METHODS OF VALUATION

METHOD 1
TRANSACTION VALUE
FORMULA

TV = PAPP + Adjustments
TO SOLVE FOR DV/TRANSACTION VALUE

CIF/CIP + Adjustments
ADJUSTMENTS

A. MANDATORY ADDITIONS
B. PERMISSIBLE DEDUCTIONS
ADJUSTMENTS
C – OMMISSIONS AND BROKERAGE
A – SSISTS
R – OYALTIES AND LICENSE FEES
P - ACKING AND COST OF CONTAINERS
P – ROCEEDS
I – NSURANCE
T – RANSPORTATION COST
 PERMISSIBLE DEDUCTIONS

1. INTEREST CHARGES
2. BUYING COMMISSION
3. PAYMENT FOR THE RIGHT TO REPRODUCE
4. CHARGES FOR POST-IMPORTATION
5. IMPORT DUTIES AND TAXES
6. FREIGHT COSTS WITHIN THE IMPORTING COUNTRY
7. MARKETING COSTS
8. ALL GENUINE DISCOUNTS (CASH, QUANTITY, TRADE)
METHOD 1 - COMMISSIONS
Commissions are fees normally paid to an agent who buys or sells for the account
of the buyer or seller and participates in the conclusion of a contract or sale
representing either the buyer or seller.

Commissions are paid usually as a percentage (%) of the amount of the business
concluded for transaction between the buyer and seller.
TYPES OF COMMISSION
Selling Commission – i s a fee paid by t he seller to a n
agent who solicit s the buyer for hi s goods a nd participat es
in the conclusion of a contract or agreement.

Buying Commission – is a fee paid by the buyer to his agent for

services rendered in representing the buyer in the purchase of goods
at the country of export or origin.
METHOD ONE
METHOD ONE
 TRY THIS!
Nero Inc. in Manila enters into trade agreement with
Mall Inc. in Korea for the supply of school pencils with
total FOB value of $10,000.00. According to the sales
contract, Mall Inc. requires all his buyers to pay 2%
of the invoice price to a selling agent stationed in
Manila.

How much is the adjustment to be added to PAPP?

METHOD ONE
METHOD ONE
 Nero Inc. in Manila enters into trade agreement with Mall Inc.

in Korea for the supply of school pencils with total FOB value
TRY THIS!

of $15,000.00. According to the sales contract, Mall Inc.

requires all his buyers to pay 2% of the invoice price to Mr.

Fox, his authorized agent stationed in Manila. Nero Inc. also

pays 1% of the invoice price to Mr. Lao, his authorized agent

stationed in Korea.
QUESTIONS

a) Who is the selling agent?

b) Who is the buying agent?

c) How much is the adjustment to be added to the

price actually paid or payable?
 TRY THIS!
Stell Inc. in Manila enters into trade agreement with Jam Inc. in China for the

purchase of machine parts at total FOB value of $25,000.00. According to the terms

of sales contract, Jam Inc. requires all importers of his machine parts to pay an

additional 2% of the invoice value directly to a selling agent in Manila. Stell Inc. also

undertakes in its own account marketing costs which is 1% of the invoice value to

promote his machine parts in the Philippines. Upon arrival of the shipment, the bill of

lading shows ocean freight charges of $1,800.00. The rate of exchange was

P46.75/$1.00.
METHOD 1 - ASSISTS
Assists refers to the value, apportioned as appropriate, of the following goods and
services where supplied directly or indirectly by the buyer free of charge or at a
reduced cost for use in connection with the production and sale for export of the
imported goods, to the extent such value has not been included in the price actually
paid or payable.
ASSISTS
a) Materials, components, parts and similar items incorporated
in the imported goods.
b) Tools, dies, moulds, similar items used in the production of
the imported goods.
c) Materials consumed in the production of the imported goods.
d) Engineering, development, artwork, design work, plans and
sketches undertaken elsewhere than in the country of
importation and necessary for the production of imported
goods.
METHOD ONE
Fairy Inc. in Manila enters into trade agreement with Win Inc. in Singapore for the
supply of computer printers with total invoice value of $10,000.00. Fairy Inc. provides
the following free of charge:

• Printer parts at $3,000.00

• Electronic tools for printer assembly at $500.00
• Ink to be used for print testing at $30.00
• Printing design sourced in Japan at $50.00
• Air Conditioner for office operations at $80.00

How much is the adjustment to be added to PAPP?

