our business is burning, hit by lightening from a thunderstorm. The media asks y
ID: 2693348 • Letter: O
Question
our business is burning, hit by lightening from a thunderstorm. The media asks you whether you will rebuild. Thank God you have replacement coverage for your firm. Some time ago, your competitor offered to buy you out at 1.5 times book value. Your appraised value indicated the firm was worth significantly more than that, possibly three times what he was offering. Your competitor countered that your tax value on the rolls of the county courthouse indicate that the building is worth only $100,000. You laughed and reminded him that this is not close to the market value the firm would sell for in the open market. Using the following valuation techniques, what is the firm worth? Which valuation technique is valid under these pending circumstances?(book, market, tax, appraised, and replacement)Explanation / Answer
THIS WILL BE HELPFUL FOR YOU AND PL RATE ME FIRST It is the normal Method of valuation which applies to over 90% of importations liable to ad valorem customs duty. top ^ 3.2 What is meant by 'transaction value'? This is the price paid or payable by the buyer to the seller for the goods when sold for export to the EC adjusted in accordance with specific rules explained in detail in the following paragraphs. This may also cover situations where goods are imported from a processor. The 'transaction value' may be 'built up' or 'constructed' by reference to the cost of processing plus any items to be added in accordance with paragraph 3.15 below particularly sub-paragraph (d). Such items are commonly referred to as 'assists'. top ^ 3.3 What if there is no sale? This rules out Method 1. You must try Method 2. Ignore the rest of this Section and go direct to Section 4. Examples of situations where there is no sale are given in Section 27. top ^ 3.4 How do I arrive at the customs value? You base it on the price actually paid or payable by the buyer to the seller for the goods. This means the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods. It includes all payments made or to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller. Thus periodic payments (such as monthly, quarterly, annually) or 'one off' payments by the buyer to the seller for the imported goods must be taken into account (for example tooling charges, engineering fees, development costs). The buyer of the imported goods need not necessarily be established in the country of importation. top ^ 3.5 What happens if there is an earlier sale where the imported goods have been sold more than once prior to entry to free circulation? Where goods are sold only once, the fact that they are declared for free circulation in the Community can be taken as confirming that the goods were 'sold for export to the Community'. Where the goods are sold to one or more subsequent buyers before entry into free circulation, this also applies to the last sale in the commercial chain prior to the introduction of the goods into the customs territory of the Community. top ^ 3.6 What other information and documentary evidence is required? Where an earlier sale has taken place involving the imported goods, you may declare the earlier sale as the basis for the customs value. NOTE. An earlier sale may not be used as the basis for import VAT where the import declaration is made in the name of a final consumer or retail customer. Remember you can only use an earlier sale where it can be demonstrated that there are specific and relevant circumstances which led to export of the goods to the customs territory of the Community. Ways in which you can do this include the following: the goods are manufactured according to EC specifications, or are identified (according to, for example, the marks they bear) as having no other use or destination the goods in question were manufactured or produced specifically for a buyer in the EC, or specific goods are ordered from an intermediary who sources the goods from a manufacturer and the goods are shipped directly to the EC from that manufacturer. Examples illustrating case situations are given in Section 28. The term 'earlier sale' may also apply to 'built up' or 'constructed' values (see paragraph 3.2). NOTE. The person completing and signing the valuation declaration, form C109A (see paragraph 19.6) must be in possession of all the facts relating to the sale upon which the declared customs value is based (see paragraph 19.7). This includes having access to the relevant accounting records kept in third countries in order to provide documentary evidence of settlement between the relevant buyer and seller to our satisfaction. Also, having declared a sale, which is accepted by us as the basis for the transaction value, you cannot subsequently amend the original declaration to another sale if the goods have been released into free circulation. top ^ 3.7 What evidence of the price paid or payable must I produce? A copy of the seller’s invoice or other document against which payment will be made. This will include telex or similar messages used instead of invoices. (See also paragraph 2.3). top ^ 3.8 What if Customs has doubts about the transaction value? Where we have doubts that the declared transaction value represents the total amount paid or payable, we will ask you for more information. If those doubts continue we shall notify you (in writing if you request) of the grounds for those doubts before making a final decision about the acceptability of the declared value. You will be given a reasonable opportunity to respond. Then we will make a final decision and notify you of it in writing. (See paragraph 2.6 