What is Customs Value? How to Determine It and Risks Businesses Need to Know

In international trade, customs value is a critical factor determining import duties and other financial obligations for goods. Accurately determining customs value not only ensures legal compliance but also minimizes risks of tax reassessments, administrative penalties, and enhances market competitiveness. This article provides a comprehensive guide on customs value, from its definition and determination methods to effective management solutions, supporting businesses in optimizing their import-export processes.

What is Customs Value?

According to Article 86 of the Customs Law 2014, customs value serves as the basis for calculating taxes on exported and imported goods. It is determined using the transaction value (actual price paid) or alternative methods when the transaction value is not feasible. Customs value directly impacts the tax amount, import costs, and the competitiveness of products in the domestic market.

Components of Customs Value

Per Articles 13 and 14 of Circular 39/2015/TT-BTC, the customs value of imported goods includes:

• Invoice Purchase Price: Based on CIF delivery terms (including cost, insurance, freight) or FOB (excluding insurance and freight).

  
  

• International Transport and Insurance Costs: If not included in the purchase price.

  
  

• Additive Adjustments: Royalties, design fees, buyer’s commissions, or costs incurred at the buyer’s request.

  
  

• Deductive Adjustments: Domestic transport, insurance, or post-importation construction/installation costs.

  
  

• Non-Deductible Items: Import duties, special consumption taxes, or other taxes.

Methods for Determining Customs Value

When the transaction value cannot be applied, businesses and customs authorities use six sequential methods (Articles 17-25 of Circular 39/2015/TT-BTC):

1. Transaction Value Method: Based on the actual price paid, applicable for transparent purchase-sale transactions.

   
   

2. Transaction Value of Identical Goods: Uses the price of identical goods imported at the same time.

   
   

3. Transaction Value of Similar Goods: Uses the price of goods with similar characteristics and purposes.

   
   

4. Deductive Value Method: Based on the domestic selling price, minus post-importation costs.

   
   

5. Computed Value Method: Calculated from production costs, profits, and other expenses.

   
   

6. Fallback Method: Based on objective data when other methods are not feasible.

Risks of Declaring Customs Value

Businesses commonly face the following risks:

• Incorrect Transaction Value Declaration: Declaring a lower-than-actual price, leading to tax reassessments.

  
  

• Misunderstanding Adjustments: Failing to accurately account for royalties, commissions, or domestic costs.

  
  

• Missing Documentation: Inability to provide invoices, contracts, bills of lading, or payment records.

  
  

• FOB/CIF Confusion: Errors in calculating transport and insurance costs.

  
  

Example: A business imports electronic components with an invoice price of USD 50,000 (FOB) but fails to declare USD 10,000 in transport costs, resulting in an incorrect customs value and a USD 2,000 tax reassessment.

Consequences of Incorrect Customs Value Declaration

Incorrect declarations can lead to:

• Tax Reassessments and Administrative Penalties: Fines up to 20% of reassessed tax or a maximum of VND 100 million (Decree 128/2020/ND-CP).

  
  

• Late Payment Penalties: 0.03% per day on overdue tax (Article 59, Tax Administration Law 2019).

  
  

• High-Risk Classification: Increased inspection frequency and prolonged clearance times (Decision 1966/QD-TCHQ).

  
  

• Post-Clearance Audits: Potential audits within 5 years from declaration registration (Article 78, Customs Law 2014).

Compliance and Risk Mitigation Solutions

To ensure compliance and minimize risks, businesses should:

• Understand Legal Regulations: Be familiar with the Customs Law 2014, Circular 39/2015/TT-BTC, and related customs value regulations.

  
  

• Maintain Complete Documentation: Retain invoices, contracts, bills of lading, payment records, and insurance certificates for at least 5 years as required.

  
  

• Ensure Internal Coordination: Align accounting, logistics, and procurement departments for consistent declaration and data management.

  
  

• Leverage Technology: Use electronic document management systems (e.g., AIS or ERP) to enhance transparency and efficiency.

  
  

• Train Staff: Improve skills in customs regulations and value declaration.

  
  

• Collaborate with Experts: Work with reputable consultants to review, prepare documentation, and address risks promptly.

W&A Consulting – Your Partner in Customs and Compliance Consulting

W&A Consulting specializes in customs and compliance consulting, supporting businesses with:

✅ Accurate customs value determination per regulations.

✅ Guidance on required documentation to declare and protect business interests.

✅ Support during post-clearance audits or interactions with authorities.

✅ Review and development of internal compliance systems to minimize risks.

👉 Learn more about our services here.

📩 Contact W&A Consulting today for tailored customs value solutions, ensuring compliance, risk control, and sustainable growth in your import-export operations.

Contact Us for Detailed Consulting

☎️ +84 93 594 8688

📧 Email: nam.phan@waco.com.vn

🌐 Website: https://www.waconsulting.vn/

📌 18th Floor, Vincom Center Đồng Khởi, District 1, Ho Chi Minh City

🏢 2nd Floor, Saigon Paragon Building, Tân Phú Ward, District 7, Ho Chi Minh City