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On Transaction Value (RA 8181)


1.
Q: What is Transaction Value?
A: Transaction Value is the price actually paid or payable for goods which are exported to the Philippines. It is the price that appears on the accompanying commercial or sales invoice issued in the country of origin or exporting country.
2.
Q: What is Home Consumption Value?
A:

Home Consumption Value or HCV is the wholesale price in the domestic market of the country of manufacture or export on the date of exportation of the same, like or similar goods (excluding internal excise taxes to be remitted or rebated). It is considered a protectionist valuation system. In the Philippines it has discouraged open competition in the market which resulted in the decline of local industries. It has also slowed down business expansion because of higher import and production costs which affect the country's competitiveness both in the domestic or home and foreign markets. The HCV system has also contributed to inflation in that it tends to increase the prices of goods in the local market.

3.
Q: Who stand to benefit from the shift from HCV to TV?
A:

The change in the valuation system will benefit the local manufacturers, exporters, importers, the country as whole and more importantly, the Filipino consumer.

The Filipino manufacturer or producer will benefit from the TV system in terms of reduced raw material costs. This in turn translates to lower production costs which enable him to price his products more competitively for the domestic and forein markets, if he is an exporter.

The shift to Transaction Value will allow the Philippines to align its valuation system not only with its ASEAN neighbors, but with the rest of the world. This system will lead to the adoption of an international standard which conforms with the GATT-World Trade Organization (GATT-WTO) because there is a precise set of rules that ensures a fair system of valuation. It adheres to the GATT-WTO objective that valuation procedures should not be used to combat dumping. Moreover, TV is based on the price actually paid in commercial practice. It is also neutral because there is no distinction between the sources of supply.

But the biggest gainer is the Filipino consumer in terms of lower prices and a wider selection of goods available to him. This will happen because the cost of the raw materials used on the product is reduced.

4.
Q: What if the local manufacturer does not pass on the savings in production cost to the local consumer?
A: He could choose to do that but market forces compel him to compete for consumer bucks. With import liberalization, producers are forced to compete not only against other local manufacturers making the same product but also with imported items. If the manufacturer wants to keep his market share, he will have to offer good quality products at the best and most affordable price which the consumer can afford.
5.
Q: Does the new system have the support of the private sector?
A: The Philippine Chamber of Commerce and Industry (PCCI) and the Joint Foreign Chambers of Commerce and in the Philippines which is composed of five foreign chambers (American Chamber of Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines, Japanese Chamber of Commerce of the Philippines, European Chamber of Commerce of the Philippines and the Australian-New Zealand Chamber of Commerce) not only support but have actively championed the adoption of the transaction value system at the earliest possible time as the basis for computing the dutiable value of imported goods. The system will provide a more predictable and acceptable international trading environment in the Philippines.
6.
Q: What is the DTI position on the shift from HCV to TV?
A: The Department of Trade and Industry supports the Transaction Value system as an important reform measure that would make the Philippines more attractive to foreign investments. The shift to this import valuation method is a critical stip to make local manufacturing industries more gloabally competitive. Moreover, it would enhance Philippine competitive standing in the new international economic order under the WTO. But even more importantly, DTI supports the adoption of the Transaction Value system of valuation because of the benefits and advantages it can give Filipino consumers. It is time consumers got a break by giving them access to quality products that are priced within their. means.
7.
Q: How is the dutiable value of an imported item computed under TV system?
A: The dutiable value of an imported item is the transaction incurred by the importer in the form of:
  1. Cost actually incurred by the importer in the form of:
    • commissions and brokerage, except buying commissions;
    • cost of containers;
    • cost of packaging (whether labor or materials)
  2. Appropriate portion of the value of goods and services supplied directly or indirectly by the importer at reduced cost for use in the production and export of the goods:
    • materials, components, parts and similar items included in the goods;
    • tools, dies, mould and similar items used in production;
    • materials consumed in production;
    • necessary engineering, development, artwork, designs, plans and sketches done outside the Philippines.
  3. Royalties and license fees as a condition for the sale;

  4. Proceeds earned due to subsequent resale, disposal or use of the imported goods which accrue directly or indirectly to the exporter;

  5. Transport cost at the port of entry in the Philippines;

  6. Loading, unloading and handling charges of imported goods at the port of entry; and

  7. Insurance.
In most cases the single amount or figure on the sales invoice already covers the cost items we have just enumerated above.
8.
Q: Are there cases when the invoice amount does not cover the above costs?
A: Yes. Some invoices do not cover the other costs in one amount. In such cases, the BOC will add the pertinent costs to the amount appearing on the sales invoice.
9.
Q: Are there ways the BOC can check the correct dutiable value of an imported article?
A: Yes, there are ways to check or verify the correct dutiable value of an imported goods. One way is from reports coming from the Philippine Revenue/Commercial Attache or other members of the Philippine Diplomatic Corps in the country of import origin.
10.
Q: What documents must the importer submit to support the declared transaction value?
A: Importers are required to submit to the BOC documents to support the declared transaction value of the imported product. These include: proforma invoice, price list and scheduel of discounts.
11.
Q: Can the BOC question the accuracy of the declared transaction value?
A:

