Customs Valuation and the WTO Agreement: Six Methods
The WTO Customs Valuation Agreement, the transaction value and the five fallback methods, the Article 8 adjustments, and the national election on freight and insurance.
Customs valuation is the process of fixing the value on which ad valorem duty is assessed, governed internationally by the Agreement on Implementation of Article VII of GATT 1994, known as the WTO Customs Valuation Agreement.
The full article will work through the six methods in their mandatory sequence: transaction value under Article 1, the transaction value of identical goods under Article 2, of similar goods under Article 3, the deductive method under Article 5, the computed method under Article 6, and the fallback method under Article 7. It will cover the Article 8 additions, including assists, royalties and resale proceeds, the related-party tests, and the circumstances in which a declared price is rejected.
Article 8.2 is the provision with the largest practical effect on shipping, because it leaves each Member to decide whether transport, handling and insurance to the place of importation enter the dutiable value. That election is what divides the world into CIF-basis and FOB-basis territories and is why the Incoterms rule chosen changes the declaration burden without changing the tax base.