Third Schedule — IMPORT DUTIES ACT

Substituted by

XIX.1999.10.

(Article 8)

Rules and Notes on Customs Valuation

Article 1

1. The customs value of imported goods shall be the transaction value, that is

the price actually paid or payable for the goods when sold for export to Malta

adjusted in accordance with the provisions of Article 8, provided -

(a) that there are no restrictions as to the disposition or use of the goods by

the buyer other than restrictions which -

(i)

are imposed or required by law or by the public authorities in

Malta;

(ii) limit the geographical area in which the goods may be resold; or

(iii) do not substantially affect the value of the goods;

(b) that the sale or price is not subject to some condition or consideration

for which a value cannot be determined with respect to the goods being

valued;

(c) that no part of the proceeds of any subsequent resale, disposal or use of

the goods by the buyer will accrue directly or indirectly to the seller,

unless an appropriate adjustment can be made in accordance with the

provisions of Article 8; and

(d) that the buyer and seller are not related, or where the buyer and seller

are related, that the transaction value is acceptable for customs purposes

under the provisions of paragraph 2 of this Article.

2. (a) In determining whether the transaction value is acceptable for the

purposes of paragraph 1, the fact that the buyer and the seller are related

within the meaning of Article 15 shall not in itself be grounds for

regarding the transaction value as unacceptable. In such case the

circumstances surrounding the sale shall be examined and the

transaction value shall be accepted provided that the relationship did not

influence the price. If, in the light of information provided by the

importer or otherwise, the customs administration has grounds for

c o n s i d e r i n g t h a t t h e r e l a t i o n s h i p i n f l u e n c e d t h e p r i c e , i t s h a ll

communicate its grounds to the importer and he shall be given a

reasonable opportunity to respond. If the importer so requests, the

communication of the grounds shall be in writing.

(b) In a sale between related persons, the transaction value shall be accepted

and the goods valued in accordance with the provisions of paragraph 1

of this Article whenever the importer demonstrates that such value

closely approximates to one of the following occurring at or about the

same time -

(i)

the transaction value in sales to unrelated buyers of identical or

similar goods for export to Malta;

(ii) the customs value of identical or similar goods as determined

under the provisions of Article 5;

(iii) the customs value of identical or similar goods as determined

under the provisions of Article 6.

In applying the foregoing tests, due account shall be taken of

demonstrated differences in commercial levels, quantity levels, the

elements enumerated in Article 8 and costs incurred by the seller in

sales in which the seller and the buyer are not related that are not

incurred by the seller in sales in which he and the buyer are related.

(c) The tests set forth in paragraph 2(b) of this Article are to be used at the

initiative of the importer and only for comparison purposes. Substitute

values may not be established under the provisions of paragraph 2(b) of

this Article.

Article 2

1. (a) If the customs value of the imported goods cannot be determined under

the provisions of Article 1, the customs value shall be the transaction

value of identical goods sold for export to Malta and imported at or

about the same time as the goods being valued.

(b) In applying this Article, the transaction value of identical goods in a sale

at the same commercial level and in substantially the same quantity as

the goods being valued shall be used to determine the customs value.

Where no such sale is found, the transaction value of identical goods

sold at a different commercial level and/or in different quantities,

adjusted to take account of differences attributable to commercial level

and/or to quantity, shall be used, provided that such adjustments can be

made on the basis of demonstrated evidence which clearly establishes

the reasonableness and accuracy of the adjustment, whether the

adjustment leads to an increase or a decrease in the value.

2. Where the costs and charges referred to in paragraph 2 of Article 8 are

included in the transaction value, an adjustment shall be made to take account of

significant differences in such costs and charges between the imported goods and the

identical goods in question arising from differences in distances and modes of

3. If, in applying this Article, more than one transaction value of identical

goods is found, the lowest such value shall be used to determine the customs value of

the imported goods.

Article 3

1. (a) If the customs value of the imported goods cannot be determined under

the provisions of Articles 1 and 2, the customs value shall be the

transaction value of similar goods sold for export to the same country of

importation and exported at or about the same time as the goods being

valued.

(b) In applying this Article, the transaction value of similar goods in a sale

at the same commercial level and in substantially the same quantity as

the goods being valued shall be used to determine the customs value.

Where no such sale is found, the transaction value of similar goods sold

at a different commercial level and/or in different quantities, adjusted to

take account of differences attributable to commercial level and/or to

quantity, shall be used, provided that such adjustments can be made on

the basis of demonstrated evidence which clearly establishes the

reasonableness and accuracy of the adjustment, whether the adjustment

IMPORT DUTIES

leads to an increase or a decrease in the value.

