China — Customs Valuation

China's customs valuation system is administered by the General Administration of Customs of the People's Republic of China (GACC), a ministry-level agency under the State Council responsible for collecting customs duties, value-added tax, and excise duties on imported and exported goods. GACC also manages the broader import and export supervision regime, including classification, origin, and enforcement.

Primary statute. The overarching authority is the Customs Law of the People's Republic of China, which grants GACC the power to levy duties and enforce customs regulations. The core valuation framework is codified in the Regulations of the People's Republic of China on Import and Export Duties (State Council Decree No. 392), adopted on October 29, 2003, and effective January 1, 2004. These Regulations implement China's WTO commitments and establish the foundational rules for determining the customs value (also called "dutiable value") of imported and exported goods.

Implementing rules. At the administrative level, GACC has issued detailed implementing measures under its decree authority. The most significant is GACC Decree No. 213 (effective February 1, 2014), titled "Measures of Customs of the People's Republic of China for the Determination of Dutiable Value of Imports and Exports," which replaced the earlier Decree No. 148. Decree No. 213 prescribes the six sequential valuation methods that mirror the WTO Valuation Agreement framework, elaborates on related-party transaction tests (including the "circumstances of sale" method introduced in 2014), and details the adjustment and verification procedures GACC officers apply at entry.

WTO Valuation Agreement alignment. As a WTO member since December 11, 2001, China committed to full implementation of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the "WTO Valuation Agreement") from its accession date. This required China to abandon the pre-WTO "minimum value" and "reference value" methods and adopt transaction-value-based valuation. The 2003 Regulations and subsequent GACC decrees are designed to conform to the WTO Agreement's six-method hierarchy: transaction value (primary), transaction value of identical goods, transaction value of similar goods, deductive value, computed value, and the fallback reasonable-means method, in that order.

Scope of application. Under Article 2 of the Regulations on Import and Export Duties, GACC must collect duties on all goods permitted to be imported into or exported out of China's customs territory and on inward articles, unless an exemption is provided by law or administrative regulation. The customs value determined under these rules forms the tax base for ad valorem duties; when duties are levied by specific rates (e.g., by weight or volume), valuation is not required.

Verification and administrative reconsideration. Article 33 of the Regulations authorizes GACC to examine contracts, invoices, accounts, payment records, and other documents to verify declared value; in cases involving large duty amounts and reasonable doubt, GACC may inquire into bank accounts with director-level approval. If the duty payer disputes GACC's valuation determination, Article 80 of GACC Decree No. 124 (Rules on Levying of Duties) requires the payer to pay the assessed duties first, then file an administrative reconsideration request with the higher-level customs authority under the Administrative Reconsideration Law; if dissatisfied with that decision, the payer may bring an administrative lawsuit in the People's Court.

Practical enforcement. GACC offices at major ports (Shanghai, Shenzhen, Beijing, Tianjin, Huangpu) exercise day-to-day valuation authority. Risk-based selectivity determines which declarations receive detailed valuation review; high-risk transactions—particularly related-party imports and imports from jurisdictions with known transfer-pricing concerns—typically face heightened scrutiny. GACC's Single Window electronic declaration system (launched 2022) integrates valuation data with classification, origin, and quota controls, enabling automated risk scoring and post-clearance audit selection.

Source: Customs Law of the People's Republic of China (GACC) Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392 (effective January 1, 2004) Source: GACC Decree No. 124, Rules on Levying of Duties Source: WTO Valuation Agreement (wto.org)

The transaction-value method is the primary method for determining the customs value (dutiable value) of imported goods in China and is used in the overwhelming majority of import declarations. Under Article 18 of the Regulations of the People's Republic of China on Import and Export Duties (State Council Decree No. 392, effective January 1, 2004), the transaction value forms the starting point for valuation, subject to specific conditions and mandatory adjustments.

Definition of transaction value. Article 18(1) of the Regulations defines the transaction value as "the transaction price of such goods, that is, the price actually paid or payable by the buyer for purchasing the import goods when sold for export to the Customs territory of the People's Republic of China, plus" the mandatory additions specified in Article 19. The price actually paid or payable includes all payments—direct or indirect—made by the buyer to the seller or to a third party to satisfy an obligation of the seller, not limited to the invoice price.

Four conditions for transaction-value acceptance. Under Article 18(3) of the Regulations, the transaction value is acceptable only if all four statutory conditions are satisfied:

1. No restrictions on disposition or use — there must be no restrictions on the buyer's disposition or use of the imported goods, other than restrictions imposed by Chinese law or regulation, restrictions that limit the geographical area for resale, or restrictions that do not substantially affect the value of the goods (Article 18(3)(1)).

1. No conditioning on unrelated consideration — the transaction value must not be subject to any condition or consideration for which a value cannot be determined with respect to the goods being valued (for example, tie-in sales where the buyer must also purchase unrelated goods) (Article 18(3)(2)).

1. No proceeds to the seller unless adjustable — no part of the proceeds of any subsequent resale, disposal, or use of the import goods by the buyer may accrue directly or indirectly to the seller, unless an appropriate adjustment can be made to those proceeds in accordance with Articles 19 and 20 of the Regulations (Article 18(3)(3)).

1. Not related parties, or relationship does not influence price — the buyer and seller are not related, or, although related, the relationship did not influence the transaction value (Article 18(3)(4)). GACC Decree No. 213 (effective February 1, 2014) introduced a significant procedural improvement in Article 18: if the circumstances of the sale are examined and found to be consistent with general business practices in the industry, GACC may determine that the special relationship does not influence the transaction value, even when a test-value comparison under the older Decree No. 148 framework is not available. This "circumstances of sale" test brings China's practice closer to the WTO Valuation Agreement's approach for related-party transactions.

Mandatory additions to transaction value. When the transaction value is accepted, Article 19 of the Regulations mandates the addition of the following items, to the extent not already included in the price actually paid or payable, provided the importer supplies objective and quantifiable data (Article 28):

• Commissions and brokerage — except buying commissions (the fee paid by the buyer to its buying agent) (Article 19(1)).

• Container and packing costs — the cost of containers treated as being one for customs purposes with the goods, and the cost of packing, whether for labor or materials (Article 19(2)).

• Assists — the value of goods and services supplied by the buyer free of charge or at reduced cost for use in connection with the production and sale of the imported goods, apportioned as appropriate (Article 19(3)). This includes (a) materials, components, parts, and similar items incorporated in the imported goods; (b) tools, dies, molds, and similar items used in the production of the imported goods; (c) materials consumed in the production of the imported goods; and (d) engineering, development, artwork, design work, and plans and sketches undertaken elsewhere than in China and necessary for the production of the imported goods.

