Imagine this scenario: A company imports goods from overseas but misinterprets the meaning of "price actually paid or payable" when declaring customs duties, leading to incorrect declarations, additional tax liabilities, and potential legal risks. To prevent such situations, the World Customs Organization (WCO) is taking action to provide clearer guidance for global trade participants.
During its 61st meeting, the WCO's Technical Committee on Customs Valuation (TCCV) completed its review of a technical question submitted by Uruguay regarding the interpretation of "price actually paid or payable" under the transaction value method. The outcome is a new explanatory document: Explanatory Note 7.1, which will be submitted for approval at the WCO Council session in June 2026. This initiative aims to offer a broader interpretation of "price actually paid or payable," focusing on the World Trade Organization's (WTO) Customs Valuation Agreement and related TCCV documents.
The Scope of "Price Actually Paid or Payable"
According to the WTO Agreement, the starting point for customs valuation of imported goods is "transaction value"—the price actually paid or payable by the buyer to the seller for the imported goods. Explanatory Note 7.1 seeks to clarify how this price should be interpreted, which payments must be included, and which may be excluded. The document details various elements, including:
- Forms of payment: The note confirms that payments aren't limited to invoice amounts but encompass all forms, including cash, letters of credit, and bank transfers.
- Direct and indirect payments: Beyond direct payments to sellers, certain indirect payments—such as buyer-paid seller expenses or benefits provided to sellers—must be included.
- Adjustments under Article 8: The Agreement permits adjustments to reflect true value, such as including commissions, packaging, or transport costs, while deducting discounts or refunds.
- WTO Valuation Committee decisions: Previous rulings on software licensing fees, technical assistance fees, and similar items provide critical context.
- Deductible items: Payments unrelated to goods (e.g., loans or penalties) and post-importation costs (e.g., installation or maintenance) may be excluded.
Final Customs Valuation Determination
The explanatory note concludes that after all necessary inclusions and adjustments, the final customs value should be determined using the transaction value method under Article 1 of the Agreement—provided no disqualifying factors exist. An attached conceptual framework links each definition to corresponding sections in the document, helping customs officials and traders apply the rules consistently.
Implications of the New Guidance
Once approved by the WCO Council, the document will be published in the WCO Customs Valuation Compendium and on its trade tools platform, serving as an authoritative reference for global trade.
- Enhanced compliance: Clearer guidance will reduce disputes over customs valuation.
- Trade facilitation: Accurate valuations speed up clearance and lower trade costs.
- Fair competition: Uniform standards prevent tariff evasion through underreporting.
- Customs efficiency: Officials will have clearer criteria for valuations.
Practical Steps for Businesses
Companies engaged in international trade should proactively adapt to these clarifications:
- Conduct internal training on updated valuation rules.
- Maintain detailed records of all payments related to imported goods.
- Consult customs specialists when uncertain about specific transactions.
As global trade grows increasingly complex, the WCO's initiative represents a significant step toward standardized, transparent customs valuation practices worldwide.