METHOD ONE
 TRY THIS!

Java Inc. in Cebu enters into trade agreement with Zen Inc.
in Japan for the supply of refrigerators with total invoice
value of $10,000.00. Java Inc. provides the following free of
charge:

• Refrigerator parts at $5,000.00

• Moulding materials for manufacture of refrigerators at
$300.00
• Refrigerator artwork sourced in Cebu at $500.00
High Inc. in Manila enters into trade agreement with Steel Inc. in Italy for the purchase of wrist
watches with total FCA value of $25,000.00. High Inc. provides the following free of charge:

• Wrist-watch strap at $500.00

• Electronic tools for watch assembly at $40.00
• Calculators at $30.00
• Wrist-watch designs sourced in Korea at $200.00

Upon arrival of the shipment, the airway bill shows air freight charges $1,500.00 and domestic
insurance of P48,600.00 with official receipt and certification presented to BOC. The exchange
rate was P48.60/$1.00.

a) How much is the dutiable value under Method One?

METHOD 1 – ROYALTIES AND LICENSE FEES
Royalties refers to payments made by the buyer/importer in respect to Patents,
Trademarks and Copyrights. The payment must be related to the imported goods
being valued.

The “right to reproduce imported goods’’ in the Philippines shall NOT be added to
the PAPP since it is not related to the imported goods.
ROYALTIES AND LICENSE FEES

a) Patent – A patent for an invention is the grant of a property right to the inventor.

b) Trademark – is a “word, phrase, symbol, or design, or a combination thereof, that

identifies and distinguishes the source of the goods of one party from those of

others’’.

c) Copyright – is a form of protection to the authors of “original works of authorship’’.

METHOD ONE
ROYALTIES AND LICENSE FEES

Nexus Inc. in Cebu enters into trade agreement with Delta Inc. in China for
the supply of school shoes with total FOB value of $18,000.00. However,
Delta Inc. requires all his buyers to pay license fee to Vans Inc. in USA for
the right to use its trademark as a condition of sale which is 1% of the
invoice value.

How much is the adjustment to be added to price actually paid or payable?

METHOD ONE
TRY THIS!

Zero Inc. in Manila enters into trade agreement with Beta

Inc. in Germany to provide one master CD containing
classical music entries with total FOB value of
$10,000.00. However, Zero Inc. pays 2% of the invoice
value as a license fee for the right to reproduce the said
master CD in the Philippines.

How much is the adjustment to be added to price actually

paid or payable?
ROYALTIES AND LICENSE FEES

ABC Trading Inc. in Cebu enters into trade agreement with Xin
Trading Inc. in China for the supply of garments with total CIF value
of $12,500.00. However, Xin Trading Inc. requires all his buyers to
pay royalty to Hwang Trading Inc. in Korea for the right to use its
brand as a condition of sale which is 3% of the invoice value. The
rate of exchange was P54.66/$1.00.

a) How much is the dutiable value under Method One?

METHOD 1 – PACKING & COST OF MATERIALS
The packaging and cost of containers should be treated as being one with the
goods. They refer to containers used for imported goods and other retail packaging
categorized as non-reusable packaging including labor cost.