• Royalties and license fees — royalties and license fees related to the imported goods that the buyer must pay, directly or indirectly, as a condition for the sale of such goods to the Customs territory of China (Article 19(5)). Two cumulative statutory conditions must be met: (1) the royalty or license fee must be related to the imported goods, and (2) payment must be a condition for the sale. The relatedness test is elaborated in GACC implementing decrees: a royalty is deemed related if paid for patent, know-how, trademark, copyright, or distribution rights, and the imported goods either embody or bear the protected right, or are used for manufacturing or resale under that right. The payment is a condition of sale if, without the royalty payment, the buyer cannot purchase the goods or the sale will not be concluded under the contract terms. Since March 30, 2016, importers must declare on each customs entry whether a special relationship exists, whether the price was influenced, and whether royalties are payable, giving GACC enhanced risk-screening capability.

• Subsequent proceeds — the value of any part of the proceeds of any subsequent resale, disposal, or use of the goods by the buyer that accrues directly or indirectly to the seller (Article 19(6)), to the extent such proceeds are objective and quantifiable.

Incoterms and freight, insurance additions. China values imports on a CIF basis (cost, insurance, freight to the port of discharge in China). If the transaction price is stated on an FOB, FCA, or other non-CIF basis, the importer must add international freight, freight-related costs, and insurance incurred before the goods are unloaded at the port of discharge within China. Conversely, costs incurred after unloading at the port of entry—including domestic transport, construction, erection, assembly, maintenance, or technical assistance undertaken in China on goods such as industrial plant or machinery—are excluded from the dutiable value under Article 20(1) and (2) of the Regulations. The Standards on Completion of Customs Declaration Forms require importers to declare freight and insurance separately; freight may be entered as a rate (percentage), unit cost per ton, or total amount, with corresponding currency codes, and GACC will adjust the dutiable value accordingly.

Verification and consultation. Article 33 of the Regulations authorizes GACC to examine or copy contracts, invoices, accounts, foreign-exchange settlement certificates, bills, records, business correspondence, and other materials to verify the declared value. Where GACC has doubts about the value and the duties involved are of a large amount, Article 33 further permits GACC—upon approval of the director of the Customs office directly under GACC or an authorized subordinate director—to inquire into fund transactions through the importer's bank accounts. Under Article 34, if GACC has doubts about the declared value, it must inform the duty payer in writing of the grounds for the doubts and require a written explanation and relevant data within a specified time limit. Article 21 requires GACC to consult with the duty payer before resorting to the secondary valuation methods if the transaction value cannot be accepted.

Consequence of non-compliance or unavailability. If the transaction value does not satisfy all four conditions under Article 18(3), or if the importer cannot provide objective and quantifiable data for the mandatory additions, GACC must reject the transaction value and proceed sequentially to the secondary valuation methods under Article 21: (1) transaction value of identical goods; (2) transaction value of similar goods; (3) deductive value (unit price in greatest aggregate quantity sold in China, with adjustments); (4) computed value (cost of materials plus profit and general expenses plus transport); and (5) the fallback "reasonable means" method, in that order, after consultation with the importer. At the request of the duty payer, the order of methods (3) and (4) may be reversed.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Articles 18–21, 28, 33–34 (effective January 1, 2004) Source: GACC Decree No. 148, Rules for Determination of the Dutiable Value of Import and Export Goods (effective May 1, 2006; superseded by GACC Decree No. 213, effective February 1, 2014) Source: GACC Decree No. 124, Rules on Levying of Duties, Articles 8–12

China imposes heightened scrutiny on the transaction value when the buyer and seller are related parties. Under Article 18(3)(4) of the Regulations of the People's Republic of China on Import and Export Duties (State Council Decree No. 392), the transaction-value method is acceptable only if "the buyer and seller are not related or, although the buyer and seller are related, such relationship does not affect the transaction value." This two-stage inquiry—(1) determining whether a relationship exists, and (2) testing whether that relationship influenced the price—is critical for multinational importers with intra-group supply chains.

Six statutory relationships. GACC Decree No. 148 (effective May 1, 2006; superseded by Decree No. 213 on February 1, 2014) defined "related persons" in Article 16, and the definition remains in force under current practice. The buyer and seller are deemed to be related under any of the following six circumstances:

1. One party is an officer or director of the other's business.
2. They are legally recognized partners.
3. One party is the employer of the other.
4. Any person directly or indirectly owns, controls, or holds 5% or more of the outstanding voting stock or shares of both parties.
5. One party directly or indirectly controls the other.
6. Both parties are directly or indirectly controlled by a third party.

Additionally, parties are related if they together directly or indirectly control a third party, or if they are members of the same family (including spouses, parents and children, siblings, grandparents and grandchildren, aunts/uncles and nieces/nephews, and in-laws). The 5% ownership threshold captures a wide range of corporate-group structures, and importers should assume that any direct or indirect parent–subsidiary relationship within a multinational enterprise meets the definition.

Two methods to prove no influence. If GACC determines that the buyer and seller are related, the importer may prove that the relationship did not influence the transaction value under one of two methods:

1. Circumstances-of-sale test. GACC Decree No. 213 (effective February 1, 2014) introduced Article 18, a new provision enabling GACC to accept the transaction value if "the circumstances of the sale are examined to be consistent with general business practices" in the industry. This qualitative test allows GACC to consider the totality of the transaction—including sales agreements, evidence of arm's-length negotiation between the parties, the presence of a formal transfer-pricing study, and commercial rationale—without requiring the importer to identify comparable transaction values. The 2014 reform brought China's related-party valuation practice closer to the WTO Valuation Agreement framework and the approaches used by other major customs authorities, where examiners may accept related-party pricing that reflects normal commercial terms even when exact test values are unavailable.

1. Test-value comparison. Under the earlier framework (GACC Decree No. 148, which remains available as an alternative), the importer may demonstrate that the transaction value closely approximates one of three "test values" at or about the same time: (a) the transaction value of identical goods sold to unrelated buyers in China; (b) the transaction value of similar goods sold to unrelated buyers in China; or (c) the deductive or computed value of identical or similar goods. If the declared value falls within an acceptable range of the test value, GACC may accept it. In practice, multinational importers with limited third-party sales in China often find the circumstances-of-sale test more practical than the test-value method.

Burden and declaration. GACC's electronic declaration system requires importers to declare on each customs entry whether a special relationship exists between the buyer and seller, whether that relationship influenced the price, and whether royalties or license fees are payable. Failure to declare a relationship accurately—or declaring "no relationship" when GACC's records or post-clearance audit reveal common ownership—exposes the importer to duty recovery, interest, and administrative penalty under the Regulations on Implementing Customs Administrative Penalty (State Council Decree No. 420). Related-party transactions are subject to higher scrutiny in GACC's risk-based selectivity framework, and undeclared relationships are a frequent trigger for post-clearance audit.

Consequence of failure. If GACC concludes that the relationship influenced the transaction value and the importer cannot prove otherwise, GACC must reject the transaction-value method and proceed sequentially to the secondary methods under Article 21 of Decree No. 392: transaction value of identical goods, transaction value of similar goods, deductive value, computed value, and the fallback "reasonable means" method. For high-volume import programs with limited identical- or similar-goods comparables, the importer may face the application of deductive or computed value, with attendant valuation adjustments and potential post-clearance duty assessments.