2. Where the costs and charges referred to in paragraph 2 of Article 8 are

included in the transaction value, an adjustment shall be made to take account of

significant differences in such costs and charges between the imported goods and the

similar goods in question arising from differences in distances and modes of

3. If, in applying this Article, more than one transaction value of similar goods

is found, the lowest such value shall be used to determine the customs value of the

imported goods.

Article 4

If the Customs value of the imported goods cannot be determined under the

provisions of Articles 1, 2 and 3, the customs value shall be determined under the

provisions of Article 5 or, when the customs value cannot be determined under that

Article, under the provisions of Article 6.

Article 5

1. (a) If the imported goods or identical or similar imported goods are sold in

Malta in the condition as imported, the customs value of the imported

goods under the provisions of this Article shall be based on the unit

are so sold in the greatest aggregate quantity, at or about the time of the

importation of the goods being valued, to persons who are not related to

the persons from whom they buy such goods, subject to deductions for

the following

(i)

either the commissions usually paid or agreed to be paid or the

additions usually made for profit and general expenses in

connection with sales in such country of imported goods of the

same class or kind;

(ii) the usual costs of transport and insurance and associated costs

incurred in Malta;

(iii) where appropriate, the costs and charges referred to in paragraph

2 of Article 8; and

(iv) the customs duties and other national taxes payable in Malta by

reason of the importation or sale of the goods.

(b) If neither the imported goods nor identical nor similar imported goods

are sold at or about the time of importation of the goods being valued,

the customs value shall, subject otherwise to the provisions of paragraph

1(a) of this Article, be based on the unit price at which the imported

goods or identical or similar imported goods are sold in Malta in the

condition as imported at the earliest date after the importation of the

goods being valued but before the expiration of ninety days after such

importation.

2. If neither the imported goods nor identical nor similar imported goods are

sold in Malta in the condition as imported, then, if the importer so requests, the

customs value shall be based on the unit price at which the imported goods, after

further processing, are sold in the greatest aggregate quantity to persons in Malta

who are not related to the persons from whom they buy such goods, due allowance

being made for the value added by such processing and the deductions provided for

in paragraph 1 (a) of this Article.

Article 6

1. The customs value of imported goods under the provisions of this Article

shall be based on a computed value. Computed value shall consist of the sum of

(a) the cost or value of materials and fabrication or other processing

employed in producing the imported goods;

(b) an amount for profit and general expenses equal to that usually reflected

in sales 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

Malta;

(c) the cost or value of all other expenses listed under paragraph 2 of

Article 8.

2. No person not resident in Malta may be compelled to produce for

examination, or to allow access to, any account or other record for the purposes of

determining a computed value. However, information supplied by the producer of

the goods for the purposes of determining the customs value under the provisions of

this Article may be verified in another country by the authorities of Malta with the

agreement of the producer and provided they give sufficient advance notice to the

government of the country in question and the latter does not object to the

investigation.

Article 7

1. If the customs value of the imported goods cannot be determined under the

provisions of Articles 1 to 6, inclusive, the customs value shall be determined using

reasonable means consistent with the principles and general provisions of the

Agreement on Customs Valuation and of Article VII of the GATT 1994 and on the

basis of data available in Malta.

2. No customs value shall be determined under the provisions of this Article on

the basis of

(a) the selling price in Malta of goods produced in such country;

(b) a system which provides for the acceptance for customs purposes of the

higher of two alternative values;

(c) the price of goods on the domestic market of the country of exportation;

(d) the cost of production other than computed values which have been

determined for identical or similar goods in accordance with the

provisions of Article 6;

(e) the price of the goods for export to a country other than Malta;

(f)

arbitrary or fictitious values.

3. If he so requests, the importer shall be informed in writing of the customs

value determined under the provisions of this Article and the method used to

determine such value.

Article 8

1. In determining the customs value under the provisions of Article 1, there

shall be added to the price actually paid or payable for the imported goods

(a) the following, to the extent that they are incurred by the buyer but are

not included in the price actually paid or payable for the goods -

(i)

commissions and brokerage, except buying commissions;

IMPORT DUTIES

(ii) the cost of containers which are treated as being one for customs

purposes with the goods in question;

(iii) the cost of packing whether for labour or materials;

(b) the value, apportioned as appropriate, of the following goods and

services where supplied directly or indirectly by the buyer free of

charge or at reduced cost for use in connection with the production and

sale for export of the imported goods, to the extent that such value has

not been included in the price actually paid or payable -

(i)

materials, components, parts and similar items incorporated in the

imported goods;

(ii) tools, dies, moulds and similar items used in the production of the

imported goods;

(iii) materials consumed in the production of the imported goods;

(iv) engineering, development, artwork, design work, and plans and

sketches undertaken elsewhere than in Malta and necessary for

the production of the imported goods;

(c) royalties and licence fees related to the goods being valued that the

buyer must pay, either directly or indirectly, as a condition of sale of the

goods being valued, to the extent that such royalties and fees are not

included in the price actually paid or payable;

(d) the value of any part of the proceeds of any subsequent resale, disposal

or use of the imported goods that accrues directly or indirectly to the

seller.