The ‘’cost of reusable containers’’ are NOT part of PAPP since they are not
considered as one with the imported goods being valued.
PACKING & COST OF CONTAINERS

a) Interior packing boxes or cartons referred to as ‘’retail’’

packing such as bags, boxes, blister packs, plastic wrappers,
cardboard boxes, etc.;
b) Exterior packing boxes or cartons also referred to as ‘’export’’
packing may include cardboard boxes, wooden crates, metal
boxes, etc.;
c) Packing materials such as cardboard inserts, bubble packs,
hay, straw, shredded paper, Styrofoam chips or sheets, etc.;
d) The labor cost involved in placing the goods in containers
such as packing and sealing of boxes and crates, coppering,
environmental conditioning, vacuum, placing goods on racks
or hangers, etc.
PACKING & COST OF
MATERIALS
Mixers Inc. in Manila enters into trade agreement with Distillers Inc. in Spain for the
supply of 1,000 bottles of red wines with total invoice value of $10,000.00. However,
the BOC found out the following charges not yet included in the invoice value:

• Cost of bottles at $300.00

• Cost of wine cases at $150.00
• Labor cost for packaging at $100.00
• Cost of container (3 x 20’ vans) at $50.00

How much is the adjustment to be added to PAPP?

PACKING & COST OF
MATERIALS
PACKING & COST OF Golden Appliances Inc. in Davao enters into trade

MATERIALS agreement with Asian Appliances Inc. in Japan for

the supply of refrigerators with total CIP value of
$22,000.00. However, the BOC found out that the
cost of large cartons at $200.00 and labor cost for
packaging at $100.00 were not yet included to the
invoice value. The rate of exchange was
P49.30/$1.00.

a) How much is the dutiable value under MethodO

ne?
METHOD 1 – PROCEEDS
Proceeds of subsequent resale, disposal or use of the imported articles shall be
added to the PAPP under the following circumstances:

a) Proceeds are paid by the buyer to the seller.

b) Proceeds are paid based on resale, disposal or use of the imported goods.
(Proceeds should be declared in the invoice or entry)
PROCEEDS

Proceeds should not be confused with the flow of dividends

from the buyer to the seller. The flow of dividends is
usually not related to the imported goods and is not
considered as proceeds of any subsequent resale, disposal
or use of the imported goods and therefore, not added to
the price actually paid or payable.
PACKING & COST OF
MATERIALS
Van Inc. in Manila enters into trade agreement with Oxen Inc. in
India for the supply of 100 units of washing machines with total
FOB value of $10,000.00. Under terms of agreement, the exporter
requires all his buyers to pay 5% of the invoice value as proceeds
for subsequent resale of washing machines in the Philippines. At
the end of the year, Van Inc. remits 50% of the invoice value as
dividends to Oxen Inc. for payment to its shareholders.

How much is the adjustment to be added to price actually paid or

payable?
PACKING & COST OF
MATERIALS
 Oval Corporation in US enters into agreement with
PROCEEDS Vox Corporation in the Philippines for the supply of
general merchandise. The prices are freely
negotiated between Oval Corporation and Vox
Corporation. According to sales contact, Vox
Corporation must pay 5% of the invoice price as
proceeds for subsequent resale. The covering
invoice shows total FOB value of $15,000.00 with
percentage of proceeds indicated. The bill of lading
indicated freight charges of $1,750.00. The rate of
exchange was P43.85/$1.00.
a) How much is the dutiable value under Method
One?
METHOD 1 – TRANSPORTATION & INSURANCE COSTS
a) The cost of transport of the imported goods to the port of entry in the
Philippines.
b) The cost of insurance of the imported goods to the port of entry in the
Philippines.
PACKING & COST OF
MATERIALS
METHOD 1 –POST-IMPORTATION CHARGES/COSTS
a) Charges for the construction, erection, assembly, maintenance or technical
assistance, undertaken after importation on imported goods such as industrial
plant, machinery or equipment;

b) Cost of transport after importation; and

c) Duties, taxes and other charges paid for the imported goods.
Ivory Inc. in Manila enters into trade agreement with Yin Inc. in China for the supply of the
television sets with total FOB value of $48,000.00. The bill of lading shows freight charges of
$2,000.00. However, the BOC found out the following charges not yet included in the invoice
price:

• Selling commission of 3% of the invoice value to a selling agent

• Ivory Inc. provided television parts at $3,500.00
• Ivory Inc. provided television blueprint sourced in Cebu at $500.00
• License fee at 2% of the invoice value for the right to use brand
• Technical and maintenance assistance at $30.00 in Cebu
• Import duties and taxes at $5,000.00 The exchange rate was P44.50/$1.00.

a) How much is the dutiable value under Method One?