Verification and consultation. Under Article 34 of Decree No. 392, if GACC has doubts about the declared value in a related-party transaction, it must inform the importer in writing of the grounds for the doubts and require a written explanation and supporting data within a specified time limit. Before resorting to a secondary valuation method, Article 21 requires GACC to consult with the importer. This consultation is the importer's opportunity to present the circumstances-of-sale evidence or test-value analysis. Importers should prepare contemporaneous documentation—including intercompany pricing agreements, functional analyses, benchmarking studies, and evidence of price renegotiation at arm's length—for submission at the consultation stage, as GACC officers have broad authority under Article 33 to examine contracts, invoices, accounts, and (with director-level approval) bank account records to verify the arm's-length nature of the price.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Articles 18, 21, 33–34 (effective January 1, 2004) Source: GACC Decree No. 148, Rules for Determination of the Dutiable Value of Import and Export Goods, Article 16 (effective May 1, 2006; superseded by GACC Decree No. 213, effective February 1, 2014)

When GACC rejects the transaction-value method—most commonly in related-party transactions where the importer cannot prove that the relationship did not influence the price, or in cases involving complex assists or royalty disputes—Article 21 of the Regulations of the People's Republic of China on Import and Export Duties (State Council Decree No. 392) mandates that GACC apply five alternative valuation methods in strict sequential order. GACC must consult with the importer before resorting to any secondary method, and the importer may reverse the order of methods (3) and (4) upon request with supporting data. These fallback methods mirror the WTO Valuation Agreement hierarchy and are essential for importers to understand when transaction-value acceptance is at risk.

## 1. Transaction value of identical goods

Definition and criteria. The first fallback method determines customs value based on the transaction value of identical goods sold for export to China at or about the same time as the goods being valued. Under GACC Decree No. 148 (Article 19, effective May 1, 2006; superseded by Decree No. 213 on February 1, 2014, but the substantive definition remains unchanged), "identical goods" means goods produced in the same country or region as the imported goods and identical in all respects including physical characteristics, quality, and reputation, though minor differences in appearance are permitted. "About the same time" means within 45 days before or after the date GACC accepts the customs declaration (Article 21 of Decree 392).

Preference and selection hierarchy. Article 21 of GACC Decree No. 148 establishes a two-tier preference: GACC must first use the transaction value of identical goods produced by the same manufacturer. Only if such a value is unavailable may GACC use transaction values of identical goods from other manufacturers in the same country or region. If more than one transaction value of identical goods is available, the lowest value is used to determine the dutiable value. This "lowest value" rule protects the importer by ensuring GACC does not overstate the valuation when multiple comparables exist.

Practical limitations. For importers of specialized machinery, custom-engineered components, or goods with proprietary specifications, identical goods in the strict GACC definition may simply not exist. In that case, GACC must proceed to method (2).

## 2. Transaction value of similar goods

Definition. The second fallback method uses the transaction value of similar goods sold for export to China at or about the same time. "Similar goods" means goods produced in the same country or region, not identical in all respects but having like characteristics and like component materials, enabling them to perform the same functions and be commercially interchangeable with the goods being valued (Article 20 of GACC Decree No. 148). The same 45-day temporal window applies, and the same preference for goods from the same manufacturer applies. If multiple transaction values are available, the lowest is used.

## 3. Deductive value (unit price method)

Methodology. The third fallback method, often called the "deductive method" or "chargeback price valuation method" in GACC terminology, determines customs value based on the resale price in China of the imported goods (or identical or similar imported goods), after deducting specified costs and expenses incurred within China (Article 22 of Decree No. 392; Article 22 of GACC Decree No. 148).

Five conditions for the sales price. Under Article 23 of GACC Decree No. 148, the domestic sales price used must satisfy all five conditions simultaneously:

1. The goods, identical goods, or similar goods are sold in China at or about the time of importation (within 45 days before or after the declaration date). If no such price is available, GACC may use a sales price within 90 days after importation, providing greater flexibility than methods (1) and (2).
2. The goods are sold in the same condition as imported (i.e., not further processed).
3. The sales occur in the first sales cycle in China (i.e., the initial resale, not downstream transactions).
4. The sales are to an unrelated buyer in China.
5. The sales price reflects the largest aggregate quantity sold—that is, GACC uses the unit price at which the greatest total volume was sold, not necessarily the highest unit price.

Mandatory deductions. Article 23 of GACC Decree No. 148 specifies three categories of deductions from the domestic sales price:

• Usual profits, general expenses (direct and indirect), and commissions usually paid in connection with first sales in China of imported goods of the same class or kind;
• Transport, associated expenses, and insurance incurred after unloading at the port of entry in China (because the customs value is CIF to the port of discharge, and post-entry costs are excluded); and
• Import duties, VAT, and other internal taxes collected by GACC or other Chinese authorities.

Further-processed goods exception. If the goods (or identical or similar goods) were not sold in China in the same condition as imported—for example, the importer further processes raw materials into finished goods before resale—Article 23 permits GACC, at the taxpayer's request, to use the sales price of the further-processed goods, provided GACC deducts the value added by processing. This value added must be calculated on the basis of objective and quantifiable data relating to processing cost, in accordance with industry-accepted criteria and methods (Article 23, final paragraph). Principles and methods applied must be consistent with generally accepted accounting principles adopted in China.

## 4. Computed value (cost build-up method)

Methodology. The fourth fallback method, the computed value method, builds the customs value from the cost of production plus profit and transport. This is the only method that requires cooperation from the foreign producer. Under Article 24 of GACC Decree No. 148, the computed value is the sum of:

1. The cost or value of raw materials, components, parts, and processing employed in producing the imported goods;
2. The usual profits and general expenses (direct and indirect) of goods of the same class or kind as the imported goods that are sold for export to China; and
3. The cost of transport, charges associated with transport, and insurance incurred prior to unloading at the port of entry in China.

Producer verification. Article 24 authorizes GACC to verify the relevant materials provided by the overseas manufacturer, but GACC must first obtain the consent of the overseas manufacturer and notify the government of the country or region in advance—a safeguard that reflects WTO Valuation Agreement Article 6 constraints. Principles and methods used to determine cost or expense must be consistent with generally accepted accounting principles in the country or region of manufacture.

Importer's right to reverse order. Because the computed-value method requires producer cooperation and may not be feasible when the foreign manufacturer declines to provide cost data, Article 21(1) of Decree No. 392 explicitly permits the importer, upon provision of relevant information, to request that GACC reverse the order of application of methods (3) and (4)—that is, to attempt computed value before deductive value.

## 5. Reasonable-means method (fallback)

Residual authority. When none of the four preceding methods can be applied, GACC must determine the customs value under the method of reasonable means (Article 25 of GACC Decree No. 148). This residual method authorizes GACC to use objective and quantifiable data consistent with the principles in Article 2 of Decree No. 148 (which mandates adherence to the WTO Valuation Agreement framework).

