Second Hand Machinery Valuation by DGFT Approved Agencies
at Discharge Port Allowed
· New 2015 Guidelines Replace 2008 Circular
· Inspection Forms with Certifications for Value Additions
Introduced
[CBEC Circular No. 25
dated 15th October 2015]
Subject: Valuation of
second hand machinery.
The Board has
received representations from other Ministries, trade bodies and traders
regarding issues arising from the interpretation of Board's circular no.
4/2008-Cus dated 12th February 2008. The circular requires that field formations
rely upon a chartered engineer's inspection report while valuing imports of
second hand machinery and that inspection/appraisement reports issued at the
port of loading should be accepted. The circular also states that there is no
need to specify the agencies whose certificates alone would be accepted. It has
been ascertained from field formations that the present practice in this regard
is that if an importer produces a chartered engineer's appraisement report
issued at the load port, with the ingredients indicated in para 8 (a) of the
circular 4/2008-Cus, the same is being accepted by Custom Houses. Also,
appraisement / inspection reports prepared by pre-shipment inspection agencies
in India, which have been notified by DGFT, are also being accepted by the
Custom Houses. However, if the report produced by the importer does not contain
information mandated in the circular 4/2008-Cus dated 12th February
2008, the importer is advised to select any chartered engineer, empaneled by
the Custom House, for inspection / appraisement of the second hand machinery.
In this regard, consultations have also been held with DGFT, DIPP, Trade
Associations (Oil, FICCI, ASSOCHAM, BCHAA and others)
2. After due consideration of the suggestions
and concerns put forth the Board has decided to issue the following guidelines
for valuation of imports of second hand machinery:
3. Where used second hand machinery is sold for
export to India and the sale meets all of the requirements set out in Customs
Valuation (Determination of Value of Imported Goods) Rules 2007, the price paid
or payable for the goods is to be used as the basis for determining the
assessable value.
4. However, it is frequently the case that as
part of an arrangement, separate from the contract of sale, the second hand
machineries are reconditioned, refurbished, modernized, or otherwise improved
prior to their importation into India. In such situations, there is a change in
the condition of the goods brought about prior to their importation. Similarly,
other costs such pre-shipment inspection, dismantling and crating charges may
be incurred by the buyer after the sale of the goods. Costs of all such
elements need to be determined for the purpose of arriving at the value under
section 14 of the Customs Act. Thus, there may be instances where the
requirements of Rule 3 of the Valuation Rules are not met, in which case, the
value for imposition of duty must be determined under one of the subsequent
methods of valuation applied in sequential order.
5. In view of the nature of goods, there may be
certain difficulties in applying Rule 4 or 5 of the CVR, 2007. These
difficulties arise from the fact that the goods being valued are used second
hand machinery, and it may be difficult to find data relating to sales of such goods
to India, which could be considered identical or similar and meet all the
requirements of Rule 4 and 5 of the CVR, 2007
6. Similarly, application of Rule 7 of CVR,
2007 where under goods being appraised are valued on the basis of subsequent
sales of identical or similar goods in India, may also not be possible because
the goods being appraised are imported for use rather than for resale. The
difficulty of finding such sales of goods which could be considered identical
or similar to the goods being appraised, may preclude the application of this method.
7. Under Rule 8 of the CVR, 2007, goods are
valued using the computed value method which is based, among other things on
the cost of production of the goods being appraised plus an amount for profit
and general expenses. However, since used capital goods are not manufactured as
such, viz, as old and used machinery, it is not possible to calculate
assessable value based upon the cost of production.
8. It follows that in cases where used capital
goods cannot be appraised under Rule 3, and where there may be difficulty in
applying Rules 4 to 8 of the CVR, 2007, the proper officer may be required to
apply the residual method under Rule 9 so as to factor condition, depreciation,
refurbishment, charges of disassembly & packing and any expenses incurred
by way of pre-shipment inspection agency charges etc
9. Given the nature of challenges in computing
the value of second hand machinery under Rule 9 and the need to ensure that the
approach applied reflects commercial reality and results in a value which is
fair, and is arrived through uniform processes by all custom houses, it is felt
that it is necessary to obtain inspection / appraisement reports from qualified
neutral parties.
10. For this purpose, the Board has decided that
Inspection / Appraisement Reports issued by Chartered Engineers, or their
equivalent, based in the country of sale of the second hand machinery shall be
accepted by all Custom Houses. For the purposes of uniformity, the format in
which inspection/appraisement reports shall be prepared by the Chartered
Engineer is annexed to this circular. In the event that an importer does not
produce an inspection/appraisement report in the prescribed format from the
country of sale, he shall be free to engage the services of inspection agencies
notified as per HBoP 2015-20. In case the agencies notified in the HBoP not
being at the port of import, the importers will be free to select any Chartered
Engineer from those empaneled by the Custom House of the port of import.