 METHODS OF VALUATION

METHOD 2
TRANSACTION VALUE OF
IDENTICAL GOODS
METHOD 2 – TV OF IDENTICAL GOODS
Where the dutiable value cannot be determined under method one, the dutiable value shall be the transaction value of

identical goods sold for export to the Philippines and exported at or about the same time as the goods being valued. For

purposes of this section, “Identical goods” refer to goods which are the same in all respects, including physical

characteristics, quality and reputation. Minor differences in appearances shall not preclude goods otherwise conforming to

the definition from being regarded as identical.

If, in applying this section, more than one transaction value of identical goods are found, the lowest value shall be used to

determine the customs value.

The dutiable value shall be the transaction value of identical goods based on the following:

1. Identical goods sold for export to the Philippines;

2. Identical goods exported to the Philippines at or about the same time as the goods being
valued. (45 days prior to exportation or 45 days from date of exportation using the bill of
lading or airway bill dates of the goods being valued).
 Identical goods refers to imported
IDENTICAL GOODS
goods produced:

1. In the same country of origin as the goods being

valued.

2. By the same producer/manufacturer as the

goods being valued.

3. If no such sale can be established, then Customs

can consider the value of identical goods produced
by other persons at the same country.
Identical goods also means goods which are the same in all
respects including:

1. Physical Characteristics.
2. Quality.
3. Reputation.

Minor differences in appearance like color, size, label or pattern are allowed
provided said difference do not affect the value of goods.
IDENTICAL GOODS

Identical goods do NOT include engineering, development,

artwork, design work and plans/sketches when undertaken
in the Philippines.

In applying Method 2, if more than one transaction value of

identical goods is found, the lowest of such values shall be
used to determine the dutiable value of imported goods.
A wholesaler of various equipment imported from Germany 30 units of baking machine with FOB value of
$1,500.00/unit. The ocean freight charges indicated in the bill of lading amounted to $2,000.00. However,
Method 1 cannot be established by Customs prompting the retrieval of import records to be used for price
comparison.

The transaction value of identical baking machines were made under Method 1 and were compared as to the bill
of lading dates of equipment being valued, namely: 20 days ago - $1,800.00, 30 days ago - $1,750.00, 40 days
ago - $2,100.00 and 60 days ago-$1,600.00.

The identical baking machines were purchased by different wholesalers and sold by same seller in Germany as
the equipment being valued. The exchange rate was P44.50/$1.00.
a) How much is the dutiable value under Method Two?
 METHODS OF VALUATION

METHOD 3
TRANSACTION VALUE OF
SIMILAR GOODS
METHOD 2 – TV OF SIMILAR GOODS
Where the dutiable value cannot be determined under the preceding method, the dutiable value shall be the transaction value

of similar goods sold for export to the Philippines and exported at or about the same time as the goods being valued. For

purposes of this section, “Similar goods” refer to goods which, although not alike in all respects, have like characteristics and

similar component materials which enable them to perform the same functions and to be commercially interchangeable. The

quality of the goods, its reputation and the existence of a trademark shall be among the factors to be considered in

determining whether goods are similar. If, in applying this section, more than one transaction value of similar goods are

found, the lowest value shall be used to determine the customs value.
The dutiable value shall be the transaction value of similar goods based on the following:

1. Similar goods sold for export to the Philippines;

2. Similar goods exported to the Philippines at or about the same time as the goods being
valued. (45 days prior to exportation or 45 days from date of exportation using the bill of
lading or airway bill dates of the goods being valued).
SIMILAR GOODS
Similar goods also means goods which, although
not alike in all respects should show the
following:
1. Have like characteristics.
2. Have like component materials.
3. Must perform the same function.
4. Must be commercially interchangeable.
5. Must be produced in the same country.
SIMILAR GOODS

Similar goods do NOT include engineering, development,

artwork, design work and plans/sketches when undertaken
in the Philippines.

