Methods of Valuation

• Valuation Methods

  • Method 1: Transaction Value
  • Method 2: Transaction Value of Identical Goods
  • Method 3: Transaction Value of Similar Goods
  • Method 4: Deductive Value
  • Method 5: Computed Value
  • Method 6: Fall back Value
• General Principles

  • The methods of valuation are set out in a sequential order of application
  • The primary method for customs valuation is the Transaction Value and imported goods are to be valued in accordance with the provisions of this method whenever the conditions prescribed for its use are fulfilled
  • Where the dutiable value cannot be determined under the Transaction Value method, it is to be determined by proceeding sequentially through the succeeding methods to the first method such as Methods 2 to 6
  • The order of application of Methods 4 and 5 may be reversed upon the request of the importer subject to the approval of the Commissioner of Customs
• Transaction Value

  Formula: PAPP +MA/-PD
• PAPP

  Price Actually Paid or Payable for the goods when sold for export to the Philippines
• Sale


  • There is a commercial operation which involves a buyer and a seller
  • The buyer agrees to obtain certain commodities
  • There is an exchange of ownership of the goods at a time and for a price or other consideration
  • A compensation was given in exchange for the transfer of ownership and acquisition of goods
  • Both parties acknowledge that the transaction constitutes a commercial operation
• Goods that might be considered not subject to a sale

  • Free consignment like gifts, samples and promotional items
  • Goods imported on consignment
  • Goods imported by intermediaries, who do not purchase the goods and who sell them after importation
  • Goods imported by branch offices which are not separate legal entities
  • Goods imported under a hire or leasing contract
  • Goods supplied on loan, which remains the property of the seller
• Sale for Export

  Transactions involving an actual international transfer of goods may be used in valuing merchandise under the Transaction Value Method
• Mandatory Addition

  • Commissions and Brokerage Fees
  • Assists
  • Royalties and License Fees
  • Packing and container costs
  • Proceeds
  • Insurance
  • Transport Cost
• Permissible Deduction

  • Charges for construction, erection assembly maintenance or technical assistance, undertaken after importation on imported goods
  • Transport Cost incurred after importation
  • Duties, taxes and other charges paid for the imported goods
• Four Conditions under Method 1: Transaction Value

  • No restriction of disposition
  • No condition on sale
  • No proceeds to seller
  • No relationships between the buyer and the seller
• Fixed date


  A date that represents the beginning of a model year, meaning the seller can only use or exhibit it upon that date (e.g. January 1, 2022)
• No condition on sale


  • The sale or price must not be subject to some conditions or considerations for which the value cannot be determined with respect to the goods being valued
  • Examples: The seller establishes the price on condition the buyer will buy other goods, the price is dependent on the price of goods sold by the buyer to the seller, the price is established based on a form of payment extraneous to the imported goods
• No proceeds to seller


  • No proceeds of any subsequent release, disposal, or use of goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the Mandatory Addition
• No relationship between the buyer and the seller

  • The buyer and the seller shall be deemed to be related only if: they are officers/directors of each other's business, they are legally recognized partners, they are employer and employee, any person directly or indirectly owns/controls 5% or more of their outstanding voting stock/shares, one directly or indirectly controls the other, both are directly or indirectly controlled by a third person, together they directly or indirectly control a third person, or they are related by affinity or consanguinity up to the 4th civil degree
  • If the Collector of Customs has no doubts on the acceptability of the price despite the buyer and seller being related, Method One shall apply without the need of further examination
  • If the Collector has doubts, the importer shall be given an opportunity to supply additional information for examination, and if still dissatisfied, Transaction Value shall not apply
• Transaction Value of Identical Goods (Method 2)

  Used when any of the conditions prescribed in Method 1 are not fulfilled
• Identical goods


  Goods which are the same in all respects including physical characteristics, quality and reputation, produced by the producer of the goods being valued (or a different producer in the same country of production if no identical goods are produced by the same producer)
• Conditions for Method 2


  • Identical goods shall be sold for export to the Philippines
  • Identical goods shall be exported at or about the same time as the goods being valued (generally interpreted as 45 days before or after)
  • Identical goods shall be in a sale at the same commercial level and same commercial quantity (can be different if appropriate adjustments are made based on demonstrated evidence)
• Transaction Value of Similar Goods (Method 3)


  Used when any of the conditions under Method 2 are not fulfilled
• Similar goods


  Goods that, although not alike in all respects, have like characteristics and component materials, are capable of performing the same functions, and are commercially interchangeable with the goods being valued (can be produced by a different producer in the same country of production if no similar goods are produced by the same producer)
• Conditions for Method 3

  • Similar goods shall be sold for export to the Philippines
  • Similar goods shall be exported at or about the same time as the goods being valued (generally interpreted as 45 days before or after)
  • Similar goods shall be in a sale at the same commercial level and same commercial quantity (can be different if appropriate adjustments are made based on demonstrated evidence)