11. No Custom House shall require any importer to
have an inspection / appraisement report of second hand machinery from a
particular Chartered Engineer. The importer shall be free to select any
chartered engineer, empaneled by the Custom House for the respective class of
goods, if so required.
12. To sum up, the following guidelines shall be
followed:
a). All imports of second hand machinery / used
capital goods shall be ordinarily accompanied by an inspection / appraisement
report issued by an overseas chartered engineer or equivalent, prepared upon
examination of the goods at the place of sale.
b). The report of the chartered engineer or
equivalent should be as per the Form A annexed to this circular.
c). In the event of the importer failing to procure
an overseas report of inspection / appraisement of the goods, he may have the
goods inspected by any one of the agencies in India, as are notified by the
DGFT under Appendix 2G of the HBoP 2015- 20 and Aayat Niryat Forms to FTP
2015-20, as amended from time to time (para 2.59 of Handbook of Procedures
2015-20 refers).
d). At customs stations where agencies notified by
DGFT are not present, importers may continue to avail of the services of
locally empaneled chartered engineers.
e). In cases where the report is to be prepared by
the agencies in India notified by DGFT or the chartered engineers empaneled by
Custom Houses the same shall be in the Form B annexed to this circular.
f). The value declared by the importer shall be
examined with respect to the report of the chartered engineer Similarly, the
declared value shall be examined with respect to the depreciated value of the
goods determined in terms of the circular No. 493/124/86-Cus VI dated
19/11/1987 and dated 4/1/1988. If such comparison does not create any doubt
regarding the declared value of the goods, the same may be appraised under rule
3 of the CVR, 2007. If there are significant differences arising from such
comparison, Rule 12 of the CVR, 2007 requires that the proper officer shall
seek an explanation from the importer justifying the declared value. The proper
officer may then evaluate the evidence put forth by the importer and after
giving due consideration to factors such as depreciation, refurbishment or
reconditioning (if any), and condition of the goods, determine whether the
declared transaction value conforms to Rule 3 of CVR, 2007. Otherwise, the
proper officer may proceed to determine the value of the goods, sequentially,
in terms of rule 4 to 9.
13. This circular supersedes circular 4/2008-Cus
dated 12th February 2008.
14. Any difficulty in the implementation of the
foregoing guidelines may be brought to the notice of the Board.
Form B
(Refer Pare 12(e) of
Circular No. 25/2015 dated 15th October 2015
[On the letter Head of the
Chartered Engineer/firm if inspection report is issued in India]
I, ___________ (name
of chartered engineer) hereby certify that I have carried out an inspection of
the used machinery covered under invoice no ___________ dated __________ issued
by ___________ (name of co)as per the details below:-
I/We have visually
inspected the second hand machinery/capital goods and certify the following:
(i) Place of Inspection _________
(ii) Date of Inspection _________
(iii) Duration of inspection (in hours) _________
Details of Importer:
(i) Name: _________
(ii) Address: _________
(iii) Importer Exporter Code No. _________
Details of the goods:
i. Name of Manufacturer of the machine
________ (with address/country/tel/website, if available; in case of multiple
machines or a plant, details may be provided in a separate sheet)
ii. Year of the manufacture of machinery:
iii. Serial no. / ID No. or the manufacturer's
plate affixed on the machine: __________ (please also enclose a photograph)
iv. Description of Machine
v. Whether original invoice relating to the
machine is available?
vi. If yes, value ________ currency ______ Date
of Invoice ______ (please enclose copy)
vii. If no, please estimate the original sale price
of the machinery:
viii. Present condition of machinery and expected
lifespan:
(In case the goods
being inspected are second hand spares of capital goods, it should be certified
whether "such spares have at least 80% residual life of original
spare")
Refer: Para 2.31 of
the Foreign Trade Policy 2015-20
______________________________________________________________________
______________________________________________________________________
(Please attach close
up photographs of the machinery; multiple photographs may be taken, if
necessary.)
ix. Has any reconditioning or repairs been
carried out immediately preceding this inspection: YES/No
x. If yes, have these been carried out at the
expense of the seller or by the purchaser or a third party?
xi. Are there invoices to indicate the cost
thereof: YES/NO (please enclose
relevant invoices)
xii. If No, then estimated cost thereof _______
xiii. Please briefly describe the nature of repairs
and/or refurbishment:
xiv. Were any charges incurred by the purchaser, for
dismantling, packing and transporting the machinery to the port of export? If
yes, please indicate the charges _________
xv. Any catalogues / documentation of the machine
are available? If yes, please provide the details and copies.