In applying Method 3, if more than one transaction value of

similar goods is found, the lowest of such values shall be
used to determine the dutiable value of imported goods.
A wholesaler of perfumes imported from France 100 boxes with FCA value of $150.00/box. The air freight
charges indicated in the airway bill amounted to $1,500.00. However, Method 1 cannot be established by
Customs prompting the retrieval of import records to be used for price comparison.

The transaction value of similar perfumes were made under Method 1 and were compared previous dates: 10
days ago - $100.00, 25 days ago - $120.00, 35 days ago - $140.00 and 50 days ago - $200.00. The exchange
rate was P46.30/$1.00.

a) How much is the dutiable value under Method Three?

 METHODS OF VALUATION

METHOD 4
DEDUCTIVE VALUE
METHOD 4 – DEDUCTIVE VALUE
Sec. 704 – Deductive Value (Method Four).

Where the dutiable value cannot be determined under the preceding method, the dutiable value shall be the deductive value

unless otherwise requested by the importer as provided in Section 700 hereof. The deductive value which shall be based on

the unit price at which the imported goods or identical or similar imported goods are sold in the Philippines, in the same

condition as when imported, in the greatest aggregate quantity, at or about the time of the importation of the goods being

valued, to persons not related to the persons from whom they buy such goods, subject to deductions for the following:
 a) Either the commissions usually paid or agreed to be paid or the

SIMILAR GOODS additions usually made for profit and general expenses in
connection with sales in such country of imported goods of the
same class or kind;

b) The usual costs of transport and insurance and associated costs

incurred within the Philippines;

c) Where appropriate, the costs of:

(i) transport of the imported, goods from the port of exportation to the
port of entry in the Philippines;
(ii) loading, unloading and handling charges associated with the
transport of the imported goods from the country of exportation to the
port of entry in the Philippines; and
(iii) insurance;

d) The customs duties and other national taxes payable in the Philippines
by reason of the importation or sale of the goods.
DEDUCTIVE VALUE

The dutiable value shall be determined on the basis of sales

in the Philippines of the goods being valued or of identical
or similar imported goods, less certain specified expenses
resulting from the importation and resale of the goods.
1. The imported goods being valued or identical or similar imported goods have been sold in the domestic
market in the Philippines in the same condition as when they are imported;

2. Domestic sale of the imported goods being valued or of identical/similar imported goods must have taken
place at or about the time of importation of the goods being valued. (45 days prior to and 45 days following the
importation of the goods being valued);

3. The local purchaser must not be related to the importer from whom the imported goods were brought and
must have not supplied any assist to the foreign producer, either directly or indirectly;

4. The deductive value shall be determined based on the unit price in the greatest aggregate quantity as sold in
the Philippines subject to the following deductions:
 a) Commissions generally earned on a unit basis in
DEDUCTIVE VALUE connection with sales in the Philippines of the same
class or kind;

b) Additions made in determining sales profit and general

expenses in the Philippines for goods of the same kind
and class;

c) Usual costs of transport, insurance and associated

costs incurred within the Philippines;

d) Import duties and other national taxes payable in the

Philippines by reason of the importation or sale of the
goods.
Max Inc. in Cebu City imported 500 pieces of athlete shoes from Xin Inc. in China. The transaction value cannot be
determined under Method 1 since the seller and buyer are related and relationship and has influenced the price and
there were no previous importation of same shipment thus, Methods 2 and 3 were not used. However, the BOC had
record of domestic prices of said athlete shoes and information below.

