Mr. T imported certain goods from a related person Mr. R of US and transaction value has been rejected. Rules 4 and 5 of the Valuation…

(a) The value of the imported goods is determined under rule 8 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter referred to as Import Valuation Rules) if the same cannot be determined under the earlier rules. However, the order of application of rules 7 and 8 can be reversed at the request of the importer and with the approval of the proper officer. Thus, request of Mr. T for determination of value under rule 8 is legally acceptable, if the same is also approved by the proper officer. Assuming that the request of Mr. T has been approved by the proper officer, the assessable value of the imported goods under rule 8 will be the sum of- (a) the cost of materials and fabrication or other processing; (b) an amount for profit and general expenses (c) the cost or value of all other expenses under rule 10(2) of the said rules. Computation of assessable value Particulars Amount ($) Cost of materials 2,000 Add: Fabrication charges 1,000 Other chargeable expenses 400 Other indirect costs 250 Cost of the goods at Mr. R's factory 3,650 Add: Net profit margin @ 20% of FOB, i.e. 25% of total cost 1,000 Total cost till US port = Cost of the goods at factory +Freight from factory to US port and loading charges at US port = $ 4,000 [$ 3,650 + $ 250 + $ 100] FOB value = Total cost till port + profit = $ 5,000 ($ 4,000 +$ 1,000) Add: Freight & loading/unloading charges 1,000 [In case of import by air, the cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation are restricted to 20% of FOB value] Insurance charges 50 Assessable value 5,700 Assessable value in Indian Rupees (Exchange rate -70 per $) 3,99,000