Six prohibited bases. Article 26 of GACC Decree No. 148 expressly prohibits GACC from using any of the following as the basis for valuation under the reasonable-means method, ensuring alignment with WTO Valuation Agreement Article 7.2:

1. The selling price in China of goods produced in China (domestic production is not a valid comparable for imports);
2. A system that provides for acceptance of the higher of two alternative values;
3. The price of goods in the domestic market of the country of exportation;
4. The price of identical or similar goods computed on values or costs other than those prescribed in Article 24 (i.e., computed value as defined above);
5. The selling price of goods for export to a third country or region other than China; or
6. Minimum customs values, or arbitrary or fictitious values.

These prohibitions prevent GACC from reverting to the pre-WTO "minimum value" or "reference price" regimes China abandoned upon accession in 2001.

Application in practice. In practice, GACC officers applying the reasonable-means method often use adjusted transaction values of broadly similar goods, deductive values with extended time windows, or weighted averages of available data, provided the data are objective, quantifiable, and documented. The method provides GACC with flexibility but within the bounds of WTO disciplines.

## Procedural safeguards: consultation and administrative review

Mandatory consultation. Article 21 of Decree No. 392 requires GACC to consult with the duty payer before applying any secondary valuation method. This consultation is the importer's opportunity to propose an alternative method, to supply data supporting transaction-value acceptance, or to request reversal of the deductive/computed order.

Administrative reconsideration and litigation. Under Article 80 of GACC Decree No. 124 (Rules on Levying of Duties), if the importer disputes GACC's valuation determination under any of the secondary methods, the importer must pay the assessed duties first, then file an administrative reconsideration request with the higher-level customs authority under the Administrative Reconsideration Law. If dissatisfied with the reconsideration decision, the importer may bring an administrative lawsuit in the People's Court. The pay-first-dispute-later rule applies uniformly across all valuation disputes.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Articles 21–22 (effective January 1, 2004) Source: GACC Decree No. 148, Rules for Determination of the Dutiable Value of Import and Export Goods, Articles 19–26 (effective May 1, 2006; superseded by GACC Decree No. 213, effective February 1, 2014) Source: GACC Decree No. 124, Rules on Levying of Duties, Article 80

The customs value (dutiable value) of imported and exported goods in China must be stated in Renminbi (RMB) for duty calculation, even when the transaction is invoiced in a foreign currency. Article 38 of the Regulations of the People's Republic of China on Import and Export Duties (State Council Decree No. 392) sets out the mandatory conversion framework and the applicable exchange rate, which directly affects the duty and import VAT liability on every import declaration.

Mandatory RMB conversion. Under Article 38(1), "where the transaction value of import or export goods and associated costs are computed in a foreign currency, such foreign currency shall be converted into RMB at the basic exchange rate published by the People's Bank of China for the calculation of customs value." The People's Bank of China (PBOC) publishes daily central parity rates (the "basic exchange rate") for major currencies against the RMB; these rates are authoritative for all customs-valuation conversions.

Fallback for currencies without a published PBOC rate. For currencies for which PBOC does not publish a basic exchange rate, Article 38(2) provides that "the customs value shall be converted into RMB in accordance with the relevant provisions of the State." The regulation does not specify the fallback mechanism in detail; in practice, importers facing this scenario should confirm the applicable conversion method with the port-level customs authority and with the State Administration of Foreign Exchange (SAFE) before declaration to avoid post-clearance adjustment.

The "date when the exchange rate applies." Article 38(3) delegates to GACC the authority to prescribe the effective date for selecting the exchange rate: "The date when the exchange rate applies shall be prescribed by the General Administration of Customs." Under the current GACC administrative practice reflected in the Single Window electronic declaration system, the exchange rate applied is the PBOC basic exchange rate effective on the date of declaration—that is, the date GACC accepts the import or export declaration—not the contract date, invoice date, or payment date. This declaration-date rule is consistent with GACC Decree No. 124 (Rules on Levying of Duties), Article 21, which provides that duties "shall be calculated and levied in terms of RMB."

Practical implication: currency risk on the importer. Because the exchange rate is fixed as of the declaration-acceptance date under current GACC practice, importers bear the currency risk for the period between contract signature (or payment) and customs declaration. For example, if an importer contracts to purchase goods for USD 100,000 when the exchange rate is 6.5 RMB/USD (RMB 650,000) but does not declare until the rate moves to 6.8 RMB/USD, the customs value will be RMB 680,000, and duty and import VAT will be calculated on the higher RMB base. Conversely, RMB appreciation benefits the importer by reducing the RMB-denominated customs value.

No revaluation for payment fluctuations. Once GACC accepts the declaration and calculates duties at the declaration-date exchange rate, subsequent currency movements—whether the importer pays the foreign seller sooner or later—do not affect the dutiable value. Article 18 of Decree No. 392 defines the transaction value as the price "actually paid or payable," which is the contractual obligation; the GACC-calculated RMB customs value is fixed at the time the Duty/Tax Payment Record is issued and is not revisited for exchange-rate changes thereafter.

Currency declaration requirements. The Standards on Completion of Customs Declaration Forms for Import/Export Goods (GACC procedural guidance, effective August 26, 2005, and updated periodically) require the importer to declare the transaction price in the original contract currency and to indicate the corresponding currency code from the GACC Currency Code List. The Standards specify that the importer must declare freight and insurance separately with the applicable currency code. GACC's Single Window system applies the PBOC basic exchange rate on the declaration-acceptance date and converts the declared foreign-currency value to RMB; the importer sees the converted RMB customs value on the electronic declaration form and on the Duty/Tax Payment Record.

Rounding and calculation precision. Under Article 21 of GACC Decree No. 124, customs duties and import taxes "shall be calculated and levied in terms of RMB and rounded off to RMB fen" (0.01 RMB). This means the final duty liability is rounded to two decimal places, the smallest unit of account in RMB. Exchange-rate conversions are applied at full precision before rounding, so rate variations can produce fractional-fen differences that are then rounded at the final duty-calculation stage.

Post-clearance audit and exchange-rate verification. During post-clearance audits conducted under the authority of GACC Decree No. 124, Article 8, GACC may verify that the importer used the correct PBOC rate on the declaration-acceptance date and that the declared currency matches the contract and payment evidence. Under Article 34 of Decree No. 392, if GACC has doubts about the declared value, it must inform the importer in writing of the grounds and require a written explanation and supporting data within a specified time limit. If the importer declared the transaction value in a currency that does not match the contract or foreign-exchange settlement certificate, GACC may challenge the declared value and require additional documentation. Misstatement of the currency is treated as a false declaration and may trigger duty recovery, interest, and administrative penalty under the Regulations on Implementing Customs Administrative Penalty (State Council Decree No. 420).

No advance-rate lock or provisional-conversion mechanism. The Regulations and GACC implementing decrees do not provide for importers to lock in an exchange rate at contract signature or to declare a provisional conversion pending final payment. The PBOC rate on the declaration-acceptance date is binding under current practice.

