Tax and SARS knowledge base
Which import costs form part of customs value?
Which import costs must an importer consider when determining customs value?
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Direct answer
Do not treat the commercial invoice total or a general landed-cost report as the final customs value without review. SARS says Customs valuation follows six methods in a strict hierarchy. The transaction-value method is generally first when its prescribed conditions are met, but buyer-seller relationships, royalties, licence fees, restrictions and other transaction facts can affect whether and how it is used.
The practical task is to prepare a complete valuation file before the Customs declaration is made. Put the purchase contract, invoice, payment trail, Incoterms, transport records, relationship information and every relevant side agreement in one place. That allows a Customs specialist or internal compliance reviewer to identify the correct method and any required additions or deductions under the current law.
What this means in practice
Customs value is a specific legal value used in the Customs process. It is not automatically the amount paid to the supplier, the accounting cost of inventory, the insurance value or the price later charged to a customer. Those amounts may overlap, but they do not answer the valuation question without testing the transaction facts.
SARS identifies six valuation methods applied in a defined sequence:
- Transaction value, generally the price actually paid or payable when the conditions are met.
- Transaction value of identical goods.
- Transaction value of similar goods.
- Deductive value.
- Computed value.
- A fall-back method applied more flexibly after the preceding methods cannot be used.
SARS also explains that the sequence of the deductive and computed methods may be reversed on the importer's request in the circumstances allowed by the law. This is a technical area. The useful operational message is not to select a method because it produces a preferred number. Start with current rules and evidence, then document why the selected method is appropriate.
Step-by-step
- Gather the commercial transaction records.
Keep the purchase order, signed supply agreement, invoice, credit notes, debit notes, payment confirmation, Incoterms, freight and insurance records. Ask whether any price is conditional on a later rebate, volume, resale, financing term or other agreement. A missing side agreement can make a seemingly simple invoice file incomplete.
- Identify relationship and control facts.
SARS highlights the relationship between buyer and seller as a valuation consideration. Record common ownership, director relationships, group financing, exclusivity, price-setting rights and any other facts that could affect the transaction. Do not hide a related-party relationship because the invoice is commercially genuine. It is a valuation fact to assess openly.
- Identify royalties, licences and restrictions.
Review intellectual-property licences, trademark agreements, software agreements, technical-assistance contracts, agency contracts and resale restrictions. SARS notes that royalties or licence fees and restrictions placed on the buyer can affect customs value. The legal payment name is less important than what the payment relates to and whether it is connected to the imported goods.
- Apply the current valuation method hierarchy.
Have a competent reviewer test the transaction-value method and its conditions first. If it cannot be used, document why and move through the required hierarchy. Retain the reviewer's assumptions, the facts supplied and the exact date of the current source material. Do not construct an alternative value simply to make the duty cost lower.
- Reconcile the declaration to the valuation workpaper.
Compare line items, currency, quantity, invoice terms, transport records and declaration values. Ensure any adjustment is explained in the file. If the commercial arrangement changes after clearance, obtain advice promptly on the correct Customs treatment rather than leaving a difference unexplained.
- Keep ongoing change controls.
Review the valuation file when the supplier changes, an affiliate is introduced, royalty terms change, a rebate is agreed, the goods are redesigned or a new Incoterm is used. Make customs valuation part of contract review, not a final check after payment.
Documents and records to keep
Retain supply agreements, invoices, purchase orders, credit and debit notes, payment evidence, freight and insurance documents, Incoterms, exchange-rate support and transport records. Keep ownership charts, relationship summaries, licences, royalty agreements, agency agreements, rebates, financing arrangements and correspondence that explain the price.
Also retain the valuation method memo, current legal and policy sources consulted, declaration data, Customs assessments, broker instructions and any Customs correspondence. The file should allow a reviewer to move from the Customs entry back to the legal contract and payment trail without relying on memory.
Important limits and exceptions
This article does not calculate a customs value or say which method applies to a transaction. The Customs and Excise Act, current policy and the exact commercial facts control. Classification, preferential origin, import VAT and transfer pricing are separate questions even where they use some of the same documents.
Avoid two common errors: assuming a related-party invoice is automatically unacceptable, and assuming it is automatically acceptable. Both conclusions need current legal analysis. Do not alter a commercial invoice description or split charges artificially to target a Customs result.
When to get tailored advice
Get Customs advice before clearance for related-party imports, royalty-bearing goods, restricted distribution arrangements, unusual financing, commissions, bundled contracts or a significant duty exposure. Obtain a fresh review when contracts or payments change.
TaxProof can help assemble and reconcile the valuation evidence file. We cannot calculate customs value, select a valuation method or provide a binding Customs opinion.