2. The following shall also be included in the customs value

(a) the cost of transport of the imported goods to the port or place of

importation;

(b) loading, unloading and handling charges associated with the transport of

the imported goods to the port or place of importation; and

(c) the cost of insurance.

3. Additions to the price actually paid or payable shall be made under this

Article only on the basis of objective and quantifiable data.

4. No additions shall be made to the price actually paid or payable in

determining the customs value except as provided in this Article.

Article 9

Where the conversion of currency is necessary for the determination of the

customs value, the rate of exchange to be used shall be that determined by the

Central Bank of Malta and the relative provisions of article 12 of this Act shall

Article 10

All information which is by nature confidential or which is provided on a

confidential basis for the purposes of customs valuation shall be treated as strictly

confidential by the authorities concerned who shall not disclose it without the

specific permission of the person or government providing such information, except

to the extent that it may be required to be disclosed in the context of judicial

proceedings.

Article 11

The notes at the Annex to this Schedule form an integral part of and are to be

read and applied in conjunction with this Schedule.

Article 12

1. In this Schedule

(a) "customs value of imported goods" means the value of goods for the

purposes of levying ad valorem duties of customs on imported goods;

and

(b) "produced" includes grown, manufactured and mined.

2. (a) In this Schedule "identical goods" means goods which are the same in

all respects, including physical characteristics, quality and reputation.

Minor differences in appearance would not preclude goods otherwise

conforming to the definition from being regarded as identical.

(b) In this Schedule "similar goods" means goods which, although not alike

in all respects, have like characteristics and like component materials

which enable them to perform the same functions and to be

commercially interchangeable. The quality of the goods, their reputation

and the existence of a trademark are among the factors to be considered

in determining whether goods are similar.

(c) The terms "identical goods" and "similar goods" do not include, as the

case may be, goods which incorporate or reflect engineering,

development, artwork, design work, and plans and sketches for which no

adjustment has been made under paragraph 1 (b)(iv) of Article 8 because

such elements were undertaken in Malta.

(d) Goods shall not be regarded as "identical goods" or "similar goods"

unless they were produced in the same country as the goods being

valued.

(e) Goods produced by a different person shall be taken into account only

when there are no identical goods or similar goods, as the case may be,

produced by the same person as the goods being valued.

3. In this Schedule "goods of the same class or kind" means goods which fall

within a group or range of goods produced by a particular industry or industry sector,

and includes identical or similar goods.

4. For the purposes of this Schedule, persons shall be deemed to be related only

(a) they are officers or directors of one another’s businesses;

(b) they are legally recognised partners in business;

(c) they are employer and employee;

(d) any person directly or indirectly owns, controls or holds 5 per cent or

more of the outstanding voting stock or shares of both of them;

(e) one of them directly or indirectly controls the other;

(f)

both of them are directly or indirectly controlled by a third person;

(g) together they directly or indirectly control a third person; or

(h) they are members of the same family.

Persons who are associated in business with one another in that one is the

sole agent, sole distributor or sole concessionaire, however described, of the other

shall be deemed to be related for the purposes of this Schedule if they fall within the

criteria of paragraph 4 of this Article.

Article 13

Upon written request, the importer shall have the right to an explanation in

writing from the customs administration of Malta as to how the customs value of his

imported goods was determined.

Article 14

Nothing in this Schedule shall be construed as restricting or calling into

question the rights of customs administrations to satisfy themselves as to the truth or

accuracy of any statement, document or declaration presented for customs valuation

purposes.

ANNEX

INTERPRETATIVE NOTES

General Note

Sequential Application of Valuation Methods

1. Articles 1 to 7, inclusive, define how the customs value of imported goods is

to be determined under the provisions of this Schedule. The methods of valuation are

set out in a sequential order of application. The primary method for customs

valuation is defined in Article 1 and imported goods are to be valued in accordance

with the provisions of this Article whenever the conditions prescribed therein are

fulfilled.

2. Where the customs value cannot be determined under the provisions of

Article 1, it is to be determined by proceeding sequentially through the succeeding

Articles to the first such Article under which the customs value can be determined.

Except as provided in Article 4, it is only when the customs value cannot be

determined under the provisions of a particular Article that the provisions of the next

Article in the sequence can be used.

3. If the importer does not request that the order of Articles 5 and 6 be

reversed, the normal order of the sequence is to be followed. If the importer does so

request but it then proves impossible to determine the customs value under the

provisions of Article 6, the customs value is to be determined under the provisions of

Article 5, if it can be so determined.

