Two enterprises importing the same product under the same HS code can end up paying different amounts of import duty if the customs value they declare differs — and that difference is typically the point the customs authority scrutinises most closely during a post-clearance audit. The customs value is not simply the price shown on the commercial invoice; it must be determined using the correct method, with the statutory additions and deductions applied. This article sets out the principles for determining the customs value and how to calculate import duty and import-stage VAT.
What the customs value is
The customs value is the value of exported or imported goods used as the basis for calculating export duty, import duty and customs statistics. For imported goods, Vietnam's principles for determining the customs value are built on the GATT/WTO Valuation Agreement, transposed into domestic law through the current guiding instruments; the actual transaction value is applied first, and an alternative method is used only where the transaction value does not meet the conditions for application or cannot be determined.
The customs value is not always the same as the price on the commercial invoice — certain items must also be added or excluded under the regulations, depending on the delivery terms (Incoterms) and the actual cost structure.
The six methods for determining the customs value
Determining the customs value of imported goods applies six methods in sequence, moving to the next method only where the preceding one does not meet the conditions for application:
Method 1 – Transaction value of the imported goods
The price actually paid or payable for the imported goods, after the statutory additions and deductions have been applied. This is the method applied first, provided the transaction is not subject to restrictions on the use or disposal of the goods and there is no special relationship that distorts the price.
Method 2 – Transaction value of identical goods
Applies where the value cannot be determined under Method 1, based on the accepted transaction value of identical goods imported at or around the same time as the shipment being valued.
Method 3 – Transaction value of similar goods
Similar to Method 2, but applied to goods that are not identical yet share essential characteristics and a similar commercial function.
Method 4 – Deductive value
Based on the resale price of the imported goods (or of identical or similar goods) in the domestic market, after deducting post-import costs such as transport, profit and the usual selling and administrative expenses.
Method 5 – Computed value
Based on the cost of production — materials, processing, and the profit and general expenses usually reflected in sales of goods of the same class from the country of production.
Method 6 – Fall-back method
Applies where the value cannot be determined under the five methods above; it flexibly applies the preceding methods using reasonably available objective data, without using the bases the law excludes (the domestic price in the country of export, an arbitrarily fixed price, or an arbitrary minimum price).
Items to be added and items that may be deducted
When determining the transaction value (Method 1), the enterprise adds to the price actually paid any of the following items not already included in the price:
- Selling commissions and brokerage fees (excluding buying commissions).
- The cost of packing and packaging treated as forming a whole with the imported goods.
- The value of goods and services the buyer supplies free of charge or at a reduced price to the seller for use in producing and exporting the goods (materials, moulds, engineering work undertaken overseas, and so on).
- Royalties and licence fees the buyer must pay as a condition of the sale.
- Transport and insurance costs to the place of importation, depending on the delivery terms (Incoterms) applied.
Conversely, certain items are excluded where they are clearly itemised separately in the documents: post-import costs (installation, maintenance, technical support), domestic transport after the place of importation, deferred-payment interest shown as a reasonably separate item, and taxes payable in Vietnam.
How to calculate import duty and import-stage VAT
As a general principle, import duty equals the customs value multiplied by the import duty rate corresponding to the HS code determined (the preferential rate, the special preferential rate under an FTA where a valid C/O is held, or the standard rate, depending on which applies).
Import-stage VAT is calculated on (the customs value plus import duty, plus special consumption tax and environmental protection tax where applicable), multiplied by the VAT rate applicable to that item. The enterprise must aggregate the taxes in the correct order before calculating VAT, because VAT is calculated on the total value that already includes those taxes.
Worked example
The example below uses assumed figures purely to illustrate the calculation; it does not reflect the actual duty rate of any specific item:
An imported shipment has a customs value of VND 1,000,000,000. Assuming an import duty rate of 10%, the import duty payable is VND 100,000,000. The VAT-assessable value equals the customs value plus import duty, that is VND 1,100,000,000. Assuming a VAT rate of 10%, the import-stage VAT payable is VND 110,000,000. Under this hypothetical example, the total tax payable at the import stage is VND 210,000,000, excluding any storage or inspection fees.
The actual duty rate applicable to any specific item must be checked against the import-export tariff schedule in force at the time of declaration; the figures in this example should not be used to calculate actual duty.
Frequently asked questions
Must the customs value equal the price on the commercial invoice? Not necessarily. The customs value is the price actually paid or payable, after the statutory additions and deductions have been applied — it can differ from the invoice value depending on the structure of the transaction.
When does the customs authority hold a value consultation? Typically where the declared value shows signs of being unusual compared with reference price data for identical or similar goods imported previously, or where the buyer and seller have a special relationship that could affect the price.
If an enterprise has a relationship with the seller (parent-subsidiary), will the transaction value automatically be rejected? Not automatically. A special relationship only matters if it actually affects the price; the enterprise can demonstrate that the transaction value still reflects the ordinary market price.
If the customs authority assesses a higher customs value than declared, can the enterprise appeal? Yes. The enterprise has the right to provide explanations, supplement documents and lodge a complaint under the procedure set out in current law if it disagrees with the value-assessment decision.
Book a consultation with TLA Consulting to review your customs valuation method before declaration, and avoid the risk of a value consultation or assessment.
