China motorcycle parts customs valuation revised
SOHAIL SARFRAZ
ISLAMABAD (December 09 2008): The Directorate-General of Customs Valuation, Karachi, has issued revised customs values of motorcycle components and parts imported from China for accurate assessment of customs duty at the import stage. In this regard, the Directorate has issued a ''valuation ruling'' to the collectors of customs for implementation within the jurisdiction of their respective collectorates.
The ruling has been issued by the DV Valuation taking into account the viewpoint of local manufacturers and assemblers of Chinese motorcycles and importers of motor parts/components from China.
According to the ''valuation ruling'', the customs value of the motorcycle part/component Carburettor would be US$6.85/pc; motorcycle part/component Piston US$1.55/pc; motorcycle part/component Magneto Assy US$6.70/pc; motorcycle part/component CDI US$0.88/pc; and customs value on the import of motorcycle part/component Key Lock Set (of 5 pcs) would be US$2.86 per piece.
According to the ruling of DG Valuation, High Courts of Lahore and Sindh, had set aside DG Valuation orders regarding determination of customs value of motorcycle parts and components imported from China, decided under section 25A of the Customs Act, 1969. It was further ordered by the courts that value of the goods should be re-determined under section 25-A of the Act, within a period of two months strictly in accordance with the sequential order provided under section 25 of the Customs Act.
In compliance with the orders of High Courts, the valuation of parts/components of China origin motorcycle 70 cc was taken up in terms of section 25A of the Act and meetings were held with all stakeholders on, in sequel to the meetings earlier in the matter. The aforesaid meetings were attended by three types of stake holders, ie the importers, local assemblers and local manufacturers. During the meeting, it was decided with mutual consent of all the stake holders that, in the first instance, the valuation of the five items be taken up carburettor, piston, Magneto Assy, C.D.I. and Key Lock Set.
The three categories of stakeholders presented their detailed viewpoints on the valuation issue.
Local Manufacturers and Vendors:
The Local Manufacturers vehemently pleaded that the import values mentioned in the previous rulings may be enhanced for the following reasons. Firstly, prices of motorcycle parts depend largely on the weight thereof. Therefore, the valuation/assessment should be done on per piece and weight basis.
Secondly, the proceedings should be finalised in the light of data of past clearances instead of market enquiry: the provisions of sub-sections (5) and (6), and not sub-section (7), of the Act may be applied. Local manufacturers also handed in few sheets which, according to them, contained actual declared values of the above mentioned five items cleared from Customs House Karachi in the past.
Thirdly, the argument advanced by irrelevant persons and unregistered associations should not be entertained; only the genuine importers should be allowed to participate in the proceedings.
Fourthly, prices of motorcycle parts/components (particularly Carburettor) of China and Japan origin is the same as there is no difference in function and quality of the goods of the aforesaid two origins, though production cost of China origin goods is slightly lower. Fifthly, items like CDI unit and lock key set (of 5 pcs) are high technology items, and manufacturing cost of the same in the local vendor market was quite high. Therefore, the price of similar China origin goods has also to be quite high. They suggested import value of US$ 14.31, US$ 3.60, US$ 7.00, US$ 1.60 and US$ 4.31 for Carburettor, Piston, Magneto Assy, C.D.I. and Key Lock Set respectively.
The Assemblers of Chinese Motorcycles:
The second stakeholders in the matter were local assemblers of motorcycles of various Chinese brands. They have mainly submitted that the local manufacturers, manufacturing motorcycles under various Japanese brands under franchise arrangements have only one target and that target is to create monopoly in the market by way of driving other competitors out of the market.
In the past (ie before the assemblers of Chinese origin motorcycles had entered the market, they had literally fleeced the consumers by charging prices of their choice as there was no competition in the market. However, with the arrival of assemblers of Chinese origin motorcycles in the market the prices of even Japan origin motorcyc1e had significantly come down which meant that previously the local manufacturers were over-charging. Therefore, it was in the interest of the consumers that the assemblers of Chinese motorcycles should be allowed to survive in the market through creating a truly competitive atmosphere.
High Courts had clearly ordered that value of motorcycle parts/components be determined strictly in accordance with the provisions of section 25 of the Act and in light of the documentary evidence available on record.