4. Where the customs value cannot be determined under the provisions of

Articles 1 to 6, inclusive, it is to be determined under the provisions of Article 7.

Use of Generally Accepted Accounting Principles

1. "Generally accepted accounting principles" refers to the recognized

consensus or substantial authoritative support within a country at a particular time as

to which economic resources and obligations should be recorded as assets and

liabilities, which changes in assets and liabilities should be recorded, how the assets

and liabilities and changes in them should be measured, what information should be

disclosed and how it should be disclosed, and which financial statements should be

prepared. These standards may be broad guidelines of general application as well as

detailed practices and procedures.

2. For the purposes of this Schedule, the customs administration shall utilize

information prepared in a manner consistent with generally accepted accounting

principles in the country which is appropriate for the Article in question. For

example, the determination of usual profit and general expenses under the provisions

of Article 5 would be carried out utilizing information prepared in a manner

consistent with generally accepted accounting principles of Malta. On the other

hand, the determination of usual profit and general expenses under the provisions of

Article 6 would be carried out utilizing information prepared in a manner consistent

with generally accepted accounting principles of the country of production. As a

further example, the determination of an element provided for in paragraph 1(b)(ii)

of Article 8 undertaken in Malta would be carried out utilizing information in a

manner consistent with the generally accepted accounting principles of that country.

Note to Article 1

1. The price actually paid or payable is the total payment made or to be made

by the buyer to or for the benefit of the seller for the imported goods. The payment

need not necessarily take the form of a transfer of money. Payment may be made by

way of letters of credit or negotiable instruments. Payment may be made directly or

indirectly. An example of an indirect payment would be the settlement by the buyer,

whether in whole or in part, of a debt owed by the seller.

2. Activities undertaken by the buyer on his own account, other than those for

which an adjustment is provided in Article 8, are not considered to be an indirect

payment to the seller, even though they might be regarded as of benefit to the seller.

The costs of such activities shall not, therefore, be added to the price actually paid or

payable in determining the customs value.

3. The customs value shall not include the following charges or costs, provided

that they are distinguished from the price actually paid or payable for the imported

goods

(a) charges for construction, erection, assembly, maintenance or technical

assistance, undertaken after importation on imported goods such as

industrial plant, machinery or equipment;

(b) the cost of transport after importation;

(c) duties and taxes of the country of importation.

The price actually paid or payable refers to the price for the imported goods.

Thus the flow of dividends or other payments from the buyer to the seller that do not

relate to the imported goods are not part of the customs value.

Paragraph 1(a)(iii)

Among restrictions which would not render a price actually paid or payable

unacceptable are restrictions which do not substantially affect the value of the goods.

An example of such restrictions would be the case where a seller requires a buyer of

automobiles not to sell or exhibit them prior to a fixed date which represents the

beginning of a model year.

Paragraph 1(b)

1. If the sale or price is subject to some condition or consideration for which a

value cannot be determined with respect to the goods being valued, the transaction

value shall not be acceptable for customs purposes. Some examples of this include

(a) the seller establishes the price of the imported goods on condition that

the buyer will also buy other goods in specified quantities;

(b) the price of the imported goods is dependent upon the price or prices at

which the buyer of the imported goods sells other goods to the seller of

the imported goods;

(c) the price is established on the basis of a form of payment extraneous to

the imported goods, such as where the imported goods are semi-finished

goods which have been provided by the seller on condition that he will

receive a specified quantity of the finished goods.

2. However, conditions or considerations relating to the production or

marketing of the imported goods shall not result in rejection of the transaction value.

For example, the fact that the buyer furnishes the seller with engineering and plans

undertaken in Malta shall not result in rejection of the transaction value for the

purposes of Article I. Likewise, if the buyer undertakes on his own account, even

though by agreement with the seller, activities relating to the marketing of the

imported goods, the value of these activities is not part of the customs value nor

shall such activities result in rejection of the transaction value.

Paragraph 2

1. Paragraphs 2(a) and 2(b) provide different means of establishing the

acceptability of a transaction value.

2. Paragraph 2(a) provides that where the buyer and the seller are related, the

circumstances surrounding the sale shall be examined and the transaction value shall

be accepted as the customs value provided that the relationship did not influence the

all cases where the buyer and the seller are related. Such examination will only be

required where there are doubts about the acceptability of the price. Where the

customs administration have no doubts about the acceptability of the price, it should

be accepted without requesting further information from the importer. For example,

the customs administration may have previously examined the relationship, or it may

already have detailed information concerning the buyer and the seller, and may

already be satisfied from such examination or information that the relationship did

not influence the price.

