Simpler rule on landing charges

Changes will help align custom valuation rules with WTO norms

The Central Board of Excise and Customs (CBEC) intends to abolish loading 1 per cent landing charges on CIF (cost, insurance and freight) value of imported goods. Its website has uploaded the proposal to amend Rule 10(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 — known as the Customs Valuation Rules (CVR) — and invited stakeholders’ comments.  

For imports, Section 14(1) of the Customs Act, 1962, prescribes the basis for valuation as transaction value — price paid or payable for the goods when sold for export to India for delivery at a place and time of importation, where the buyer and seller are not related and price is the sole consideration for sale of goods, subject to such other conditions as may be specified in the rules made in this behalf. It also says that such transaction value shall include "in addition... any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf”. Accordingly CVR has been notified.

Rule 3(1) of CVR says “subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10”. Rule 10(2) of CVR mandates addition of the cost of transport of the imported goods to the place of importation; loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation (known as landing charges) and the cost of insurance. The landing charges are fixed at 1 per cent of the CIF vale of the goods. The proposed amendment omits this stipulation. 

The proposed amendment, however, retains landing charges at Rule 10(2)(a) that reads, “the cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation”. The critical and subtle change here is substitution of the word 'at' with 'to', which means that landing charges at ports, airports, inland container depots (ICD) etc will not form a part of the assessable value. 

The other changes proposed in CVR include limiting cost of insurance till the place of importation; rewording the provisions where the free on board (FOB) value is not ascertainable but the sum of FOB value of the goods and the cost of insurance or the sum of FOB value of goods and the cost of transport and landing charges are ascertainable; extending the exclusion of cost of insurance, transport and landing charges associated with transhipment to another customs station for all sea/air  consignments and defining place of importation as the customs station where the goods have been brought for being cleared for home consumption or in the case of goods to be removed to a bonded warehouse, the customs station from where goods are to be removed for the purpose of deposit in a warehouse.

These welcome changes will bring in the concept of charging duty on all costs till the place of importation but excluding the delivery costs at the port/airport/ICD and, thus, align CVR with article 8.2 of World Trade Organisation’s Agreement on Customs Valuation. 

e-mail: tncrajagopalan@gmail.com