Yes. The BOC Commissioner can question the accuracy of the declared value, especially when the following conditions or situations are present:

  1. The foreign seller/exporter fixes the prices of the imported goods on condition that the Filipino buyer/exporter will buy other goods in specified quantities from him;
    • The foreign seller/exporter fixes the price of the imported product because the Filipino buyer/exporter will buy other products in sufficient quantities from him;
    • The price of the imported product is tied with the price/s of the product the Filipino buyer/importer will sell the foreign seller/exporter;
    • The price is based on an agreement between the foreign seller/exporter selling his semi-finished products to the Filipino buyer/importer for a specified quantity once these products are processed.
  2. Part of the proceeds of any subsequent resale of the goods goes directly or indirectly to the seller/exporter, unless an appropriate adjustment is made in accordance with the provisions of the General Agreement on Tariffs and Trade (GATT).

  3. The buyer/importer and seller/exporter are related and their relationship influences or affects the conditions of the sale of the imported goods.
12.
Q: How can the BOC check the accuracy of the goods' declared value?
A:

The BOC Commissioner can use any of two ways to check the accuracy of the goods' declared value:

  • Look for the transaction value of identical goods which were imported into the Philippines on or about the same date as the goods for being valued;
  • Look for the transaction value of similar goods which were imported into the Philippines on or about the same date as the goods being valued;
13.
Q: What are identical goods?
A: Identical goods are those which are alike in all respects, including physical characteristics, quality and reputation as the item under scrutiny. Minor differences in appearance will not affect goods regarded as identical.
14.
Q: What are similar goods?
A: Similar goods, on the other hand, are those which are not fully alike but have the same characteristics and component materials. Such goods perform the same function as the comparable item and may be commercially interchangeable. To be considered similar, goods should share three features: quality of the goods, its reputation and the existence of a trademark.
15.
Q: Is there any other way to determine the dutiable value aside form the methods discussed above?
A:

If the dutiable value cannot be determined through the above methods, it may still be arrived at using measures consistent with the principles and general provisions of GATT:

  1. Unit price at which the identical or similar imported goods are sold domestically to persons not related to the seller at or about the time of importation subject to deductions under GATT; or

  2. The computed value, which is the sum of:
    • the cost or value of raw materials used in production;
    • the profit and general expenses in importing the goods which should be equal to the amount indicated in the sale of that good from its originating country;
    • the freight, insurance, and other transportation expenses incurred in importing the goods.
16.
Q: How can an importer avoid delays in cases when the final dutiable value of the goods imported has yet to be determined?
A: The importer can file a cash bond equivalent to the maximum amount of duties and taxes that could be imposed plus 25%.
17.
Q: When are buyers/importers and sellers/exporters considered related?
A:

Buyers/importers and sellers/exporters are considered related if:

  • They are both officers or directors of each others businesses;
  • They are legally recognized partners in business;
  • One is the employer and the other his employee;
  • One of them owns, controls or holds 5% or more of the outstanding voting stocks or shares, directly or indirectly, of the others' business;
  • One of them, directly or indirectly, controls both their businesses;
  • Together they control a third person; and
  • They belong to the same family.
18.
Q: What is export value?
A:

The export value of an imported good is the price of the imported item in the principal markets of the exporting country at the time it is shipped to the Philippines.

Between now and the year 2000 when Transaction Value will be fully implemented, the export value of the imported goods will be the basis for computing the dutiable value of Philippine imports.

19.
Q: How is the dutiable value computed under the export value system?
A:

The dutiable value of an imported good is the export value plus:

  • The cost of all containers, covering and/or packings of any kind;
  • All other costs, charges and expenses; and
  • Freight and insurance premium required at the port of enty.

In most cases the figure or amount in the sales invoice already covers the above costs. When it does not, the BOC will add the above costs to the amount appearing on the sales invoice.

20.
Q: How will BOC check the accuracy of a questionable export value declaration?
A:

There are three ways the BOC can verify the export value of an imported item in case of reasonable doubt

  • The export value of the goods in the principal export markets of the country of manufacture, if it is not the exporting country;
  • The export value of the goods when exported to a third country with the same economy as the country of exportation;
  • The domestic wholesale selling price of the same articles in Manila, or other principal markets in the Philippines.
21.
Q: Can the Commissioner of BOC delegate his power to determine the dutiable value of an imported good or release imports that are under cash bond?
A: Yes, he can delegate authority to determine dutiable value or release imports under cash bond to the Collector of Customs in case there are no established or published export value for such imports. The Collector, however, has to immediately report to the Commissioner whenever an export value for the imported good is established for publication.
22.
Q: Will the BOC publish the export value of imported goods for the public's information?
A: Yes, the export value of imported goods will be published and made available for the public's information.
23.
Q: Can an importer question the export value published by the BOC?
A:

Yes, an importer who is not satisfied with BOC's published export value has 15 days, from the date of the publication, to file a protest.

The BOC has 15 days, from the time of the protest, to decide whether to amend or retain the export value. Modifications will also be published by BOC.

24.
Q: Where are protests filed?
A:
The Commissioner of Customs will create a special committee to handle complaints/protests regarding published export values of imported goods. The committee will review and decide whether to modify or retain the export value of the imported item concerned.

 


   
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