3. Where the customs administration is unable to accept the transaction value

without further inquiry, it should give the importer an opportunity to supply such

further detailed information as may be necessary to enable it to examine the

circumstances surrounding the sale. In this context, the customs administration

should be prepared to examine relevant aspects of the transaction, including the way

in which the buyer and seller organize their commercial relations and the way in

which the price in question was arrived at, in order to determine whether the

relationship influenced the price.

Where it can be shown that the buyer and seller, although related under the

provisions of Article 15, buy from and sell to each other as if they were not related,

this would demonstrate that the price had not been influenced by the relationship. As

an example of this, if the price had been settled in a manner consistent with the

normal pricing practices of the industry in question or with the way the seller settles

prices for sales to buyers who are not related to him, this would demonstrate that the

shown that the price is adequate to ensure recovery of all costs plus a profit which is

representative of the firm’s overall profit realized over a representative period of

time (e.g. on an annual basis) in sales of goods of the same class or kind, this would

demonstrate that the price had not been influenced.

4. Paragraph 2(b) provides an opportunity for the importer to demonstrate that

the transaction value closely approximates to a "test" value previously accepted by

the customs administration and is therefore acceptable under the provisions of

Article 1. Where a test under paragraph 2(b) is met, it is not necessary to examine

the question of influence under paragraph 2(a). If the customs administration has

already sufficient information to be satisfied, without further detailed inquiries, that

one of the tests provided in paragraph 2(b) has been met, there is no reason for it to

require the importer to demonstrate that the test can be met. In paragraph 2(b) the

term "unrelated buyers" means buyers who are not related to the seller in any

particular case.

Paragraph 2(b)

A number of factors must be taken into consideration in determining whether

one value "closely approximates" to another value. These factors include the nature

of the imported goods, the nature of the industry itself, the season in which the goods

are imported, and, whether the difference in values is commercially significant.

Since these factors may vary from case to case, it would be impossible to apply a

uniform standard such as a fixed percentage, in each case. For example, a small

difference in value in a case involving one type of goods could be unacceptable

while a large difference in a case involving another type of goods might be

acceptable in determining whether the transaction value closely approximates to the

"test" values set forth in paragraph 2(b) of Article 1.

Note to Article 2

1. In applying Article 2, the customs administration shall, wherever possible,

use a sale of identical goods at the same commercial level and in substantially the

same quantities as the goods being valued. Where no such sale is found, a sale of

identical goods that takes place under any one of the following three conditions may

be used

(a) a sale at the same commercial level but in different quantities;

(b) a sale at a different commercial level but in substantially the same

quantities; or

(c) a sale at a different commercial level and in different quantities.

Having found a sale under any one of these three conditions adjustments will

then be made, as the case may be, for

quantity factors only;

a.

commercial level factors only; or

b.

both commercial level and quantity factors.

c.

3. The expression "and/or" allows the flexibility to use the sales and make the

necessary adjustments in any one of the three conditions described above.

4. For the purposes of Article 2, the transaction value of identical imported

goods means a customs value, adjusted as provided for in paragraphs 1(b) and 2 of

this Article, which has already been accepted under Article 1.

5. A condition for adjustment because of different commercial levels or

different quantities is that such adjustment, whether it leads to an increase or a

decrease in the value, be made only on the basis of demonstrated evidence that

clearly establishes the reasonableness and accuracy of the adjustments, e.g. valid

As an example of this, if the imported goods being valued consist of a

shipment of 10 units and the only identical imported goods for which a transaction

value exists involved a sale of 500 units, and it is recognized that the seller grants

quantity discounts, the required adjustment may be accomplished by resorting to the

seller’s price list and using that price applicable to a sale of 10 units. This does not

require that a sale had to have been made in quantities of 10 as long as the price list

has been established as being bona fide through sales at other quantities. In the

absence of such an objective measure, however, the determination of a customs

value under the provisions of Article 2 is not appropriate.

Note to Article 3

1. In applying Article 3, the customs administration shall, wherever possible,

use a sale of similar goods at the same commercial level and in substantially the

same quantities as the goods being valued. Where no such sale is found, a sale of

similar goods that takes place under any one of the following three conditions may

be used

(a) a sale at the same commercial level but in different quantities;

(b) a sale at a different commercial level but in substantially the same

quantities; or

(c) a sale at a different commercial level and in different quantities.

2. Having found a sale under any one of these three conditions adjustments will

then be made, as the case may be, for

(a) quantity factors only;

(b) commercial level factors only; or

(c) both commercial level and quantity factors.

3. The expression "and/or" allows the flexibility to use the sales and make the

necessary adjustments in any one of the three conditions described above.

4. For the purpose of Article 3, the transaction value of similar imported goods

means a customs value, adjusted as provided for in paragraphs 1(b) and 2 of this

Article, which has already been accepted under Article 1.

