Here we intend to discuss that for the purpose of customs valuation what is an "assist". Assist is basically an assistance extended by the buyer to its supplier. For example, a shirt incorporates two yards of cloth costing Rs 100 per yard furnished by the buyer. The assist in this case is worth Rs 200 per shirt, and no apportionment is necessary.
GATT code of valuation assumes that the value of goods received from the seller should include at least some of these forms of assistance. The addition for the assist is made only if the value is not already included in the price, but since the assist was provided to the seller free of charge by the buyer, the seller may not be charging the buyer for it,1 and the fact thus call for attention to this aspect of the import. Such assists were part of Customs Valuation under BDV, however, the GATT code provisions differ from the former provisions in a number of important respects, and hence the code must be looked with a fresh eye.
There are five conditions that must be satisfied before the assist addition to the Customs Value as per Article 8.1 (b). These conditions include:
a) The goods and services must have been supplied by the buyer free of charge: Note the following points:
-- What matters is that the assist is supplied by the buyer, regardless of where they come from.
-- The buyer does not need to own or make the assist.
-- Here the reduced cost implies that the measure of the amount of assist is the cost to the buyer.
b) The assist must be used in connection with the production or sale for export of the imported goods.
c) The value of assist must not already be included in the price.
d) The value of assist must be apportioned as appropriate to determine the amount properly attributable to the particular goods being valued for Customs purpose.
e) The assist must be of a category listed in the code.2
An assist can be of the following category:
a) Materials, components, parts and similar items incorporated in the imported goods
b) Tools, dies, moulds and similar items used in production of the imported goods.
c) Materials consumed in the production of imported goods.
d) Engineering, developments, artwork, design work and plans and sketches undertaken elsewhere than the country of importation.
However, interpretation of this clause differs in different countries. For example, Canada does not consider engineering follow-through, quality control, trouble shooting, routine or periodic alteration as research and development activities.
Now we come to the point that how calculations for assist are to be made? While making calculations of assist, following are the guide lines to be observed:
a) The assist is to be valued at cost to the buyer who furnishes it without addition for profit.
b) Necessary allocations are to be made according to generally accepted accounting principles.
c) Design, etc, will have nominal value.
d) Things like plans after their use must be given a nominal value.
e) The intangible assist must be necessary for the production of the imported goods.3 Supply of quality control and management personnel at no cost to the seller is to be regarded neither as an assist nor as an indirect payment. Similarly, detailed specifications, including various dimensions noted on a drawing of the machine are included in the buyers' order, so as to advise the exporter/manufacturer of what the buyer needs.
Value of the assist is the cost to the importer of purchasing or producing the product.4 The cost of production governs not only if the importer does the work but also if he produces of the assist is related to the importer. No profit to the importer is to be included. Where the assist has been used by the importer before he sends it abroad as an assist, the value of the assist should accordingly be reduced. In case of damage and deterioration, a downward adjustment in its value may be made even if it has not been used. Where assist involves payments in foreign currency the conversion is permissible.5 For the shipping costs, the provisions of code are silent, hence such costs are apparently to be excluded where the same are not included in the purchase price, however, and in such cases parties have to avoid concealment.
Some assists are directly consumed or physically incorporated in the making processes, in such cases, the cost of assist pertaining to particular number of units of the product exported can usually be determined quite easily.
Sometimes, for one reason or another, it is not worth the trouble to apportion the cost of the assist over the many units involved. The value of the assist may be small, or it may take too much effort or argument to arrive at an appointment, or the entire output may be scheduled for importation at or about the same time. In any case where the importer prefers to do so, he is permitted to include the cost of the entire assist on one or a few early shipments (the necessary cost figures may not be ready immediately). The value might be apportioned to the first shipment if the importer wishes to pay duty on the entire value at one time'. Where this method is adopted, it obviously follows that no addition is to be made in respect of the assist on any later shipments, even though the goods still reflect the assist.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates Karachi)
1. See Article 8.1 (b) of the code which states that goods and services supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods.
2. Since Article 8.1 (b) applies only to the specified gods and services
3. For example five sketches are furnished to the manufacturer, who chooses and uses one. Only the cost of that one is to be added.
4. Generally procurement, inspection and warehousing costs are excluded from the value of assist.
5. In terms of Article 9