Coordination with State Administration of Foreign Exchange (SAFE). When the importer remits foreign currency to the overseas seller, the bank settlement must reconcile with the customs-declared foreign-currency value and the GACC-accepted declaration number, per SAFE foreign-exchange administration requirements. Discrepancies between the SAFE foreign-exchange record and the GACC declaration may trigger inquiries from both authorities, particularly in related-party transactions where the declared import price is later adjusted.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Articles 18, 34, 38 (effective January 1, 2004) Source: GACC Decree No. 124, Rules on Levying of Duties, Articles 8, 21 (effective October 25, 2014) Source: Standards on Completion of Customs Declaration Forms for Import/Export Goods (GACC procedural guidance, effective August 26, 2005)

China's General Administration of Customs (GACC) offers a formal procedure for importers and exporters to obtain a written advance valuation ruling before importation. This mechanism is grounded in Article 10 of GACC Decree No. 124 (effective March 1, 2005), which authorizes applications for prior determination of customs value, including issues like methodology, mandatory additions (assists, royalties), or acceptance of related-party transaction value. The system is further clarified—and materially revised—by later instruments: GACC Decree No. 236 (Interim Measures for Customs Advance Rulings, effective February 1, 2018) and subsequent GACC Announcements (notably Announcement No. 202 of 2022).

Statutory framework.

• Article 10 of Decree 124 permits any "duty and/or tax payer" (importer, exporter, consignee/consignor) to file an application with GACC for advance valuation, alongside requests for classification or origin determination. The decision, once issued, is binding when the goods in question are declared, provided the factual scenario matches the ruling application. Prior to 2018, no detailed regulation specified the procedure, documentation, or time limits.

Material update—Interim Measures (Decree No. 236, 2018).

• GACC Decree No. 236 introduced a formal process for advance rulings, including valuation:
• Application must be filed at least three months before import/declaration.
• GACC will accept or reject the application within 10 working days of receipt.
• Decision must issue within 60 days of acceptance (or 90 days in complex cases).
• The advance ruling is generally valid for three years from issuance, unless the facts, law, or regulations change.
• The ruling binds both Customs and the applicant for entries matching the facts presented; applicants must inform Customs of any material changes.
• There are explicit revocation grounds: if the applicant provides incomplete or erroneous information, if the facts change, or if a change in law/regulations renders the ruling obsolete.
• The system operates on a “one issue per application” basis. Applicants wishing to cover both classification and valuation must file separately.
• The Measures detail required documentation (including contracts, pricing details, HS code proposals, evidence for valuation mechanisms) and allow for supplemental document requests.
• There is an express administrative reconsideration procedure for applicants dissatisfied with the ruling.
• These measures are publicly available on GACC's portal, but only core highlights are found in the English-language summaries; practitioners should consult the original text for details or inquire through local Customs offices.

Further procedural clarifications (Announcement No. 202 of 2022).

• Announcement No. 202 confirms modern electronic application channels (GACC Single Window system), reiterates the pre-declaration timing rules, and clarifies that the written decision (advance ruling) is binding on the specified goods and applicant only, not against third parties. Rulings may not be transferred.

Application process (as currently administered—2024).

• The application should include:

1. A detailed good description, technical specification, intended use, and proposed HS/HTS code;
2. For valuation rulings: contracts, invoices, evidence of price, Incoterms, and (if relevant) documentation for related-party status, royalty/license fee structure, assists or apportioned costs.
3. Supporting legal analysis for the valuation method proposed or clarification sought (for example, arguments for transaction value acceptance in a related-party transaction, including functional analyses or competitive pricing evidence).

• A formal Application Form is required, and applicants typically must submit via the GACC Single Window or to the regional Customs office that supervises the import.

Binding effect, duration, and revocation.

• The three-year validity, revocation, and modification grounds are now clearly specified (Decree 236), addressing prior uncertainty.
• Rulings are binding if the factual and legal context has not changed and the ruling has not expired or been revoked; material change, legal revision, or error/incomplete disclosure can render a ruling null.
• Applicants must monitor for changes and may be required to cease relying on the ruling when notified by Customs.

Distinction from advance declaration.

• As before, the advance-valuation ruling mechanism is distinct from advance (pre-arrival) declaration. The former addresses how value will be determined and binds Customs to a valuation approach for covered facts; the latter addresses timing of declaration and release.

Recent clarity—what changed:

• Before GACC Decree 236 (2018), advance valuation was technically available but lacked a standardized process, timelines, or duration. The 2018 Measures introduce procedural discipline, deadlines, validity, and defined revocation. The process is further digitalized and clarified by Announcement 202 (2022).

Source: GACC Decree No. 124, Rules on Levying of Duties and Taxes, Article 10 (Mar. 1, 2005) Source: GACC Decree No. 236, Interim Measures for Customs Advance Rulings (Chinese primary) (Feb. 1, 2018) Source: Announcement No. 202 of 2022—Advance Ruling System Source: Regulations of the People’s Republic of China on Import and Export Duties, State Council Decree No. 392

Importers in China are obligated by law to maintain and, upon request, present detailed documentation supporting their declared customs value on entry. These requirements are rooted in Articles 33 of the "Regulations of the People's Republic of China on Import and Export Duties" and Articles 9, 21, and 40 of GACC Decree No. 124 (Rules on Levying of Duties).

Categories of required documents at declaration:

• Article 9 of GACC Decree No. 124 mandates that importers must provide the purchase contract, commercial invoice, transport documents (such as a bill of lading or airway bill), proof of payment, insurance documents, and, if relevant, certificates pertaining to origin, royalty agreements, or documentation on assists and related-party agreements. This reflects the minimum set of documentation GACC requires with every customs valuation declaration.

GACC’s authority and powers:

• Under Article 33 of the Regulations, GACC is empowered to call for "contracts, invoices, account books, documents concerning payment and settlement, and other relevant materials" to verify the accuracy of the customs value. If GACC suspects under-valuation or needs clarification, it may require submission of additional records it deems relevant specific to the value declared.

Duty determination and inspection:

• Article 21 of GACC Decree No. 124 stipulates that GACC will determine and collect duties based on the documents provided at the time of declaration and is authorized to inspect original records. GACC may copy or temporarily seize any document it examines to complete its verification process.

Record retention period:

• Article 40 of GACC Decree No. 124 imposes a legal requirement on importers to retain their declarations and supporting documents for three years from the date of actual import or export. This covers all documentation provided at declaration and any supporting materials that may be called for by GACC to verify dutiable value.

Consequences of non-compliance:

• If required documentation is not presented, is incomplete, or is found to be inaccurate when demanded, GACC may reject the declared value and apply secondary valuation methods that may be less favorable to the importer (per Article 33). The law also provides for administrative penalties and duty recovery in the event of misstatement or documentary non-compliance.