5. A condition for adjustment because of different commercial levels or

different quantities is that such adjustment, whether it leads to an increase or a

decrease in the value, be made only on the basis of demonstrated evidence that

clearly establishes the reasonableness and accuracy of the adjustment, e.g. valid

As an example of this, if the imported goods being valued consist of a

shipment of 10 units and the only similar imported goods for which a transaction

value exists involved a sale of 500 units, and it is recognized that the seller grants

quantity discounts, the required adjustment may be accomplished by resorting to the

seller’s price list and using that price applicable to a sale of 10 units. This does not

require that a sale had to have been made in quantities of 10 as long as the price list

has been established as being bona fide through sales at other quantities. In the

absence of such an objective measure, however, the determination of a customs

value under the provisions of Article 3 is not appropriate.

Note to Article 5

1. The term "unit price at which ... goods are sold in the greatest aggregate

quantity" means the price at which the greatest number of units is sold in sales to

persons who are not related to the persons from whom they buy such goods at the

first commercial level after importation at which such sales take place.

2. As an example of this, goods are sold from a price list which grants

favourable unit prices for purchases made in larger quantities.

Sale quantity

Unit price

Number of sales

Total quantity sold at each price

1-10 units

10 sales of 5 units

5 sales of 3 units

11-25 units

5 sales of 11 units

over 25 units

1 sale of 30 units

1 sale of 50 units

The greatest number of units sold at a price is 80; therefore, the unit price in

the greatest aggregate quantity is 90.

3. As another example of this, two sales occur. In the first sale 500 units are

sold at a price of 95 currency units each. In the second sale 400 units are sold at a

a particular price is 500; therefore, the unit price in the greatest aggregate quantity is

95.

4. A third example would be the following situation where various quantities

are sold at various prices.

(a) Sales

Sale quantity

Unit price

40 units

30 units

15 units

50 units

25 units

35 units

5 units

(b) Totals

Total quantity sold

Unit price

In this example, the greatest number of units sold at a particular price is 65;

therefore, the unit price in the greatest aggregate quantity is 90.

5. Any sale in the importing country, as described in paragraph 1 above, to a

person who supplies directly or indirectly free of charge or at a reduced cost for use

in connection with the production and sale for export of the imported goods any of

the elements specified in paragraph 1(b) of Article 8, should not be taken into

account in establishing the unit price for the purposes of Article 5.

6. It should be noted that "profit and general expenses" referred to in paragraph

1 of Article 5 should be taken as a whole. The figure for the purposes of this

deduction should be determined on the basis of information supplied by or on behalf

of the importer unless his figures are inconsistent with those obtained in sales in

Malta of imported goods of the same class or kind. Where the importer’s figures are

inconsistent with such figures, the amount for profit and general expenses may be

based upon relevant information other than that supplied by or on behalf of the

importer.

7. The "general expenses" include the direct and indirect costs of marketing the

goods in question.

8. Local taxes payable by reason of the sale of the goods for which a deduction

is not made under the provisions of paragraph 1(a)(iv) of Article 5 shall be deducted

under the provisions of paragraph 1(a)(i) of Article 5.

9. In determining either the commissions or the usual profits and general

expenses under the provisions of paragraph 1 of Article 5, the question whether

certain goods are "of the same class or kind" as other goods must be determined on a

case-by-case basis by reference to the circumstances involved. Sales in Malta of the

narrowest group or range of imported goods of the same class or kind, which

includes the goods being valued, for which the necessary information can be

provided, should be examined. For the purposes of Article 5, "goods of the same

class or kind" includes goods imported from the same country as the goods being

valued as well as goods imported from other countries.

10. For the purposes of paragraph 1(b) of Article 5, the "earliest date" shall be

the date by which sales of the imported goods or of identical or similar imported

goods are made in sufficient quantity to establish the unit price.

11. Where the method in paragraph 2 of Article 5 is used, deductions made for

the value added by further processing shall be based on objective and quantifiable

data relating to the cost of such work. Accepted industry formulas, recipes, methods

of construction, and other industry practices would form the basis of the

calculations.

12. It is recognized that the method of valuation provided for in paragraph 2 of

Article 5 would normally not be applicable when, as a result of the further

processing, the imported goods lose their identity. However, there can be instances

where, although the identity of the imported goods is lost, the value added by the

processing can be determined accurately without unreasonable difficulty. On the

other hand, there can also be instances where the imported goods maintain their

identity but form such a minor element in the goods sold in Malta that the use of this

valuation method would be unjustified. In view of the above, each situation of this

type must be considered on a case-by-case basis.

Note to Article 6

1. As a general rule, customs value is determined under this Schedule on the

basis of information readily available in Malta. In order to determine a computed

value, however, it may be necessary to examine the costs of producing the goods

being valued and other information which has to be obtained from outside Malta.

