Customs valuation is the determination of the value of imported goods for the purposes of the assessment of customs duties, taxes, and fees. Under Iraqi law, the framework engages the principles incorporated into the Customs Law No. 23 of 1984 (as amended), supplemented by the operational practice of the General Authority of Customs and influenced by international principles of customs valuation, principally those set out in the World Trade Organization Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the WTO Customs Valuation Agreement). Iraqi valuation practice draws on the transaction-value methodology recognised as the primary international standard.
Statutory Framework
The Iraqi customs valuation framework engages the provisions of the Customs Law No. 23 of 1984 addressing the determination of customs value, the implementing regulations of the General Authority of Customs prescribing the operational application of the valuation framework, and the principles of the WTO Customs Valuation Agreement as reflected in Iraqi practice. The framework establishes a hierarchical methodology for the determination of customs value, with the transaction value as the primary basis and a sequence of alternative methods available where the transaction value cannot be applied.
Transaction Value as Primary Basis
The transaction value is the principal basis of customs valuation. The transaction value is defined as the price actually paid or payable for the goods when sold for export to Iraq, subject to defined adjustments. The transaction value is to be applied where:
- There is a sale of the goods for export to Iraq
- The price actually paid or payable is ascertainable
- There is no restriction on the disposition or use of the goods by the buyer, other than restrictions of a defined permitted character
- The sale is not subject to conditions for which a value cannot be determined
- No part of the proceeds of subsequent resale accrues to the seller in a manner that cannot be quantified
- In related-party transactions, the relationship does not influence the price, or the importer can demonstrate that the transaction value is acceptable for customs purposes
Where the transaction value satisfies these conditions, it is the basis of valuation, subject to the prescribed adjustments.
Statutory Adjustments
The transaction value is, in general, adjusted to capture additional elements that are properly included in the customs value but that may not be included in the invoice price. The principal adjustments include:
- Commissions and brokerage, except buying commissions, incurred by the buyer
- The cost of containers and packing where treated as one with the goods
- The value of goods and services supplied by the buyer to the seller free of charge or at reduced cost for use in connection with the production and sale of the imported goods (assists)
- Royalties and licence fees related to the imported goods that the buyer is required to pay as a condition of sale
- Proceeds of any subsequent resale, disposal or use of the imported goods accruing to the seller
- Transport costs to the place of importation
- Loading, unloading, and handling charges incurred to the place of importation
- Insurance costs
Conversely, certain elements are not included in customs value, including the cost of transport after importation, the cost of construction or assembly undertaken after importation, and duties and taxes payable in Iraq by reason of the importation.
Related-Party Transactions
Transactions between related parties engage substantive valuation considerations, as the relationship between the parties may influence the price. Under the framework:
- The transaction value may be accepted where the relationship has not influenced the price
- The importer may demonstrate that the transaction value closely approximates a test value, including the transaction value of identical or similar goods sold to unrelated buyers
- Where the importer cannot demonstrate the acceptability of the transaction value, alternative valuation methods apply
The treatment of related-party transactions engages substantive documentation, with importers in such transactions advised to maintain transfer pricing documentation, comparable transaction analysis, and other supporting evidence.
Alternative Valuation Methods
Where the transaction value cannot be applied, the alternative valuation methods are applied in the prescribed hierarchical sequence:
- The transaction value of identical goods, applied to goods that are the same in all respects sold for export to Iraq at or about the same time
- The transaction value of similar goods, applied to goods that are like the goods being valued in characteristics and component materials, performing the same functions, and commercially interchangeable
- The deductive method, based on the unit price at which the imported goods or identical or similar imported goods are sold in Iraq, subject to deductions for commissions, transport, duties, and other costs
- The computed method, based on the cost of production, profit, and general expenses of the manufacturer of the imported goods
- The fallback method, based on reasonable means consistent with the principles and general provisions of the framework
The sequence is, in general, mandatory, although the importer may request the reversal of the deductive and computed methods. Each method engages specific data requirements and methodological considerations.
Documentation Requirements
Substantive documentation is required to support the customs value. The principal documents include:
- The commercial invoice, demonstrating the price actually paid or payable
- The contract documentation supporting the sale
- Documentation of payment, including bank documentation evidencing the transfer of funds
- Documentation of transport and insurance costs
- Documentation of any commissions, royalties, or related payments
- For related-party transactions, transfer pricing documentation and comparability analysis
- For alternative methods, the data supporting the application of the alternative method
The documentation should be available at the point of customs clearance and should be retained for the periods prescribed by the Customs Law to support post-clearance audit response.
Valuation Disputes
Valuation disputes arise where the customs authority and the importer disagree on the customs value of imported goods. The dispute may engage:
- Disagreement on the applicability of the transaction value
- Disagreement on the inclusion or exclusion of specific elements in the customs value
- Disagreement on the application of alternative methods
- Disagreement on the acceptability of the importer’s documentation
Valuation disputes are among the most prevalent customs disputes. The resolution proceeds through the administrative review procedures of the General Authority of Customs, with subsequent recourse to the administrative courts where the administrative review does not produce resolution. The procedural requirements engage specific time limits and substantive standards that should be observed with care.
Valuation Rulings
The General Authority of Customs may, in some cases, issue advance valuation rulings or guidance applicable to specific importers or specific transactions. Where available, such rulings provide enhanced certainty for substantial importers and reduce the prospect of disputes at the point of clearance. Importers contemplating substantial recurring transactions may benefit from engagement with the customs authority to obtain such guidance, supported by appropriate documentation.
Strategic Considerations
Strategic considerations in customs valuation include the structuring of transactions to support clean transaction value claims, the documentation of pricing decisions for subsequent verification, the maintenance of comparable transaction data for related-party transactions, the segregation of post-importation costs (such as construction and assembly) where these are not part of customs value, and the structured response to customs valuation inquiries. Investment in valuation discipline is substantially less costly than disputes arising from valuation positions.
How We Can Help
Etihad Law Firm advises on customs valuation in Iraq, including the structuring of transactions to support transaction value claims, related-party transaction documentation, the application of alternative valuation methods, the preparation of valuation positions for substantial importations, post-clearance audit response, the conduct of valuation disputes before the General Authority of Customs and the administrative courts, and the procurement of advance guidance where available.