The import price of Carburettor produced by Honda Japan is $11.00/pc while the price of same Carburettor produced in China is not over $4.00/pc. Therefore, the quality factor of Chinese and Japanese goods needs to be kept in consideration while determining value of Chinese origin Carburettor.
In any case, there is no justification for putting the value of US$13.00 on China origin Carburettor - whereas the same value is taken of Japan origin Carburettor which is totally unjustified: either the value of Japan origin Carburettor should by over US$24.00 or that of China origin should be US$6.00 as there was huge difference of quality and production costs in both countries besides the freight difference for Pakistani importers for importing goods from China and Japan; and they added that there could be no comparison between the cost of parts produced in China and Pakistan because raw material/scrap is imported in China from all sources of the world in greatest quantity at best prices, which results in cheaper cost of production, which is 10 percent against 90 percent in Pakistan. This is further supported with subsidies provided by the Chinese government to the tune of 38 percent.
The importers of motorcycle parts/components from China (MSPIDA):
The association stated that prices of motorcycle parts in China are factually low due to various reasons including low incidental charges/landed cost. For example, the actual market price of CDI unit, Lock Set and Carburettor in China is as low around Rs 120, 100 and 300 respectively arid the best quality Carburettor in China is available at $6.00/pc. They contended that the values previously notified by the Directorate General in the impugned orders were unjustified and contrary to the aforesaid ground reality. They emphasised that the business of the local manufacturers should not be supported by government departments at the cost of the importer and that the courts had viewed this aspect of the matter adversely, they added.
According to the DG Valuation, the local manufacturers pleaded that the values already notified may be enhanced instead of bringing down; the assemblers pleaded for downward revision of the impugned values, particularly that of carburettor which, they, should not be more than US$ 600 in any case and, the importers pleaded that import value of carburettor be determined @US$ 3.00.
The rival arguments have been duly considered in light of the orders of High Courts arid manner of valuation provided under section 25 of the Act. The transaction values declared by the importers in respect of the impugned five items have not been accepted by the clearance collectorates due to applicability of the previous valuation rulings issued by this Directorate General as well as due to incorrect declaration of particulars of the goods in the import documents.
For the same reasons, test values in terms of sub-section (5) and (6) of section 25 of the Act are not applicable in this ease. The purported evidences of past clearances provided by the representative of Atlas Honda have been examined at length. It has been found that shipments in most of those cases were made from Singapore and there is no evidence on record to the effect that the goods were of China origin. Therefore, keeping in view the aforesaid situation, the valuation method prescribed section 25 (7) of the Act has been applied in this case and findings of the market survey been relied upon.
The market survey has shown that there is a vast difference between the selling prices of China and Japan origin goods. Even the same brand goods manufactured in China are significantly low priced compared to the one produced in Japan. It has been further found that China origin parts are much inferior in quality appearance and weight compared to the Japan origin parts/components, though both perform the same function in 70 cc motorcycles, DG Valuation maintained.
For example, Japan origin Honda brand carburettor for 70 cc motorcycle is available in the local market @ Rs 1850/pc whereas China origin carburettor, supposedly performing the same function, is available at, as low a price as Rs 310/pc. Obviously, the aforesaid two items are not at par with each other in terms of qua1ity, durability appearance, guarantee etc. This is precisely the reason why value of China origin goods has been historically determined by this Directorate General in the region of 1/3rd of the Japan origin goods meant for the same function. For example, a difference of 66 percent m the valuation of automotive vehicle parts and engine bearing bushes has been maintained vide Valuation Ruling dated May 29 2008 and July 25, 2008 in China and Japan origin goods.
It is an established fact that the local manufacturers are themselves importing branded Japan origin carburettors in the range of US$ 13.00 and US$14.00 and they plead that unbranded and low quality carburettors imported by the assemblers from China should be assessed to duty/taxes at the same value. Clearly, such a plea is neither in consonance with the market realities nor the standards of valuation historically followed m this Directorate General.
Keeping in view the findings of market survey and the observations made above, the customs values of motorcycle components/parts are re-determined and revised, DG Valuation added.
