All goods imported are subject to the levy of duty as specified in the Customs Tariff Act, 1975. For this purpose, the value of the goods on which the rate of duty is to be applied has to be determined first.

Under the provisions of Customs Act, 1962 the value is the price at which such or similar goods are sold or offered for sale. In the case of the imported goods, the assessable value is to be determined in terms of the Customs Valuation Rules, 1988. The Assessable value should be the value at the time and place of importation. Hence the value should include the cost of goods at the country of exportation, cost of transport, cost of insurance, cost of loading, unloading and other handling charges. When the freight charges and the insurance charges are known and added to the cost of the goods to arrive at the assessable value, In other words, CIF value becomes the basis for charging the Customs duty.

In the case where the actual freight, insurance are not known then the following are to be added to the FOB value:

  1. Freight – 20% of the FOB value
  2. Insurance – 1.125% of FOB value

Thereafter, Landing charges @1% of CIF is added to the CIF to arrive a the assessable value. It is the assessable value on which the Customs duties are levied.

Under the Valuation Rules 1988, the value of assessment would be the Transaction Value i.e. the price at which goods have been sold for export to India. Generally, the Invoice value is accepted as the “Transaction Value”