuation method using transacted taptap点点.

(IV) There is no special relationship between the buyer and the seller or, where there is a special relationship but, in accordance with the provisions has no effect on the transacted taptap点点.

There are two questions involved here: first, what is special relationship? Second, how to determine whether the special relationship has affected the taptap点点 in invoice or contract between the two parties?

· What is special relationship?

According to the Article 16 of the “taptap点点 Determination Measures”, under any of the following circumstances, the buyer and the seller shall be deemed to have a special relationship:

Where the buyer and the seller are related in business or one party is the sole agent, sole distributor, or sole transferee of the other party and satisfy the provisions of the preceding paragraph(s), they shall be deemed to have a special relationship.

· How to determine whether the special relationship has effect on the taptap点点 in the invoice or contract between the two parties?

According to the Article 17 of the “taptap点点 Determination Measures”, where there is a special relationship between the buyer and the seller but the taxpayer is able to prove that the transacted taptap点点 is close to any of the following prices at the same time or roughly around the same time, the special relationship shall be deemed to have no effect on the transacted taptap点点 of the imports:

(I) the transacted taptap点点 of identical or similar imports sold to a buyer in China which does not have a special relationship with the seller;

(II) the dutiable value of identical or similar imports determined in accordance with the provisions of chargeback taptap点点 valuation method; or

(III) the dutiable value of identical or similar imports determined in accordance with the provisions of computed taptap点点 valuation method.

When making a comparison using the aforesaid taptap点点(s), the Customs shall consider the difference in commercial standards and import quantities, as well as whether the variance in costs is affected by the buyer and the seller having a special relationship. If, upon examination of the circumstances relating to the sale of the goods, Customs deems it to be in conformity with general commercial practices, it may determine that the special relationship has no effect on the transacted taptap点点 of the imports.

According to the “taptap点点 Determination Measures”, when determining the dutiable value, the Customs shall, on the basis of the paid or payable taptap点点 declared , add the factors that should be included and subtract the factors that should not be included. the final adjusted taptap点点 is the transacted taptap点点. In short, the aforementioned factors that shall be included in the transacted taptap点点 and the factors excluded from the transacted taptap点点 are the adjustment factors, the former is called the addition term, the latter is the subtraction term.

(Ⅰ) Addition Term: The factors that shall be included in the transacted taptap点点

According to the Article 11 of the “taptap点点 Determination Measures”, when the dutiable value of imports is examined and determined on the basis of the transacted taptap点点, the following expenses or value which have not been included in the actual taptap点点 or payable taptap点点 of the goods shall be included in the dutiable value:

· The following expenses to be borne by the buyer:

(1) commission and broker’s fee other than commission for procurement;

(2) expenses of containers deemed to be part of the goods; and

(3) packaging material costs and packaging labour costs;

· The value of the following goods or services related to manufacturing of imports and sale within the People’s Republic of China which are provided by the buyer free of charge or below cost and may be apportioned in the appropriate proportions:

(1) materials, components, parts, and similar goods included in the imports;

(2) tools, models, and similar goods used in the process of manufacturing of the imports;

(3) materials consumed in the process of manufacturing of the imports; and

(4) engineering design, technical research and development, craft, drafting, and related services required for manufacturing of the imports overseas

· Royalties to be paid by the buyer directly or indirectly to the seller or related parties, except for those paid under any of the following circumstances:

(1) the royalties are not related to such goods; or

(2) payment of royalties shall not constitute a criterion for sale of such goods within the People’s Republic of China; and

· Gains derived by the seller directly or indirectly from the buyer’s income from sale, disposal, or usage of such goods following importation.

Taxpayers shall provide the Customs with objective and quantifiable data on the aforesaid costs or values. If taxpayer is unable to provide, the Customs shall, upon clarifying the relevant information and carrying out taptap点点 negotiation with the taxpayer, the dutiable value of such goods shall be examined and determined in accordance with the following methods of using transacted taptap点点 of identical goods, using transacted taptap点点 of similar goods, chargeback taptap点点, computed taptap点点; and reasonable.

(Ⅱ) Subtraction Term: The factors not included in the dutiable taptap点点

According to the Article 15 of the“taptap点点 Determination Measures”, the following taxes and expenses listed individually in the taptap点点 of the imports shall not be included in the dutiable value of such goods:

1. construction, installation, assembly, maintenance, or technical support expenses of plant, machinery, or equipment, etc, incurred following importation, with the exception of repair expenses;

2. transportation and related expenses and insurance premium incurred after unloading of the imports upon arrival in the People’s Republic of China;

3. import tariff, import-linked taxes levied by the Customs and other domestic taxes;

4. fees paid for duplication of the imports in China; and

5. expenses incurred for technical training and overseas observation, and study in China and overseas.

6. Interest expenses which satisfy the following criteria simultaneously shall not be included in the dutiable value:

(1) the interest expenses incurred for financing the purchase of the imports;

(2) there is a financing agreement in writing;

(3) the interest expenses are listed out individually; or

(4) the taxpayer can prove that the interest rate is not higher than the normal interest rate for financing such transactions in the locality at the same time and the actual paid or payable taptap点点 of imports is very close to that of identical or similar imports where there is no financing arrangement.

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