Customs Valuation in Japan – overall structure

Overview

Basically the import consumption tax and customs duties are imposed when import declaration is made, those are calculated by multiplying the import declaration price by the tariff rate. The determination of the import declaration price should be decided by the importer under him/her responsibility.

The import declaration price (customs value) is determined by the following steps.

※Please note that this article is drafted mainly aiming to make understandings as capturing big picture, therefore it does not describe details regarding Japan Customs Tariff Law.

Sale transaction exists between importer and exporter	YES →	[1] Principle determination method
NO ↓
Already imported goods which meet the identical or similar conditions of the import goods	YES →	[2] Use of the transaction value of identical or similar goods method
NO ↓
Able to identify the sales price and costs incurred in Japan	YES →	[3] Use of the domestic selling price method
NO ↓		↕ selectable [3] or [4]
Exporter is a manufacturer and able to provide production cost	YES →	[4] Use of the production cost method
NO ↓
[5] Other methods

[1] Principle determination method

In principle, if the import is made based on the import transaction※1, we can use the principle determination method.

※1：Import transaction is a transaction that a buyer in Japan makes a sale transaction with an overseas seller for shipping the goods to Japan, and the goods actually arrive in Japan.

The Customs Value is the transaction price paid by the buyer to the seller, plus the additional expenses.

Customs value ＝ Transaction price ＝ Actually paid or payable※2 ＋ Additional expenses※3

※2： The Customs value of imported goods shall be the transaction value, that is the price actually paid or payable by the buyer to or for the benefit of the seller for the imported goods relating to the import transaction.

※3：For instance, transportation fee, insurance fee, commissions.

The principle determination method cannot be used for certain import cases, for instance, if there is no sales transaction, goods are traded free of charge, etc. In these cases, the following alternative methods are applied for the determination of the Customs Value.

[2] Use of the transaction value of identical or similar goods method

(1)Overview

If you already imported identical or similar goods, the customs value can be determined by using those goods if conditions raised by the following can meet.

Conditions of being identical goods

The imported goods should have exported approximately within one month before or after the export date of the targeting import goods.
The imported goods should have produced in the same country as the targeting import goods.
The imported goods should have an identical shape, quality and value as the targeting import goods.

Conditions of being similar goods

Same requirement as previously mentioned 1.2. in identical goods.
The imported goods has similarity in terms of shape, component and functions. And it should be interchangeable with the targeting import goods.

(2)Documents need to prepare

The materials to prove the identity and similarity. e.g. specification document, photos.
The customs clearance documents related to the referenced identical / similar goods, such as invoice, import permissions.

[3] Use of the domestic selling price method

(1)Overview

In case customs value cannot be determined by the previous methods, the determination method [3] using of the domestic selling price or [4] using of the production cost can be applied. Upon request by importer, the priority of between [3] and [4] are selectable.

If we look at the [3] use of the domestic selling price method, the calculation is made by follows.

Customs value　＝　Domestic selling price※4　－　（general expenses required for the domestic sales of identical / similar goods, domestic transportation costs, and paid taxes & customs duties etc.)

(2)Documents need to prepare

The evidence to prove the domestic selling price
The materials to prove the domestic expenses (Invoice receipt from logistic companies, invoice receipt to confirm the paid taxes & customs duties)

[4] Use of the production cost method

(1)Overview

When the manufacturing cost of the imported goods can be identified, the customs value can be determined by follows.

Customs value　＝　Production cost of the import goods　＋　（general profits and expenses of export sales of identical / similar goods and the transportation costs until arrival at the port in Japan)

(2)Documents need to prepare

The evidence to prove the manufacturing cost, such as accounting ledger of the producer
The materials to prove the profit and expenses added to the production costs, such as invoices

[5] Other methods

(1)Overview

If the methods mentioned previously cannot be used, Other methods will be applied.

Practically, in many cases, we apply this other methods.

As an example, we’d like to introduce one of the other methods which is applying to Amazon FBA’s case, that overseas seller ship and import their goods to Japan.

Customs value　＝　Selling prices in average※5　－　Deductible costs (e.g. FBA fee, Referral fees)※6　

※5：Average of the selling prices is basically for the goods soled in past 30days on Amazon’s website.

※6：The deductible costs incurred after the arrival of the imported goods in Japan can be considered as deductible costs.

(2)Documents need to prepare

The materials to prove the selling prices in average, and deductible costs you use for the calculation.

Please find the explanatory materials regarding customs value for Amazon-FBA’s overseas sellers : 　Main Trade Procedures and Customs Valuation（English）

Please feel free to contact us if you would like to discuss anything regarding your customs valuation issues.