Furthermore, in most cases the producer of the goods will be outside the jurisdiction

of the authorities of Malta. The use of the computed value method will generally be

limited to those cases where the buyer and seller are related, and the producer is

prepared to supply to the authorities of Malta the necessary costings and to provide

facilities for any subsequent verification which may be necessary.

2. The "cost or value" referred to in paragraph 1(a) of Article 6 is to be

determined on the basis of information relating to the production of the goods being

valued supplied by or on behalf of the producer. It is to be based upon the

commercial accounts of the producer, provided that such accounts are consistent

with the generally accepted accounting principles applied in the country where the

goods are produced.

3. The "cost or value" shall include the cost of elements specified in paragraphs

1(a)(ii) and (iii) of Article 8. It shall also include the value, apportioned as

appropriate under the provisions of the relevant note to Article 8, of any element

specified in paragraph 1(b) of Article 8 which has been supplied directly or

indirectly by the buyer for use in connection with the production of the imported

goods. The value of the elements specified in paragraph 1(b)(iv) of Article 8 which

are undertaken in Malta shall be included only to the extent that such elements are

charged to the producer. It is to be understood that no cost or value of the elements

referred to in this paragraph shall be counted twice in determining the computed

value.

4. The "amount for profit and general expenses" referred to in paragraph 1(b)

of Article 6 is to be determined on the basis of information supplied by or on behalf

of the producer unless his figures are inconsistent with those usually reflected in

sales 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 Malta.

5. It should be noted in this context that the "amount for profit and general

expenses" has to be taken as a whole. It follows that if, in any particular case, the

producer’s profit figure is low and his general expenses are high, his profit and

general expenses taken together may nevertheless be consistent with that usually

reflected in sales of goods of the same class or kind. Such a situation might occur,

for example, if a product were being launched in Malta and the producer accepted a

nil or low profit to offset high general expenses associated with the launch. Where

the producer can demonstrate that he is taking a low profit on his sales of the

imported goods because of particular commercial circumstances, his actual profit

figures should be taken into account provided that he has valid commercial reasons

to justify them and his pricing policy reflects usual pricing policies in the branch of

industry concerned. Such a situation might occur, for example, where producers have

been forced to lower prices temporarily because of an unforeseeable drop in demand,

or where they sell goods to complement a range of goods being produced in Malta

and accept a low profit to maintain competitivity. Where the producer’s own figures

for profit and general expenses are not consistent with those usually reflected in

sales 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 Malta, the amount for profit and

general expenses may be based upon relevant information other than that supplied by

or on behalf of the producer of the goods.

6. Where information other than that supplied by or on behalf of the producer is

used for the purposes of determining a computed value, the authorities of the

importing country shall inform the importer, if the latter so requests, of the source of

such information, the data used and the calculations based upon such data, subject to

the provisions of Article 10.

7. The "general expenses" referred to in paragraph 1(b) of Article 6 covers the

direct and indirect costs of producing and selling the goods for export which are not

included under paragraph 1(a) of Article 6.

8. Whether certain goods are "of the same class or kind" as other goods must be

determined on a case-by-case basis with reference to the circumstances involved. In

determining the usual profits and general expenses under the provisions of Article 6,

sales for export to Malta of the narrowest group or range of goods, which includes

the goods being valued, for which the necessary information can be provided, should

be examined. For the purposes of Article 6, "goods of the same class or kind" must

be from the same country as the goods being valued.

Note to Article 7

1. Customs values determined under the provisions of Article 7 should, to the

greatest extent possible, be based on previously determined customs values.

2. The methods of valuation to be employed under Article 7 should be those

laid down in Articles 1 to 6, inclusive, but a reasonable flexibility in the application

of such methods would be in conformity with the aims and provisions of Article 7.

3. Some examples of reasonable flexibility are as follows

Identical goods - the requirement that the identical goods should be

a.

exported at or about the same time as the goods being valued could be

flexibly interpreted; identical imported goods produced in a country

other than the country of exportation of the goods being valued could be

the basis for customs valuation; customs values of identical imported

goods already determined under the provisions of Articles 5 and 6 could

be used.

Similar goods - the requirement that the similar goods should be

b.

exported at or about the same time as the goods being valued could be

flexibly interpreted; similar imported goods produced in a country other

than the country of exportation of the goods being valued could be the

basis for customs valuation; customs values of similar imported goods

already determined under the provisions of Articles 5 and 6 could be

used.

Deductive method - the requirement that the goods shall have been sold

c.

in the "condition as imported" in paragraph 1(a) of Article 5 could be

flexibly interpreted; the "ninety days" requirement could be

administered flexibly.