Note: Best practices such as maintaining additional documents (e.g., transfer pricing studies, internal analyses) and keeping electronic records accessible for audit are recommended by practitioners but are not explicitly required by the cited regulations. This section covers only statutory and regulatory mandates.

Source: Regulations of the People's Republic of China on Import and Export Duties, Article 33 Source: GACC Decree No. 124, Rules on Levying of Duties, Articles 9, 21, 40

Importers who misdeclare or understate the customs value of goods in China face significant administrative penalties, duty recovery, and the possibility of criminal prosecution. The enforcement landscape for valuation misdeclarations has changed materially following amendments in 2024 and 2025.

Administrative penalties and enhanced voluntary disclosure (2025): Under Article 15 of the “Regulations of the People's Republic of China on Implementing Customs Administrative Penalty” (State Council Decree No. 420), Customs may impose administrative penalties (including warnings, confiscation, and fines of up to RMB 500,000) where the importer fails to declare, or truthfully declare, the customs value and this results in underpayment of duties. Effective January 1, 2025, the voluntary disclosure mechanism is further clarified: disclosures made within the extended period prescribed by the General Administration of Customs (GAC) may qualify for reduced or exempted penalties, provided all duties and taxes are fully paid before the infraction is discovered by Customs. This represents a practical shift in enforcement, offering more certainty and a longer window for importers to conduct internal reviews and make corrections.

Duty, tax, and interest recovery: Customs must recover short-collected duties and taxes in all misdeclaration cases. Article 52 of GACC Decree No. 124 requires interest at a daily rate of 0.05% on the deficient amount until full payment. This regime is unchanged by the 2024–2025 amendments.

New valuation rules for suspected smuggling (Dec 2024): From December 1, 2024, GAC Announcement No. 168 establishes that for cases classified as suspected smuggling, Customs may use the domestic wholesale price (less taxes, profits, and inbound expenses) as a basis for determining dutiable value when import prices are deemed unreliable. This formalizes and publishes benchmarks previously handled under case-by-case practice.

Revised measures on the determination of taxable value (Oct 2024): GAC Order No. 273 (Measures of the Customs for Determining the Taxable Value of Imported and Exported Goods, amended October 28, 2024) clarifies procedures for valuation reviews and strengthens Customs' discretion to apply secondary methods where the declared price lacks objective basis, especially in high-risk or related-party transactions. These amendments increase the transparency of Customs' valuation adjustments and enforcement.

Referral and criminal liability: Intentional valuation misdeclarations may be referred for criminal prosecution under Article 26 of Decree No. 420. Administrative penalty rules and Decree No. 124 do not stipulate criminal thresholds or penalty amounts; referral depends on criteria in the PRC Criminal Law as determined by the Customs authority.

Procedural rights and enforcement: Article 30 of Decree No. 420 authorizes Customs to seize goods suspected of violation and secure evidence. Article 33 of the Regulations on Import and Export Duties allows Customs to examine documentation and require importer explanations. Disputes must follow the pay‑first, challenge‑later rule (GACC Decree No. 124, Art. 80).

Summary of material changes: Voluntary disclosure timelines and conditions were expanded and clarified (2025), new procedures for valuation of suspected smuggling cases were formalized (Dec 2024), and Customs' review powers enhanced for all cases under amended valuation measures (Oct 2024).

Source: Regulations of the People’s Republic of China on Implementing Customs Administrative Penalty, State Council Decree No. 420 Source: GACC Decree No. 124, Rules on Levying of Duties Source: Measures of the Customs for Determining the Taxable Value of Imported and Exported Goods (GAC Order No. 273, 2024) Source: GAC Announcement No. 168 of 2024

China's customs valuation regime applies special rules for goods imported under processing trade arrangements (加工贸易), a category that covers both “processing with supplied materials” (来料加工) and “processing with imported materials” (进料加工). These mechanisms allow enterprises to import inputs for processing or assembly in China, generally on the condition that the finished products are re-exported. This regime has particular implications for duty liability when imported materials are either not re-exported or finished goods are diverted to the domestic market.

Duty exemption and deferral. Article 20 of the Customs Law of the People's Republic of China and the Regulations on the Administration of Processing Trade Goods (State Council Decree No. 339) specify that imported raw materials, parts, or components incorporated into exported goods are eligible for duty exemption or deferral. To qualify, imports must be declared under an approved processing contract, processed in accordance with that contract, and then re-exported or otherwise dealt with in compliance with Customs’ requirements. If the goods or their processed forms are not exported as originally intended, duties and taxes become payable under normal import rules.

Retroactive assessment on domestic sale or diversion. According to Article 36 of the Regulations of the People's Republic of China on Import and Export Duties, if imported materials under processing trade are subsequently sold or transferred within China—rather than being re-exported—then the dutiable value is determined at the time and place of domestic sale or transfer. If the original transaction value remains available (e.g., on recent diversion before processing), that is used; if not, fallback methods outlined in Article 21 apply, such as deductive or computed value.

Recordkeeping and reconciliation. Enterprises engaged in processing trade must maintain clear, accurate records of quantities imported, consumed, wasted, and exported as required under the processing contract. Customs may require reconciliation between declared usage and contract terms and may impose penalties or demand retroactive duties for discrepancies or unauthorized use.

Scrap, loss, and waste. Where loss, scrap, or waste from processing trade goods is concerned, only quantities within the allowances approved by Customs through the processing trade contract or permitted by relevant regulations will benefit from duty exemption; excess amounts may be assessed for duties, but the regulations do not provide detailed valuation method in public primary sources.

Regulatory framework.

• Customs Law of the People's Republic of China, Articles 20, 31-33.
• Regulations on the Administration of Processing Trade Goods (State Council Decree No. 339).
• Regulations of the People's Republic of China on Import and Export Duties, Article 36.

Some valuation and reconciliation practices, such as exact methods for valuing diverted finished goods or scrap, are not fully specified in the available public GACC English sources and must be confirmed with the latest customs regulations or directives.

Source: Customs Law of the People’s Republic of China Source: Regulations on the Administration of Processing Trade Goods, State Council Decree No. 339 Source: Regulations of the People’s Republic of China on Import and Export Duties, Decree No. 392

China's General Administration of Customs (GACC) requires the addition of certain royalties and license fees to the customs value of imported goods in accordance with Article 19(5) of the Regulations of the People's Republic of China on Import and Export Duties (State Council Decree No. 392), mirroring the WTO Valuation Agreement Article 8. This continues to be an area of significant scrutiny in customs audits of multinational supply chains and related-party imports.

Material update—implementing rules replaced: Previously, importers and practitioners referred to Customs Decree No. 102 (2003) for the administrative test on the inclusion of royalties and license fees in dutiable value. However, GACC issued Decree No. 213 ("Measures for the Customs Determination of Import and Export Goods Pricing"), which took effect on February 1, 2014 and expressly repealed Decree No. 102. Decree No. 213 governs the implementing rules for all royalty and license fee additions, and citations should reference this current authority as of 2024. The statutory test articulated in Article 19(5) itself has not changed, but the controlling implementing rules and administrative procedures are now under Decree No. 213.