if you disagree with a customs decision.) top ^ 3.9 What if the sale is subject to any restrictions? If the sale is subject to conditions which restrict your freedom to dispose of or sell the goods as you wish you may not be able to use Method 1 (see Section 29). top ^ 3.10 What if I am related to the seller of the goods? The fact that you are related to the seller of the goods does not mean that Method 1 cannot be used. The price paid or payable is still acceptable unless as a result of the relationship you get a reduced price (see Section 30). top ^ 3.11 What does 'related' to the seller mean? Persons (natural or legal) are related if: they are officers or directors of one another’s businesses they are legally recognised partners in business they are employer and employee any person directly or indirectly owns, controls or holds 5% or more of the outstanding voting stock or shares of both of them one of them directly or indirectly controls the other both of them are directly or indirectly controlled by a third person together they directly or indirectly control a third person, or they are members of the same family (see Section 31). But if you act as the seller’s agent, distributor or concessionaire you are related only if one of the above categories also applies. top ^ 3.12 If I’m an intermediary (such as a selling agent) or branch office can I use Method 1? You may be able to use Method 1. Section 32 for selling agents or 33 for branch offices give further information. top ^ 3.13 Does it matter whether I pay the seller direct? No. You can pay a third party if the seller says so. top ^ 3.14 Does it matter whether I pay in cash? No. You can also pay by letters of credit or negotiable instrument. top ^ 3.15 What items must I add to the price paid or payable? You must add the following to the price you pay (unless they are already included): (a) Delivery costs. The costs of transport, insurance, loading or handling connected with delivering the goods to the EC border must be included. Section 17 gives further details. (b) Commissions. Certain payments of commission and brokerage, including selling commission, must be included. Section 32 gives more details about selling agents. But you can exclude buying commission if it is shown separately from the price paid or payable for the goods (see paragraph 3.16(f) and Section 34). (c) Royalties and licence fees. You must include these payments when they relate to the imported goods and are paid by you as a condition of the sale to you of those goods. You can find further information in Section 35. (d) Goods and services provided free of charge or at reduced cost by the buyer. If you provide, directly or indirectly, any of the following, you must include in the customs value any part of the cost or value not included in the price charged to you by the seller: (i) materials, components, parts and similar items incorporated in the imported goods including price tags, kimball tags, labels (ii) tools, dies, moulds and similar items used in producing the imported goods, for example, tooling charges. There are various ways of apportioning these charges (iii) materials consumed in producing the imported goods, for example, abrasives, lubricants, catalysts, reagents etc which are used up in the manufacture of the goods but are not incorporated in them, or (iv) engineering, development, artwork, design work and plans and sketches carried out outside the EC and necessary for producing the imported goods. The cost of research and preliminary design sketches is not to be included. NOTE. If you make any payments (periodically or 'one off') to the seller for any of the above goods and services, you must include the amounts in the customs value (see paragraph 3.4). (e) Containers and packing. Include: the cost of containers which are treated for customs purposes as being one with the goods being valued (that is not freight containers the hire-cost of which forms part of the transport costs), and the cost of packing whether for labour or materials. Where containers are for repeated use, for example, reusable bottles, you can spread their cost over the expected number of imports. If a number of the containers may not be re-exported, this must be allowed for. (f) Proceeds of resale. If you are to share with the seller (whether directly or indirectly) the profit on resale, use or disposal of the imported goods you must add the seller’s share to the price paid (but see paragraph 3.16(d) as regards dividends). For example, if the seller is to have 30% of the profit which you receive, this is to be added to the price paid or payable. If at the time of importation the amount of profit is not known, you must request release of the goods against a deposit or guarantee (see paragraph 2.5). (g) Export duty & taxes paid in the country of origin or export. When these taxes are incurred by the buyer they are dutiable. However, if you benefit from tax relief or repayment of these taxes they may be left out of the customs value. top ^ 3.16 Can I leave out any items from the customs value? Yes. The following items may be left out of the customs value: (a) Delivery costs within the EC. If the seller’s or carrier’s charge covers delivery beyond the EC border you may deduct the additional charges for such delivery, providing they are shown separately from the price paid or payable for the goods. Section 17 gives more details. (b) EC duties or taxes. You can deduct from the price you pay any included customs duty or other taxes which are payable in the EC because of the importation or sale of the goods. To find the amount of duty included in the invoice price, use the formula: For