Note to Article 8

Paragraph 1(a)(i)

The term "buying commissions" means fees paid by an importer to his agent

for the service of representing him abroad in the purchase of the goods being valued.

Paragraph 1(b)(ii)

1. There are two factors involved in the apportionment of the elements

specified in paragraph 1(b)(ii) of Article 8 to the imported goods - the value of the

element itself and the way in which that value is to be apportioned to the imported

goods. The apportionment of these elements should be made in a reasonable manner

appropriate to the circumstances and in accordance with generally accepted

accounting principles.

2. Concerning the value of the element, if the importer acquires the element

from a seller not related to him at a given cost, the value of the element is that cost.

If the element was produced by the importer or by a person related to him, its value

would be the cost of producing it. If the element had been previously used by the

importer, regardless of whether it had been acquired or produced by such importer,

the original cost of acquisition or production would have to be adjusted downward to

reflect its use in order to arrive at the value of the element.

3. Once a value has been determined for the element, it is necessary to

apportion that value to the imported goods. Various possibilities exist. For example,

the value might be apportioned to the first shipment if the importer wishes to pay

duty on the entire value at one time. As another example, the importer may request

that the value be apportioned over the number of units produced up to the time of the

first shipment. As a further example, he may request that the value be apportioned

over the entire anticipated production where contracts or firm commitments exist for

that production. The method of apportionment used will depend upon the

documentation provided by the importer.

4. As an illustration of the above, an importer provides the producer with a

mould to be used in the production of the imported goods and contracts with him to

buy 10,000 units. By the time of arrival of the first shipment of 1,000 units, the

producer has already produced 4,000 units. The importer may request the customs

administration to apportion the value of the mould over 1,000 units, 4,000 units or

10,000 units.

Paragraph 1(b)(iv)

1. Additions for the elements specified in paragraph 1 (b)(iv) of Article 8

should be based on objective and quantifiable data. In order to minimize the burden

for both the importer and customs administration in determining the values to be

added, data readily available in the buyer’s commercial record system should be

used in so far as possible.

2. For those elements supplied by the buyer which were purchased or leased by

the buyer, the addition would be the cost of the purchase or the lease. No addition

shall be made for those elements available in the public domain, other than the cost

of obtaining copies of them.

3. The ease with which it may be possible to calculate the values to be added

will depend on a particular firm’s structure and management practice, as well as its

accounting methods.

4. For example, it is possible that a firm which imports a variety of products

from several countries maintains the records of its design centre outside Malta in

such a way as to show accurately the costs attributable to a given product. In such

cases, a direct adjustment may appropriately be made under the provisions of Article

8.

5. In another case, a firm may carry the cost of the design centre outside Malta

as a general overhead expense without allocation to specific products. In this

instance, an appropriate adjustment could be made under the provisions of Article 8

with respect to the imported goods by apportioning total design centre costs over

total production benefiting from the design centre and adding such apportioned cost

on a unit basis to imports.

6. Variations in the above circumstances will, of course, require different

factors to be considered in determining the proper method of allocation.

7. In cases where the production of the element in question involves a number

of countries and over a period of time, the adjustment should be limited to the value

actually added to that element outside Malta.

Paragraph 1(c)

1. The royalties and licence fees referred to in paragraph 1(c) of Article 8 may

include, among other things, payments in respect to patents, trade marks and

copyrights. However, the charges for the right to reproduce the imported goods in

Malta shall not be added to the price actually paid or payable for the imported goods

in determining the customs value.

2. Payments made by the buyer for the right to distribute or resell the imported

goods shall not be added to the price actually paid or payable for the imported goods

if such payments are not a condition of the sale for export to Malta of the imported

goods.

Paragraph 3

Where objective and quantifiable data do not exist with regard to the

additions required to be made under the provisions of Article 8, the transaction value

cannot be determined under the provisions of Article 1. As an illustration of this, a

royalty is paid on the basis of the price in a sale in the importing country of a litre of

a particular product that was imported by the kilogram and made up into a solution

after importation. If the royalty is based partially on the imported goods and partially

on other factors which have nothing to do with the imported goods (such as when the

imported goods are mixed with domestic ingredients and are no longer separately

identifiable, or when the royalty cannot be distinguished from special financial

arrangements between the buyer and the seller), it would be inappropriate to attempt

to make an addition for the royalty. However, if the amount of this royalty is based

only on the imported goods and can be readily quantified, an addition to the price

actually paid or payable can be made.

Note to Article 12

Paragraph 4

For the purposes of this Article, the term "persons" includes legal person,

where appropriate.

Paragraph 4(e)

For the purposes of this Schedule, one person shall be deemed to control

another when the former is legally or operationally in a position to exercise restraint

or direction over the latter.

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