Statutory and regulatory tests—two cumulative conditions: A royalty or license fee must be added to dutiable value if and only if both statutory conditions below are satisfied:

1. The royalty or license fee is related to the imported goods (i.e., paid for the right to use intellectual property—patents, trademarks, copyrights, or know-how—embodied in, or necessary for, the goods being valued).
2. Payment is a condition of sale for the goods to be exported to China (the sale would not take place, or would not be at that price, without the royalty or license fee arrangement—regardless of whether the payment is made to the seller or a third party).

This means royalties paid to a third-party IP holder (such as a parent company or licensor) must still be considered if the sale is conditional on payment. GACC does not require the addition of all royalties—only those meeting both statutory criteria. Decree No. 213 elaborates what counts as "related to the imported goods" and how GACC determines if a payment is deemed a condition for sale or not, including whether the goods embody or bear the intellectual property, or if use of the IP is required for resale in China.

Required documentation and apportionment. Article 28 of the regulation, as implemented by Decree No. 213, requires any additions to be supported by objective and quantifiable data. If a royalty relates in part to the imported goods and in part to other goods or territories, only the portion applicable to the imported goods should be added, and the importer must provide a reasonable basis for apportionment (common bases such as value, volume, or specific allocation agreement may be accepted if objectively supported). The regulations do not prescribe a rigid formula; GACC retains discretion to require additional evidence.

Exclusions remain—what is not dutiable. Royalties or license fees paid entirely for the right to manufacture goods within China (i.e., after importation), or for rights unrelated to the imported good (for example, distribution or marketing rights where the imported product does not bear the trademark), remain outside Article 19(5) and are not added to customs value. The burden is on the importer to substantiate exclusions if challenged in a customs review.

Summary of material change: As of February 1, 2014, GACC Decree No. 213 is the controlling regulation implementing Article 19(5) for determination and documentation of royalty/license fees to be included in customs value. Decree No. 102 has been repealed. Practitioners should ensure all current references and compliance protocols are aligned with Decree No. 213.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Article 19(5), Article 28 Source: GACC Decree No. 213, Measures for the Customs Determination of Import and Export Goods Pricing (effective Feb. 1, 2014, repealing Decree No. 102, 2003)

China’s customs valuation regime requires importers to add the value of certain goods and services provided by the buyer to the seller, free of charge or at reduced cost, to the declared (invoice) price when determining dutiable value. These are called “assists,” and the statutory basis is Article 19(3) of the Regulations of the People’s Republic of China on Import and Export Duties (State Council Decree No. 392).

What qualifies as an assist? Article 19(3) specifies four categories of assists:

1. Materials, components, parts, and similar items incorporated in the imported goods.
2. Tools, dies, molds, and similar items used in producing the imported goods.
3. Materials consumed in producing the imported goods (such as lubricants, abrasives, or catalysts).
4. Engineering, development, artwork, design work, or plans/sketches carried out outside China, necessary for producing the imported goods.

Only goods/services supplied by the buyer (importer) "directly or indirectly" to the seller count if they are for use in the production and sale for export of the imported goods and if not already included in the invoice price.

Valuing and apportioning assists Article 28 requires that the value of assists must be supported by “objective and quantifiable data.” Where an assist is used in the production of multiple units, its value is apportioned across all goods produced (for example, dividing the cost of a mold over the units manufactured). The regulations do not prescribe a single apportionment method but support any approach that fairly reflects usage and is supported by available documents (such as contracts or invoices for tooling or engineering services).

If the importer cannot provide sufficient objective data, GACC may reject the transaction value and proceed to secondary valuation methods, as allowed by the regulation.

Exclusions and operational points

• Only work carried out outside China qualifies as an assist under Article 19(3)(d).
• No addition is needed if the assist’s value is already included in the purchase price of the imported goods.
• Proper documentation is critical; insufficient support may lead to value rejection as set out in the regulation.

Practical example: If a buyer provides a production mold worth RMB 400,000 to the manufacturer, used to make 40,000 goods for import into China, RMB 10 per unit must be added to the dutiable value for each imported item, unless already included in the invoice price.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Article 19(3), Article 28

China’s customs framework allows importers to declare a provisional (temporary) customs value—referred to in practice as “暂估价”—when the final transaction value or required objective data (such as invoices, royalties, assists, or freight costs) are unavailable at the time of import declaration. This option serves to keep goods moving while providing time to clarify the true dutiable value, but it comes with procedural requirements and oversight.

Legal authority and scope Article 27 of the Regulations of the People’s Republic of China on Import and Export Duties (Decree No. 392) establishes that when the customs value of imported goods cannot be determined at declaration due to unavailable objective and quantifiable data, "Customs may preliminarily determine, collect, or guarantee the duties according to the declared value or a value determined by Customs, and require the duty payer to supplement and finalize the value within a prescribed time limit.” The specific instances are not enumerated in the regulation but commonly include unfinalized prices, royalties pending negotiation, and incomplete freight or insurance charges at entry.

Application and security The regulation authorizes Customs to request a guarantee or security for the possible duty difference before allowing release of goods under provisional value. GACC Decree No. 124, Article 17 further provides that Customs may collect duties against a guarantee or postpone collection under prescribed conditions. The type or amount of guarantee is at the discretion of Customs and may include deposits or bank guarantees—as set out by local Customs offices—but the regulation itself does not stipulate any forms or thresholds.

Documentation and process The regulation requires importers to supplement the customs value "within a prescribed time limit"—the exact deadline to be set by Customs. There is no uniform statutory period (such as three months); any reference to typical timeframes reflects common administrative practice and not the regulation itself. If an importer cannot provide the finalized data within the original period, a time extension may be requested, but this is subject to Customs’ consent. If finalized value or full documentation is not provided by the set time, Customs may determine the value based on available records and may impose consequences as provided by law—though the regulation does not detail the exact enforcement mechanism or penalty process for non-supplementation at this step.

Duty adjustment and interest When the final value becomes available, the importer is responsible for submitting a supplemental declaration. Any additional duties must be paid promptly. Under Article 52 of Decree No. 124, overdue duties are subject to interest at a daily rate published by GACC (0.05% per day as of 2026, but this is subject to change by announcement). Excess duty paid may be refunded according to Article 46 of Decree No. 392.

Recordkeeping All documents related to both the provisional and supplemental declarations must be retained for three years for potential audit.

In sum, provisional customs valuation enables entry clearance when final price certainty is absent—but leaves the importer with a compliance clock and possible risk if true values or supportive documents are not timely produced. Where exact steps and forms are not defined in statute, importers should confirm with their supervising Customs office.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Article 27 Source: GACC Decree No. 124, Rules on Levying of Duties, Article 17, Article 52

The deductive value method, termed the "unit price method" in Chinese customs practice, is the third fallback approach applied by the General Administration of Customs (GACC) when transaction value and the values for identical or similar goods are unavailable. Its framework is set out in Article 22 of the Regulations of the People's Republic of China on Import and Export Duties (Decree No. 392) and detailed in Articles 22 and 23 of GACC Decree No. 148.

