Customs value of imports to come from transaction value

By Riyadi

JAKARTA (JP): The Directorate General of Customs and Excise will change the customs value of imported goods from prevailing market value to transaction value, but will not change the goods' coding system.

The Director of Tariffs and Customs Prices, Daeng M. Nazier, said last week the government would impose the new customs values on April 1, when the 1995 customs law came into force.

"There will be no change in the classification and coding system of imported goods after April 1. We will remain using the current harmonized systems," Daeng said at a customs seminar.

"However, we will change the customs value from the prevailing export value to the transaction value because the prevailing export value does not represent actual trading practices," he said.

The new customs procedures will combine self-assessment, on- arrival inspections and post-release audits.

Importers will be allowed to report their goods' transaction value and assess the value of the duties and taxes they owe.

He said any mistake in classifying goods into the correct harmonized systems would not be subject to fines, but any deliberate undervaluing would be subject to fines of up to Rp 500 million (US$207,295).

The customs office would help importers, upon request, classify imported goods into the right harmonized system 30 days before they submit customs declarations, Daeng said.

The customs office will also help importers decide the transaction value of imports 30 days after the submission of the customs declaration.

"Because of the abundant works we have, we would like to advise importers to use the harmonized systems they currently use," Daeng said.

"And in terms of the transaction value, as long as they report the real value without hiding something, they should not worry about the fines," he said.

GATT

Daeng said Indonesia subscribed to the General Agreement on Tariff and Trade (GATT) valuation code to determine the customs transaction value.

GATT was replaced by the World Trade Organization in January 1995.

Article VII of the GATT agreement, which governs the GATT valuation code, stipulates that customs value should be based on simple and equitable criteria consistent with commercial practices and that valuation procedures should be of general application without distinguishing supply sources.

Daeng said the 1995 customs law, especially article 15, a finance ministerial decree and a circular letter by the director general of customs and excise had given customs officials' guidelines as to how they should determine the customs value of imports based on their transaction value.

Article 15 of the customs law along with its elucidation and supporting rulings defines transaction value as the price actually paid or payable by importers for the imported goods.

Whenever the actual value is unascertainable, customs officials should determine the value for customs purposes based on the nearest ascertainable equivalent.

Customs officials can determine imported goods' transaction value on goods when reported transaction value is unascertainable based on the value of identical or similar goods produced in the same exporting country.

The transaction value can also be calculated using the deduction method. This involves using imported goods' prevailing prices in the domestic market deducted by the value of its import duties and taxes, freight, insurance and handling costs.

The customs administration can also calculate transaction value using the computation method. This involves adding up the price of a product's raw materials with its processing costs and other related costs of bringing the goods to Indonesia's customs area.

Customs officials may contest the transaction an importer quotes whenever the buyer and the seller are related. But customs officials may not use this clause as grounds for not accepting the transaction value.

"In such cases, the importer must prove that their relationship with the seller does not influence the price. Otherwise, we will not accept their declared transaction value," Daeng said.

According to the GATT valuation code, the buyer and seller are deemed related only if they are officers or directors of one another's businesses, are legally recognized partners in business or are employer and employee.

The buyer and the seller are also considered to be related if any one directly or indirectly controls the other, if both are directly or indirectly controlled by a third person, if they are members of the same family, or if any person directly or indirectly owns, controls or holds 5 percent of more of their company's outstanding voting stock.

The value for customs purposes of any imported product should include transportation costs within the country of origin and to the imported country and insurance premium provided the importers pay the goods' cost, insurance and freight terms.

"However, if the importers pay the insurance premium to domestic insurance firms, they will not be required to include insurance premiums into their customs value," Daeng said.

The customs value should also include commission, packing, royalty and licensing fees.

But the value should not include the amount of any internal tax, applicable within the country of origin or export, from which the imported products has been exempted or has been or will be relieved by means of refund.

Skeptical

But several local businesses are skeptical about the capability of the customs officials, especially those on the front line, to implement the 1995 customs law with regards to the customs value of imports.

The secretary general of the Indonesian Textile Association, Benny Soetrisno, said all rulings on customs valuations seemed good but questioned customs officials' readiness to implement them correctly.

"Regulations are usually well-understood by upper-level officials, but not those in front line. The reality will be very different," Benny was quoted by Antara as saying.

The chairman of the Indonesian Importers Association, Amirudin Saud, shared Benny's skepticism and said the customs office had done little to prepare its front line officials.

"Therefore, I'm very worried if the spirited-customs officials in implementing the new customs procedures will hinder the flow of imports," Amirudin said.

He demanded importers be given a transition period in which they can choose the current preshipment inspection for their imports or the new customs procedures which include self- assessment, on-arrival inspection and post-release audit.

Febriyanto from PT Wahana Wirawan, an affiliate of the Indomobil Group, said the new customs law's concept was good but also questioned the readiness of the customs officials.

"But we don't know yet what will happen in practice. However, very often, the concept is good but the implementation is not," Febriyanto said.

Economist Anwar Nasution from the University of Indonesia said the customs office should accommodate the interests and concerns of all market forces to successfully implement the new customs law.

"The customs office should never abuse the law just because they would have the power to do it," Anwar said.