• 1,000 pieces of athlete shoes were sold in the domestic market in the Philippines after 1,000 pieces were
imported.
• 300 pieces were sold to an unrelated local buyer at P1,500.00/pc., 200 pieces were sold to another unrelated
buyer at P1,800.00/pc. and 500 pieces at P1,300.00/pc.
• Importer’s profit and general expenses were P350.00/pc.
• Import duties and taxes were P150.00/pc.
• Trucking and handling charges at country of importation P50.00/pc.
a) How much is the dutiable value under Method Four?
 METHODS OF VALUATION

METHOD 5
COMPUTED VALUE
METHOD 5 – COMPUTED VALUE
Sec. 705 – Computed Value (Method Five).

Where the dutiable value cannot be determined under the preceding method, the dutiable value shall be the computed value

of the sum of:

a) The cost or the value of materials and fabrication or other processing employed in producing the imported goods;

b) The amount for profit and general expenses equal to that usually reflected in the sale of goods of the same class or kind

as the goods being valued which are made by producers in the country of exportation for export to the Philippines;

c) The freight, insurance fees and other transportation expenses for the importation of the goods;

d) Any assist, if its value is not included under paragraph (1) hereof; and

e) The cost of containers and packing, if their values are not included under paragraph (1) hereof.
DEDUCTIVE VALUE

The dutiable value shall be determined on the basis of the

cost of production of the goods being valued, plus an
amount for profit and general expenses usually reflected in
sales from the country of exportation to the Philippines of
goods of the same class or kind.
COMPUTED VALUE
Engineering, development, artwork, design
work, plans and sketches undertaken in the
Philippines and charged to the producer
shall be added in computing the dutiable
value under Method 5.
Vortex Inc. of Singapore exported 5 units of electric equipment to its branch office in the Philippines, Vulcan Corp.
which have determined to be unacceptable as transaction value. Below is the following cost breakdown for electric
equipment undervaluation.

• Cost of materials at $5,000.00/unit;

• Cost of fabrication at $2,500.00/unit;
• Profit and General Expenses at $150.00/unit;
• Transportation cost to the port of importation at $15.00/unit;
• Marine insurance cost to the port of importation at $10.00/unit;
• Assembly cost at country of importation at $5.00/unit.
The rate of exchange was P45.00/$1.00.

a) How much is the dutiable value under Method Five?

 METHODS OF VALUATION

METHOD 6
FALLBACK VALUE
METHOD 6 – FALLBACK VALUE
Sec. 706 – Fallback Value (Method Six).

If the dutiable value cannot be determined under the preceding methods described above, it shall be
determined by using other reasonable means and on the basis of data available in the Philippines. If
the importer so requests, the importer shall be informed in writing of the dutiable value determined
under method six and the method used to determine such value.
REASONABLE FLEXIBILITY: b) Deductive Method – the requirement that the
imported goods shall have been sold in the
Philippines in the condition as imported on or
about the time of importation of the goods being
valued could be flexibly interpreted as:

‘’sold in the Philippines in the same condition as

imported, at the earliest date after importation
of the goods being valued but before expiration
of 90 days after such importation.’’
Lamb Corp. imported automobile parts and components from Gon Corp. in Germany at CIF value $25,000.00.
However, they were ship by Gon Corp. to Lamb Corp. on a consignment basis and thus, Method 1 was not used.

Dan Corp. in France also exported identical automobile parts and components to importers in the Philippines before
the date of shipment of Lamb Corp. at CIF value $26,500.00. No similar automobile parts and components were
recorded by the same seller.

Gon Corp. exports the same automobile parts and components to Axe Corp., a buyer in Indonesia at CIF value
$33,625.00.

On the other hand, Gon Corp. sells the same automobile parts and components to his local buyers at an invoice price
of $30,000.00. Use rate of exchange P47.50/$1.00.
a) How much is the dutiable value under Method Six?
SOLUTION
SOLUTION
 THANK YOU!
Leader: Inot, Kyle Anthony
Members:
Alcalde, Mary Rose Faith
Dayondon, Nikkei Marie
Igoy, Angelica
Macasero, Trixie Mae