Definition and calculation sequence When the deductive value method is triggered (Decree No. 392, Art. 22), GACC determines customs value based on the unit price at which the imported goods (or identical/similar goods) are sold in China in the "largest aggregate quantity," in the same condition as imported, and to unrelated buyers (Decree No. 148, Art. 22). The relevant sale must occur at or about the time of importation—meaning within 45 days before or after GACC accepts the customs declaration (Decree No. 148, Art. 22). If such a sale does not exist, GACC may use a sale price within 90 days after importation (Decree No. 148, Art. 22).

Mandatory deductions From the applicable resale price, GACC deducts three categories of costs (Decree No. 148, Art. 23):

• Usual profits and general expenses incurred in connection with sales in China of imported goods of the same class or kind (Decree No. 148, Art. 23(1));
• Transportation, insurance, and handling costs incurred in China after unloading at the port of entry (Decree No. 148, Art. 23(2));
• Import duties, import VAT, and any other domestic taxes payable within China upon resale (Decree No. 148, Art. 23(3)).

Special rule for further-processed goods If the importer requests, and sales in the required timeframe/condition are unavailable, the price of goods processed after import may be used, provided GACC deducts the “value added by processing.” This deduction must be based on objective and quantifiable data, consistent with Chinese generally accepted accounting principles (Decree No. 148, Art. 23, last paragraph).

Objective data and the burden of proof All deduction claims must be substantiated by objective, quantifiable data (Decree No. 392, Art. 28), such as invoices, cost records, and internal accounts. If documentation is lacking or amounts are not provable, GACC may disallow the deductions or reject a deductive value declaration altogether. GACC is expressly empowered, under Article 33 of Decree No. 124, to examine all relevant contracts, payment records, and even bank account details (with approval) to verify the declared value and deductions.

Limitations If no valid sale in the same condition occurs, or the supporting documentation for deductions is insufficient, GACC will proceed to the computed value method. The deductive method is detailed and formulaic, but without robust records, an importer risks losing access to it.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Article 22 Source: GACC Decree No. 148, Articles 22–23 Source: GACC Decree No. 124, Article 33

The computed value method is the fourth fallback approach under China's customs valuation regime, used by the General Administration of Customs (GACC) when transaction value, identical goods value, similar goods value, and usually the deductive value, are unavailable or unsuitable. The statutory basis is Article 24 of the "Regulations of the People's Republic of China on Import and Export Duties" (State Council Decree No. 392, 2004) and further detailed in GACC Decree No. 148 (Articles 24–25).

Definition of computed value (Article 24, Decree No. 392): The computed value is defined as the sum of:

1. "The cost or value of materials, components, parts and processing employed in producing the import goods;"
2. "Usual profits and general expenses (both direct and indirect) of goods of the same class or kind as the import goods that are exported to China;"
3. "The cost of transport, charges associated with transport, and insurance incurred prior to unloading at the port of entry in China."

All amounts must be supported by objective and quantifiable data, and should be consistent with generally accepted accounting principles in the country of production (Decree 148, Art. 24). The regulation requires that profit and general expense rates should reflect those normally reflected in sales of goods of the same class or kind for export to China.

Importer’s right to request the method order (Article 21, Decree No. 392): While the law sets a strict sequence of fallback methods, "upon the application of the duty payer and provision of relevant information, Customs may reverse the order of deductive value (third method) and computed value (fourth method)." This allows an importer to request use of the computed value method before the deductive value method, provided sufficient data is available.

Procedural notes and limitations: The regulations do not prescribe a detailed process for GACC to obtain cost information from the manufacturer; instead, they require that all elements used in the computation must be objectively supported and quantifiable. In practice, importers face challenges applying this method unless the supplier is willing to fully disclose cost breakdowns and profit structures to standards acceptable under PRC law. The regulation does not specify notification or consent requirements for the producer, nor does it explicitly elaborate confidentiality obligations regarding cost information beyond the general requirement for objective data.

If relevant data is lacking, or amounts cannot be substantiated, GACC may reject a computed value declaration and apply the "reasonable means" method. Disputes about computed value determination are subject to China’s ordinary rules for administrative reconsideration and litigation after payment of duties, as with other valuation methods.

Source: Regulations of the People's Republic of China on Import and Export Duties, State Council Decree No. 392, Article 24 Source: GACC Decree No. 148, Rules for Determination of the Dutiable Value of Import and Export Goods, Article 24

China’s customs valuation regime requires that importers consider whether the value of software or digital content accompanies imported goods and must be added to the dutiable value, even if delivered separately or without an explicit charge. This question commonly arises in electronics, machinery, and automotive supply chains, where embedded software or firmware can form a critical part of the product’s overall value.

Legal basis. Article 19(3) of the Regulations of the People’s Republic of China on Import and Export Duties (State Council Decree No. 392) provides that the value of “engineering, development, artwork, design work, and plans and sketches undertaken elsewhere than in China and necessary for the production of the import goods” must be added to the transaction value if supplied free of charge or at reduced cost by the buyer. Where such digital content (including software required for the product’s functioning) is objectively quantifiable and necessary for production, it is treated as an assist and subject to mandatory addition. Article 28 requires that this addition be supported by objective and quantifiable data; if provided for multiple units, a reasonable allocation method should be used, but the regulation does not prescribe a required formula.

License fees and digital rights. Under Article 19(5), royalties and license fees ‘related to the imported goods’ and paid as a condition of sale (whether to the seller or a third party) must also be added, but only if both these statutory elements are met. If the payment relates to rights that cover the imported software and the sale would not occur, or would be at a different price, absent the license, that payment falls within the addition. However, royalties purely for rights exercised after import, or for unrelated downstream activities, are explicitly excluded by the statutory test.

Scope and exclusions. The statutory text does not draw an explicit line between off-the-shelf software (e.g., a mass-market operating system) and bespoke embedded code; however, the addition requirement only applies to software or digital content supplied in connection with the production or sale of the specific imported goods, and not already included in the invoice price. If the value of software is already included in the purchase price of the goods, no further addition is required. If software is not required for the goods’ production or use, it does not fall within the compulsory additions under Article 19(3) or (5).

Practical implications. Importers should, at entry, document the role and value of any software or digital content provided for the imported goods—matching any addition to the supporting contracts, technical documentation, and objective valuation records. Inadequate support can result in rejection of the declared value and recourse to secondary valuation methods.

Where exact valuation or software-to-goods linkage cannot be confirmed in the English-language GACC statutes or regulations, importers should seek written clarification from GACC prior to declaration, as neither Article 19 nor Article 28 furnishes practical illustrations or precise allocation mechanics.

Source: Regulations of the People’s Republic of China on Import and Export Duties, State Council Decree No. 392, Article 19(3) & (5), Article 28