Customs Valuation: Determining the Import Declaration Value
Primary determination method
The process of determining the Import Declaration Value of imported goods is known as “Customs Valuation.” In most cases, when an import is based on an “Import Transaction”※1 between an overseas seller and a buyer in Japan, the primary determination method can be utilized.
※1：An “Import transaction” refers to a transaction where a buyer in Japan engages in a sales transaction with an overseas seller for the purpose of shipping goods to Japan, and the goods subsequently arrive in Japan.
Under the primary determination method, the Customs value of the imported goods is determined as the transaction price paid by the buyer (CIF basis).
Customs Duty is often calculated by multiplying the Customs Value (Transaction Value) by the Duty Rate, which varies depending on the HS code of the goods.
Consumption Tax, on the other hand, is calculated by multiplying the Customs Value plus Customs Duty by the Consumption Tax rate (currently 10%).
Exceptional determination method (e.g. when to use ACP)
In cases where a non-resident company imports goods into Japan without engaging in a sales transaction, the primary method cannot be utilized. Simply using an Invoice Value is not appropriate.
To calculate the Customs Value in such situations, it is necessary to apply the Exceptional Determination Method.
Within the exceptional determination method, several methods can be considered:
- Transaction Value of Identical or Similar Goods Method: If you have previously imported goods that possess identical or similar conditions to the goods in question, the transaction value of those goods can be used.
- Domestic Selling Price Method (Deductive Method): If you can identify the sales price (can be an estimated sales price), the domestic selling price method can be employed.
- Cost of Production Method (Cost plus Method): If the exporter is a manufacturer and can provide production costs, the production cost method may be applicable.
If none of the above methods are suitable, “Other methods” are utilized as a flexible determination method, taking into account the calculation methods mentioned earlier.
In the practical scene, most of the cases we use this “Other methods” which is a determination method in a flexible way through considering the previously mentioned calculation methods.
Avoiding Customs Valuation Problems
In recent times, there have been numerous instances of trouble arising from incorrect Customs Value settings.
In the worst-case scenario, goods may fail to clear customs, resulting in significant detention fees and eventual return shipment.
At SK Advisory, we specialize in establishing appropriate Customs Values. We can assist in conducting consultations with Japan Customs on behalf of our clients, effectively avoiding any potential issues down the line.
For Amazon’s FBA business, there is a recommended calculation formula for the declaration value. If you would like to learn more about it, please don’t hesitate to contact us!
YouTube Video – Customs Valuation in Japan – How to calculate import declaration value
- 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.
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.
Japan Customs – Customs Valuation System in Japan
Amazon, in seller central website released the guideline of Customs Valuation.
Main Trade Procedures and Customs Valuation (English)
Main Trade Procedures and Customs Valuation (Chinese)
Main Trade Procedures and Customs Valuation (Japanese)
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.
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”. —–
Our ACP Service (Attorney for Customs Procedures)
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
Customs Valuation System in Japan
Customs Valuation When You Import By ACP
ACP Japan Became Amazon’s SPN Provider as Qualified ACP Service Provider