YouTube Video – Customs Valuation in Japan – How to calculate import declaration value, how much for import taxes

Our strengths

Professional of Customs and International Trade – The CEO, as a Certified Customs Specialist in Japan – Mr. Sawada has been providing consulting services in the Trade & Customs area for many years. He was in a management position at KPMG, then started with his own company – SK Advisory to continue the customs-related services to the international clients.
Fully compliance in accordance with Japanese Customs Law – Maintaining the service quality with full compliance with Japanese Customs Law. ACP Japan is capable to manage all the necessary import compliance issues, including the classification of HS code, and setting of the appropriate Customs Valuation of the import goods to Japan.
Experienced and credible partner – As ACP Japan has been providing ACP services to many clients as demand has increased, you can totally rely on us as a credible partner. We registers 40+ ACP customers every year, the customers from around the world. In this way, all customers successfully became non-resident IOR – Importer of Record in Japan. You can see a list of our customers in here “Experiences”.
Qualified ACP service provider in Amazon SPN (Service Provider Network) – ACP Japan has officially become a qualified ACP service provider in Amazon’s Service Provider Network (SPN) under the Compliance category.

Our Customers

How does the Japanese New Invoice System affect? – Advantage of using ACP –

Recently, many companies register JCT (Japanese Consumption Tax) because the new invoice system for JCT will start in October 2023. The concept of the new invoice system is very similar to the EU’s VAT invoice system.

Your Japanese customer can’t claim input tax credits unless the sellers(suppliers) issue a qualified invoice that is written a JCT number. To issue a qualified invoice, sellers(suppliers) need to be a taxable entity and get a JCT number.

Before the Invoice system is introduced (before Oct 2023):

A company that paid consideration of goods or services (=Company-B) is able to deduct Input JCT of the consideration regardless of whether the vendor (issuer of invoice, =Company-A) is a JCT-taxable or Non JCT-taxable company.
There is no way to confirm whether the vendor (=Company-A) is JCT-taxable or Non JCT-taxable company.

After the Invoice system is introduced (after Oct 2023):

A company that paid consideration of goods or services (=Company-B) is able to deduct Input JCT of the consideration only if the vendor (Company-A) has its invoice registration number.
Company-B requests Company-A to issue the qualified invoice. If Company-A cannot submit qualified invoice, Company-B will no longer want to buy from Company-A.

**If Company-A only sells to consumers (not business entities), it may not require for Company-A to issuethe qualified invoice since normally consumers would not tend to do tax return.

Once the Comapny-A (Seller/Supplier) obtains the JCT invoice registration number, which means this company becomes a taxable entity that is obligated to file JCT tax returns on a regular basis.

For the case of a non-resident entity (Company-A), when Company-A imports and sells to customers in Japan, following 3 steps are the standard procedure.

(1) Pay import JCT to a customs office, 10% of the import customs value when Company-A imports.
<PAY TO CUSTOMS OFFICE>
(2) Obtain JCT from a customer in Japan, 10% of the sales price when Company-A sells
(3) Submit JCT tax return
(3-1) If you paid (1) as IOR = Importer, which means you appoint ACP, then you’re required to pay only the difference amount (2) – (1)
(3-2) If you paid (1) but you were not IOR = Importer, then you’re required to pay all the amount of (2). You can’t deduct (1).

Please be careful that only the IMPORTER can deduct the input JCT (import consumption tax) at the time of tax filing mentioned above (3). In other words, if another IOR service provider became the IMPORTER when you import, basically it would not be possible for the non-resident entity to deduct the input JCT (import consumption tax). Therefore, you have to pay all the amount of (2) to a tax office (mentioned above (3-2).

On the other hand, if you import with ACP, means that you became an IMPORTER thus you can deduct the input JCT (import consumption tax), when you do JCT tax return mentioned above (3). Therefore, you only need to pay the difference amount (2) – (1) to a tax office (mentioned above (3-1).

This is one of the significant advantages to use ACP service, not IOR service.

For this reason, we strongly recommend using ACP so that you can become IOR.

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We’re a reliable ACP service provider for Amazon FBA’s seller

In recent, we’ve been supporting many import projects of goods related to the Amazon-FBA program. If you are looking for a reliable ACP service provider, please let us know.

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Guidance by Amazon

According to the seller central website in Amazon, there is a guidance by Amazon that non-resident entity needs to appoint an ACP or IOR. You may check on this “Non-resident requirements”. Also, you can check the document developed by Amazon “Understand ACP and IOR guidance”. —–

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[Our Service]

Our ACP Service

[Knowledge Pages]

What is ACP? – Attorney for Customs Procedures

Steps of using ACP, how foreign entity can import into Japan by ACP

What is IOR? – Importer of Record

Amazon won’t become an IOR

Customs Valuation System in Japan

Customs Valuation When You Import By ACP

Consumption Tax in Japan

IOR and ACP