Meaning
Financial component of a computed or deductive valuation reflects the typical markup of a seller in the country of importation for goods of the same class or kind. Including profit and general expenses ensures that the customs value accounts for the overhead costs of the business and the expected return on the transaction. This figure is compared against industry standards to verify its accuracy.
It is a necessary part of the calculation when a simple transaction price is unavailable.
Expense Allocation
Costs for marketing, administration and storage are included in the general expense portion of this figure. These are the indirect costs that are not tied to the physical production of the item but are required to bring it to market. Proper reporting of profit and general expenses requires a detailed breakdown of the importer’s operating budget.
Markup Percentage
Revenue exceeding the cost of the goods is scrutinized to ensure it aligns with the common practices of the sector. If the reported profit and general expenses are lower than the industry benchmark, the customs authority may substitute a higher figure. This adjustment increases the taxable value of the import and the resulting duty.
Comparison Data
Information from other firms in the same niche provides the basis for evaluating these figures. Companies must be prepared to defend their profit and general expenses by showing that their business model is consistent with their peers. This often involves providing audited financial statements or industry surveys.
The data helps establish a range of acceptable values that the government will accept without further question. Accurate valuation prevents the artificial lowering of import prices to avoid taxes.