example, if the duty inclusive invoice price is £1100 and the rate of duty is 10% the duty included in that invoice price is: Therefore the included duty is £100. NOTE. The included duty is the last item to be deducted. (c) Discounts. These can only be left out where they relate to the imported goods being valued and there is a valid contractual entitlement to the discount at the material time for valuation. Discounts (such as contingency or retroactive discounts) related to previous importations cannot be claimed in full on the current importation. (i) Quantity or trade discounts. You can leave out these discounts where earned. In other words the price paid or payable net of these discounts is acceptable. If you are related to the seller the discounts will also be allowed if that relationship has not affected the price of the goods (see paragraph 30.1). (ii) Cash and early settlement discounts. You can also leave out these discounts on the following basis: when the payment reflecting the discount has been made at the time of entry to free circulation if the payment has not been made at the time of entry to free circulation, it will be allowed at the level declared provided it is a discount generally accepted within the trade sector concerned if the discount is higher than is generally accepted within the trade sector concerned it will only be accepted if you can demonstrate, where required, that the goods are actually sold at the price declared as the price actually paid or payable and the discount is still available at the time of entry to free circulation. NOTE. If you never take advantage of a cash discount and always pay the gross contract price for the goods, the discount may become liable for inclusion in the customs value at the time of entry to free circulation. For further information you should contact our Helpline. (d) Dividends. You can leave out dividend payments you make to the seller. (e) Marketing activities related to the imported goods. You are not required to include in the customs value the cost of the following activities which you carry out at your own expense: advertising promotion, or guarantee or warranty services. In addition any payments that you make towards general marketing support which are not related to imported goods, should not be included. NOTE. The cost of marketing activities borne by the seller are to be included in the customs value even if they are charged separately from the invoice price for the goods. (f) Buying commission. You may leave out fees or brokerage paid to your agent for representing you outside the EC in buying imported goods, providing the commission is shown separately from the price paid or payable for the goods. See Section 34 for further details. NOTE. Buying commission is only to be included in the value for VAT where the buyer in the sale on which the customs value is based is not registered for UK VAT. See paragraph 24.2 for further details. (g) Export quota and licence payments. You may leave out payments for buying export quotas and licences. But you must include payments for certificates of authenticity for meat. See Section 36 for further details. (h) Interest charges. These may be left out if they are payable under a financing arrangement for buying the imported goods, providing the charges are shown separately from the price paid or payable for the goods. See Section 37 for further details. (i) Rights of reproduction. Payments for these rights may be left out if they are shown separately from the price paid or payable for the goods. (j) Post-importation work. You may leave out charges for: construction work erecting assembling maintaining, or giving technical help for goods such as industrial plant, machinery or heavy equipment. The work may be carried out before or after importation so long as it is carried out as part of the installation of the imported goods and the charge must be shown separately from the price paid or payable for the goods. (k) Management fees. You can leave out management fees that you pay to the seller. This would include general service fees for administration, marketing, accounting, etc., that are not related to the imported goods. NOTE. You may need to produce evidence to support any claim to leave any of the items mentioned in this paragraph out of the customs value. top ^ 3.17 What can I do if, at the time of entry, I cannot arrive at a value for an item that: (a) I must add to the price paid or payable, or (b) I may leave out of the customs value? You can ask us to agree to a Method for arriving at an appropriate amount to add or exclude at the time of entry. This could involve the use of average values or a percentage addition or deduction and be subject to periodic reviews. top ^ 4. Method 2 top ^ 4.1 What is Method 2? It is the second Method you must try. It is based on the customs value of identical goods exported to the EC at or about the same time as the goods to be valued. top ^ 4.2 What is meant by 'identical goods'? These are goods produced in the same country as those being valued. They must also be the same in all respects, such as physical characteristics, quality and reputation. Minor differences in appearance do not matter. If the producer of the Method 2 goods does not produce Method 1 goods, another producer’s goods may be used for comparison. top ^ 4.3 What if there are no identical goods? This rules out Method 2. You must try Method 3. Ignore the rest of this Section and go direct to Section 5. top ^ 4.4 How do I arrive at the customs value? You base it on a customs value of identical goods already accepted by EC Customs
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.