(e) The following means/aids/technical reference
material have been used for inspecting the goods:
(i) ________________
(ii) ________________
(iii)
________________
I/We hereby declare
that the particulars and statements made in this certificate are true and
correct.
Date ___________ Signature_____________
|
Seal of the Inspecting Agency |
Name
of the Inspecting
Person/Inspector
___________
Designation
_____________
Address
(office) __________
E
Mail Address __________
Phone
Number __________
Instructions:
1. This certificate shall be presented before Indian
Customs (by the importer of the second hand machine(s)) as a part of the import
declaration under Customs Act, 1962, which is a legal declaration
2. The Chartered Engineer must enclose a copy
of the certificate issued by the Institute of Chartered Engineers which
qualifies him to perform such appraisement/inspection
3. Please attach a copy of the relevant
notification of DGFT which notifies the firm for Pre-shipment Inspection in
India (where applicable) Or,
4. Please attach copy of Customs House letter
authorising you I your firm as an empanelled chartered engineer.
Form A
(Refer Para 12(b) of
Circular No. 25/2015 dated 15th October 2015)
[On the letter head of the
Chartered Engineer/Firm or an equivalent entity in the country of sale]
I, _________ (name of
chartered engineer) hereby certify that I have carried out an inspection of the
used machinery covered under invoice no _______ dated __________ issued by
__________ (name of company/firm) as per the details below:-
l/We have visually
inspected the second hand machinery/capital goods and certify the following:
(a) (i) Country of Inspection ___________
(ii) Place of Inspection ___________
(iii) Date of Inspection ___________
(iv) Duration of inspection (in hours) ___________
(b) Details of seller:
(i) Name: ___________
(ii) Address: ___________
(iii) Telephone No. ___________
(iv) E-mail ___________
(v) Status: Actual user or dealer
(c) Details of Importer:
(i) Name: ___________
(ii) Address: ___________
(iii) Importer Exporter Code No. ___________
(d) Details of the goods
i. Name of Manufacturer of the machine
________ (with address/country/tel/website, if available; in case of multiple
machines or a plant, details may be provided in a separate sheet)
ii. Year of the manufacture of machinery:
iii. Serial no. I ID No. or the manufacturer's
plate affixed on the machine: ___________ (please also enclose a photograph)
iv. Description of Machine
v. Whether original invoice of the machine is
available?
vi. If yes, value _________ currency _________
Date of Invoice _________ (please enclose copy)
vii. If no, please estimate the original sale price
of the machinery,:
viii. Present condition of machinery and expected
lifespan:
(In case the goods
being inspected are second hand spares of capital goods, it should be certified
whether "such spares have at least 80% residual life of original
spare")
Refer: Para 2.31 of
the Foreign Trade Policy 2015-20
______________________________________________________________________
______________________________________________________________________
(Please attach close
up photographs of the machinery; multiple photographs may be taken, if
necessary.)
ix. Has any reconditioning or repairs been
carried out immediately preceding this inspection: YES/No
x. If yes, have these been carried out at the
expense of the seller or by the purchaser or a third party?
xi. Are there invoices to indicate the cost
thereof: YES/NO (please enclose
relevant invoices)
xii. If No, then estimated cost thereof __________
xiii. Please briefly describe the nature of repairs
and/or refurbishment:
xiv. Are there any charges incurred / to be incurred
by the purchaser, for dismantling, packing and transporting the machinery to
the port of export? If yes, pi indicate the charges ___________
xv. Any catalogues I documentation of the machine
are available? If yes, please provide the details and copies.
(e) The following means/aids/technical reference
material have been used for inspecting the goods:
(i). _______________
(ii). ________________
(iii).
_______________
I/We hereby declare
that the particulars and statements made in this certificate are true and
correct.
Date ___________ Signature_____________
|
Seal of the Inspecting Agency |
Name
of the Inspecting
Person/Inspector
____________
Designation
____________
Address
(office). ____________
E
Mail Address ____________
Phone
Number____________
Instructions:
1. This certificate shall be presented before
Indian Customs (by the importer of the second hand machine(s)) as a part of the
import declaration under Customs Act, 1962, which is a legal declaration
2. The Chartered Engineer / Chartered Valuer /
Qualified Expert must enclose a copy of the certificate issued by a national
body which qualifies him to perform such appraisement/inspection
3. The photograph of the Chartered Engineer /
Chartered Valuer / Qualified Expert shall be affixed to this report