Establishing the Customs Value

Customs and/or excise duty (with ad valorem rates) and Goods and Services Tax (GST) are levied on the customs value of imports.

However, some imports can:

Transaction Value Method

The transaction value method is first considered in establishing the customs value, which is the Cost, Insurance, and Freight (CIF) value under International Commercial Terms (incoterms).

To establish the customs value using this method, all other charges incidental to the sale and delivery of the imports must be added to the transaction value or the price paid or payable for the imports. Examples of these charges include selling commissions, assists (materials supplied by the importer), packing costs, proceeds of resale accruing to the seller, royalties and licence fees, freight and insurance charges. 

If any component of the customs value is settled in a foreign currency, that value should be converted to Singapore dollars using the prevailing Customs exchange rate at the time of import.

Example 1:

Company A bought 2 cartons of vitamins from Supplier B on Ex Works (EXW) incoterms.

Cost of vitamins S$1,000
Selling commission S$100
Cost of inland transportation to port of exportation S$150
Handling and document charges at port of exportation S$200
Cost of overseas freight S$300
Cost of insurance for shipment S$50

Therefore, the customs value should be the sum of all the costs, which is S$1,800.

Example 2:

Individual A purchased a bag listed for sale on an online website by a foreign seller. B (a local service provider) arranged for the bag to be collected from the foreign seller. The bag would then be stored in an overseas holding area, packaged and then shipped to Singapore. For the services rendered, B charged individual A a concierge/handling fee in addition to the cost of international freight. No insurance was purchased.

 Cost of bag                                 S$400 
 Handling charges S$20
 Cost of overseas freight S$30
 Cost of insurance for shipment Nil

The customs value should be the sum of all the costs, which is S$450. All costs incidental to the delivery of the bag to Singapore should be included for the purposes of GST payment.

Conditions for Transaction Value Method

Using the transaction value method by Singapore Customs is subject to these conditions:

  • There must be evidence of a sale. Such evidence may be in the form of commercial invoices, sale contracts, purchase orders, etc
  • There must not be restrictions on the use of the goods by the buyer
  • The sale or price is not subject to conditions for which a value cannot be determined with respect to the goods being valued. Examples include:
    • Seller establishes the price of the imported goods on condition that the buyer will also buy other goods in specified quantities
    • Price of semi-finished goods is established by the seller on condition that the buyer will give the seller a specified quantity of the finished goods
  • It must be shown that the transaction value has not been affected by any relationship between the importer and supplier

Other Valuation Methods

If the transaction value method cannot be used, the following alternatives will be used to determine the customs value:

  • Identical or similar goods value - the transaction value of identical or similar goods sold for export to Singapore
  • Deductive value - the sale price of the goods in Singapore, adjusted for costs incurred after shipment
  • Computed value - the value based on cost of production, general expenses and profits in the country of origin of the imported goods
  • Residual valuation - the value determined by Singapore Customs, based on flexible interpretation of all the previous methods

Definition of Cost, Insurance and Freight incoterms

The Cost, Insurance and Freight (CIF) incoterms means the seller (exporter) is responsible for delivering the goods onto the vessel of transport and clearing customs at the country of export.

The seller is also responsible for the international freight charges and purchasing insurance with the buyer (importer) named as the beneficiary.

The buyer should note that under CIF, the seller is only required to obtain insurance on minimum cover. If the buyer wishes to have more insurance protection, he may make arrangements with the seller or arrange for extra insurance coverage on his own.

The ownership and risk of loss of the goods are transferred to the buyer when the goods are on board the vessel. If the goods are damaged or stolen during international transport, the buyer owns the goods and must file a claim based on insurance purchased by the seller.

The buyer must clear customs and pay for all other costs at the country of import.

Definition of Ex Works incoterms

Under the Ex Works (EXW) incoterms, the seller (exporter) makes the goods available to the buyer (importer) at the seller’s premises or at another named place. The seller’s obligations and risks are minimal. After the seller delivers the goods, the ownership and risk of loss of the goods are transferred to the buyer.

The buyer is responsible for all transportation costs, duties and insurance of the goods to the country of import. The EXW price does not include the cost of delivering the goods to the port, loading onto the vessel and customs clearance at the country of export.