Customs: A perspective on import valuation, By Timi Bomodi



International trade is often conducted under globally accepted processes and procedures. These processes are hinged on protocols adopted via conventions and treaties. The World Customs Organisation, being the international body for the regulation of local Customs authorities worldwide, has come up with guidelines for the application of rules adopted by its members and other international organisations. Another organisation saddled with the responsibility of regulating international trade is the World Trade Organisation. In Its guideline for assessing the proper value for goods outlined in its Agreement on implementation of Article VII of General Agreement on Trade and Tariffs, 1994, it provides a Customs Valuation method which primarily bases the Customs value on the transaction value of the imported goods, also known as either the price actually paid or payable for the goods when sold for export to the country of importation. 


In addition to the transaction value, the WTO prescribes five other methods that can be applied successively. 
So the transaction value is followed by:* The transaction value of identical goods* The transaction value of similar goods* The deductive value method* The computed value method* The fall-back method. 
All of which are applied in hierarchical order. 
The intention of the above referenced Agreement is to provide a system that is uniform, fair, and neutral for the valuation of imported goods for Customs purposes. 
The Nigeria Customs Service being a member of WCO, has domiciled this agreement in its modus operandi. The Customs Valuation Unit under the Tariff & Trade Department has recently come under fire for lending itself to the consistent and correct interpretation and application of this agreement. 


Some unpatriotic individuals, engaged in the importation and clearing of goods who, being poorly informed about the application of these valuation methods attempted to portray the Customs in bad light, by claiming that the Valuation unit adopts non methodical and arbitrary means to arrive at values for Customs purposes.  Nothing could be further from the truth. 
This assertion is bogus and untenable when examined through the prism of current global realities. When we look at data from the past three years, and focus particularly on the last two, we are confronted with massive schisms in global supply chain occasioned by the Covid19 pandemic. Manufacturers in developed countries had to cut down on production because of the difficulties experienced in moving parts and components across international borders. Except for equipments and supplies, other goods have witnessed a decline in production. This situation has created scarcity of basic goods and services in countries, thereby creating upward price swings. A classic example is the US auto industry that has seen steady increases in the prices of new and used vehicles as a result of interruptions in global supply chain. 
Inspite of these obvious trends, the Nigeria Customs Service Valuation unit has in recent times been inundated with questionable requests for the acceptance of fictitious transaction values which bear no resemblances to global realities. Some unscrupulous importers and their agents have resorted to concocting values suitable only for their selfish ends, and solely for the purpose of evading the payment of appropriate Customs duty. 


To be sure the value for Customs duty are based on three components. One is the transaction value of the goods in question, also known as the Cost, second is the value or cost of freight, and thirdly the value of insurance for the goods in transit. All three are captured as the CIF value and forms the tax base for assessing duty. 


Whenever any one or all three of these components goes up, it automatically creates a domino effect seen in increased assessed values and duties across board. 
Since value assessments are based on the currencies of exchange when calculating duty payable on imports, we are compelled to also factor in the exchange rate. Even when the cost, insurance and freight values remain unchanged over time, the fact that the exchange rate varies, implies that there must be a commensurate increase in assessments and duty payable. 


The Nigeria Customs has in its data base a comprehensive list of import transactions that have taken place over the years. The historical data of all importers and imports in our possession lend themselves to critical analysis for Customs valuation and other purposes. Using recent aggregates of this data, we have been able to identify inconsistencies in values for the same, identical or similar goods imported by same importers from same countries of origin. We are aware that certain individuals and organisations deliberately make false attestations on their invoices and other documents with the aim of  evading the payment of duty and then turn around to blackmail the Service for querying their declarations. Like other attempts before it, this also will fail. The Nigeria Customs Service is bent on check mating all attempts at duty evasion, and it is resolved in doing this in line with the principles outlined in international treaties and agreements. 


Since we all are in agreement as to the negative effect of the pandemic on global supply chain, and its effect on cost, insurance and freight, we should then not be surprised by adjustments made by Customs Valuation officers reflecting our current global realities. Therefore, anyone imputing ulterior motives to the actions of Valuation officers, should themselves be viewed with suspicion. 
At a time like this when every kobo counts in helping the government actualize its development objectives, no one should feel justified to, under the guise of industry watchdogs, monitoring or consumer protection deprive the federal government of its dues in terms of payment of correct Customs duty.


. Bomodi, Deputy National Public Relations Officer, Nigeria Customs Service, writes from the Customs Headquarters in Abuja.