Customs Valuation Methods
Set of six hierarchical methods established by the WTO/GATT Agreement to determine the customs value of imported goods.
The Six Methods of the Customs Valuation Agreement
The WTO Agreement on Customs Valuation (formerly GATT 1994, Article VII) establishes a hierarchical system of six methods for determining the customs value of imported goods. These methods must be applied in strict sequential order, with each subsequent method used only when the preceding one cannot be applied.
Hierarchy of Methods
- Transaction Value Method (Article 1) — the price actually paid or payable
- Identical Goods Method (Article 2) — transaction value of identical goods
- Similar Goods Method (Article 3) — transaction value of similar goods
- Deductive Method (Article 5) — resale price in the importing country, less deductions
- Computed Value Method (Article 6) — cost of production plus profit and general expenses
- Fall-back Method (Article 7) — reasonable adaptation of the preceding methods
The importer may request the reversal of methods 4 and 5. The entire system aims to ensure fair, uniform and neutral valuation, excluding the use of arbitrary or fictitious values.
Application in the European Union
The Union Customs Code (UCC), Articles 70 to 74, transposes these methods. The transaction value method (Article 70 UCC) applies in over 90% of cases. Customs authorities may only resort to subsidiary methods when they demonstrate the impossibility of applying the preceding method.
Practical Considerations
The correct application of these methods is crucial as customs value directly determines the amount of duties and taxes on importation. A valuation error can lead to customs reassessment, financial penalties and clearance delays. Companies must precisely document the elements justifying the method used, particularly in related-party transactions.