Computed Value Method for EU Importers
Quick answer
The computed value method is a customs valuation technique used in specific cases where the transaction value cannot be determined or accepted. It calculates customs value based on the cost of materials and processing, profit and general expenses, and other necessary costs related to producing the imported goods [1].
Key takeaways
- The computed value method is applied when transaction value or other primary methods are unavailable or inappropriate [2][1:1].
- It includes costs of materials, fabrication or processing, profit, general expenses, and other necessary expenses [1:2].
- Buyer-supplied goods or services (assists) must be valued and included in the computed value [2:1][3][4].
- Verification of production costs may be conducted with the producer’s consent and cooperation [2:2][1:3].
- The method is generally limited to cases involving related buyers and sellers where detailed cost information is accessible [2:3].
- The computed value method is a secondary valuation method under WTO rules and EU customs law [1:4][5].
When to Use the Computed Value Method
The computed value method is used primarily when the transaction value of imported goods cannot be determined or is not acceptable for customs valuation purposes. This situation often arises when the imported goods are produced by related parties, or when the goods have undergone further processing such that their original identity is lost or difficult to trace [2:4].
Under the WTO Customs Valuation Agreement, the computed value method is generally considered a secondary method, applied only after the transaction value method and other primary methods have been exhausted or found unsuitable [1:5]. In practice, EU importers may resort to this method when:
- The transaction value is unavailable or rejected by customs authorities.
- The goods are produced under contract by a related party.
- The imported goods have lost their original identity due to processing, but the value added can be accurately determined.
- The producer is willing to provide detailed cost information and allow verification [2:5].
The method is not typically used for unrelated party transactions or where the imported goods maintain their identity and transaction value can be established [2:6].
Components of the Computed Value
The computed value consists of three main components, as defined in Article 6 of the WTO Customs Valuation Agreement and reflected in EU customs practice:
-
Cost or value of materials and fabrication or other processing
This includes all costs directly related to producing the imported goods, such as raw materials, parts, and labour involved in fabrication or processing [1:6]. -
Profit and general expenses
An amount for profit and general expenses is added, reflecting the usual amounts found in sales of goods of the same class or kind made by producers in the exporting country for export to the importing country [1:7]. -
Other necessary expenses
This includes any other costs necessary to reflect the chosen valuation option, such as packaging, design, or engineering costs incurred in the production process [1:8].
The sum of these components forms the computed value, which serves as the customs value for the imported goods when this method is applied.
Accounting for Materials and Fabrication
The first and most substantial element of the computed value is the cost or value of materials and fabrication or other processing used in producing the imported goods. This includes:
- The purchase price or production cost of raw materials, parts, and components.
- Labour costs directly related to fabrication or processing.
- Overhead costs that are part of production, as reflected in the producer’s commercial accounts [2:7].
These costs must be based on the producer’s commercial records, which should be consistent with generally accepted accounting principles in the country of production [2:8]. The valuation must avoid double counting, ensuring that costs are included only once.
If the importer or a related party supplies materials or assists used in production, their value must also be included, either at purchase price or production cost, adjusted for any prior use or depreciation [3:1].
Profit and General Expenses
The computed value method requires adding an amount for profit and general expenses that is typical for sales of similar goods by producers in the exporting country. This amount should reflect:
- The profit margin usually earned by producers of the same class or kind of goods.
- General expenses such as administrative costs, marketing, and other indirect costs related to production and sale for export [1:9].
This element ensures that the computed value approximates the commercial reality of the goods’ production and sale, rather than simply summing raw costs. The profit and general expenses figure should be based on objective data and industry standards, avoiding arbitrary or inflated amounts.
Treatment of Assists (Buyer-Supplied Elements)
Assists are goods or services supplied directly or indirectly by the buyer for use in connection with the production of the imported goods. Under EU customs law and the WTO Agreement, assists must be included in the customs value when using the computed value method [2:9][4:1].
Assists include:
- Materials, components, parts, and tools supplied by the buyer.
- Engineering, development, artwork, design work, and plans provided by the buyer.
- Services such as testing, quality control, or assembly provided by the buyer or related parties [4:2].
The value of assists is generally determined as follows:
- If purchased or leased by the buyer, the purchasing or leasing price is used.
- If produced by the buyer or a related person, the cost of production is used.
- If previously used, the value is adjusted to reflect depreciation or usage [3:2][4:3].
The value of assists must be apportioned appropriately over the imported goods to avoid overvaluation or undervaluation [3:3][4:4].
Verification and Information Requirements
Applying the computed value method requires detailed cost information from the producer of the goods. Since the producer is often outside the jurisdiction of the importing Member State, verification and information exchange pose practical challenges [2:10].
Customs authorities may request:
- Commercial accounts and records reflecting production costs.
- Documentation supporting profit and general expenses.
- Evidence of the value of assists supplied by the buyer.
Verification of this information can be conducted in the country of production with the producer’s consent and cooperation. The authorities of the importing country must give sufficient advance notice to the government of the exporting country and obtain its agreement for such verification [1:10].
The computed value method is generally limited to cases where the producer is willing to provide the necessary information and allow verification, making it less common for unrelated party transactions or where such cooperation is not feasible [2:11].
Relationship to Other Valuation Methods
The computed value method is one of the five customs valuation methods established under the WTO Customs Valuation Agreement and implemented in EU customs law. It is a secondary method, applied only if the transaction value method (Article 1) and other primary methods are not applicable or acceptable [1:11][5:1].
Primary methods include:
- Transaction value method: The price actually paid or payable for the goods sold for export to the EU, adjusted as necessary [5:2].
- Transaction value of identical or similar goods: Used when transaction value is unavailable, based on sales of identical or similar goods in the EU [6][7].
The computed value method is distinct from the deductive method, which bases customs value on the unit price at which the imported goods or identical/similar goods are sold in the EU, deducting certain costs [8].
In practice, EU importers and customs authorities apply the computed value method only when other methods cannot be used, due to the complexity and information requirements involved [2:12][1:12].
FAQ
What is the computed value method in customs?
The computed value method is a customs valuation technique that determines the customs value of imported goods based on the cost of materials and fabrication, profit and general expenses, and other necessary costs related to producing the goods [1:13].
When is the computed value method used for customs valuation?
It is used when the transaction value or other primary valuation methods cannot be determined or accepted, often in cases involving related parties or when the goods have undergone processing that changes their identity [2:13][1:14].
What costs are included in the computed value?
The computed value includes the cost or value of materials and fabrication or processing, an amount for profit and general expenses typical for the goods, and other necessary expenses related to production [1:15].
How are buyer-supplied goods and services valued in the computed method?
Buyer-supplied goods and services (assists) are valued at their purchase price if bought or leased, or at production cost if produced by the buyer or related persons. Adjustments are made for prior use or depreciation, and the value is apportioned over the imported goods [3:4][4:5].
Can customs authorities verify production costs for the computed value method?
Yes, but only with the producer’s consent and cooperation. Verification may be conducted in the producer’s country with proper notice and agreement from the relevant government authorities [1:16].
Is the computed value method a primary valuation method?
No, it is a secondary method used when the transaction value and other primary methods are unavailable or unsuitable [1:17][5:3].
