Indirect Tax Laws · Valuation under the Customs Act, 1962

Valuation of Imported and Export Goods: Section 14 of the Customs Act, 1962

Updated 5 October 2026 · Fact-checked

Under Section 14, the value of imported or export goods for customs duty is the transaction value: the price actually paid or payable for the goods when sold for export to India (or for export from India), where buyer and seller are not related and price is the sole consideration. If this fails, value is determined under the Valuation Rules. Add the prescribed costs to get assessable value, then apply duty.

Understand Valuation of Imported and Export Goods: Section 14

Customs duty on ad valorem goods is charged as a percentage of value. So the first job is to fix that value. Section 14 says where duty is chargeable on goods by reference to their value, the value is the transaction value. It applies to imported goods and export goods.

Transaction value means the price actually paid or payable for the goods when sold for export to India (for imports) or for export from India (for exports), for delivery at the time and place of importation or exportation. The price must be adjusted as per the Valuation Rules. The condition is that the buyer and seller are not related, and the price is the sole consideration for the sale. If they are related, the price is accepted only if the relationship has not influenced it, as the Rules provide.

The word payable matters. The value is not just what was paid on the invoice date. Amounts the buyer is obliged to pay as a condition of the sale also count. This is why the Valuation Rules add items such as commission and brokerage (other than buying commission), royalties and licence fees related to the goods, packing, and freight and insurance up to the place of importation. For goods imported by air, the freight added is the actual cost, but it is capped at 20% of FOB. For other modes, use the actual freight. Do not treat 20% as a rate that applies automatically. Insurance is taken at 1.125% of FOB when the actual amount is not ascertainable. Landing charges at 1% are added on the CIF value, which is FOB + freight + insurance.

If the declared price is not acceptable, for example the buyer and seller are related and the relationship influenced the price, or the price is doubted, the proper officer can reject it. Value is then fixed by moving down the methods in the Rules in sequence: identical goods, similar goods, deductive value, computed value, and the fallback method. On the importer's request, the order of deductive value and computed value is reversed. Section 14 also lets the Central Government fix tariff values for classes of goods by notification, where it considers this necessary. Duty is then charged on that tariff value.

For export goods the same idea applies: the transaction value is the price actually paid or payable for the goods when sold for export, at the time and place of exportation. The detailed export rules are the Customs Valuation (Determination of Value of Export Goods) Rules, 2007. Keep the import and export rules separate in your answers.

Key rules to remember

Transaction value (Section 14): Transaction value = price actually paid or payable for goods, adjusted per Valuation Rules; Applies if buyer and seller are not related (or relationship has not influenced price) and price is the sole consideration.
Assessable value (imports, simplified): Assessable value = FOB price + freight + insurance (+ other additions under Rule 10) + landing charges; Landing charges are 1% of CIF value, where CIF = FOB + freight + insurance. Royalty and other Rule 10 additions are added separately and are not part of the CIF base for the 1%. Check the question for actual figures.
Freight cap for air imports: Freight added (goods imported by air) = actual freight, subject to a maximum of 20% of FOB; The 20% of FOB is a ceiling for air freight, not a deemed rate. For other modes, use the actual freight. Do not add 20% of FOB when the question gives the actual freight.
Deemed insurance (imports): Insurance = 1.125% of FOB (if actual insurance not ascertainable); Applied on FOB value. Use actual insurance if given.
Landing charges: Landing charges = 1% of CIF value; CIF = FOB + freight + insurance only. Compute the 1% on this figure, as per Rule 10(2), then add it to get assessable value.
Tariff value: Duty on notified tariff value, if the Central Government considers it necessary and fixes it by notification; Section 14 lets the Central Government fix tariff values for any class of imported goods or export goods, where it considers this necessary. Duty on those goods is then charged on that value.
Hierarchy when transaction value is rejected: Transaction value (Rule 3) fails → Identical goods (Rule 4) → Similar goods (Rule 5) → Deductive (Rule 7) → Computed (Rule 8) → Fallback (Rule 9); Rules 4 to 9 apply in this sequence, after Rule 3 as a whole has failed. Proviso: on the importer's request, the order of deductive (Rule 7) and computed (Rule 8) value is reversed.

How to solve Valuation of Imported and Export Goods: Section 14 questions

Use this order for any Section 14 question, theory or numerical. It keeps your answer in provision-facts-conclusion form.

1Identify whether the goods are imported or exported. The valuation rules differ, so name the correct set of Rules.
2State the Section 14 rule: value is the transaction value, being the price actually paid or payable, at the time and place of importation or exportation.
3Test the conditions: are buyer and seller related, and is price the sole consideration? Note any restriction, extra payment or influence on price in the facts.
4If the conditions are met, accept the declared price and move to adjustments. If not, say the value is rejected and move to the sequential methods.
5List the additions: freight, insurance, commission and brokerage (not buying commission), royalty or licence fee, packing, assists, and landing charges. Exclude items the Rules exclude, such as post-importation charges and duties.
6Compute step by step: FOB, then CIF (FOB + freight + insurance), then 1% landing charges on that CIF, then add royalty and other Rule 10 items to get assessable value. Convert foreign currency at the rate applicable under Section 14, as the question states.
7Apply duties in order on assessable value: BCD first, then any other duties as the question requires.
8Write a one-line conclusion stating assessable value and why.

Quickest way: Assessable value in five lines

When to use it: Use for numerical questions that give an FOB price in foreign currency and ask for assessable value, when time is short.

Convert FOB to rupees at the exchange rate given.
Add actual freight and insurance. If insurance is not given, add 1.125% of FOB. For air freight, the actual freight is capped at 20% of FOB. For other modes, use the actual figure.
Add FOB + freight + insurance and label it CIF. Take 1% of this CIF as landing charges.
Add other Rule 10 items the question states: royalty, commission and brokerage (not buying commission), packing and so on. Do not include them in the CIF base for the 1%.
Write the assessable value and then compute duty only if asked.

Common mistakes in Valuation of Imported and Export Goods: Section 14

Adding landing charges at 1% on FOB instead of CIF.
Students remember '1%' and apply it to the first figure given.
Fix: Always compute CIF (FOB + freight + insurance) first, then take 1% of that CIF. Do not take it on a total that includes royalty.
Adding 20% freight when actual freight is given.
Students memorise 20% as an automatic addition.
Fix: For air imports, add the actual freight. The 20% of FOB is only the ceiling. For other modes, use the actual freight. Use 1.125% for insurance only when actual insurance is not ascertainable.
Including buying commission in the value.
All commission looks the same.
Fix: Buying commission is excluded. Commission and brokerage, other than buying commission, are added.
Accepting the invoice price when the parties are related, without any test.
Students focus on the arithmetic and skip the conditions.
Fix: State that relationship alone does not reject the price. It is accepted if the relationship has not influenced it.
Using the old Section 14 wording of 'ordinary course of trade' and 'normal price'.
Older notes and textbooks still use the earlier concept of price.
Fix: Use the current text: transaction value, price actually paid or payable, with adjustment per the Valuation Rules.
Mixing import and export valuation rules in one answer.
Both flow from Section 14, so they seem identical.
Fix: Cite the Import Valuation Rules, 2007 for imports and the Export Valuation Rules, 2007 for exports.

Worked examples

Example 1

Alpha Ltd imports machinery from an unrelated seller in Germany. The invoice FOB price is US$ 10,000. Actual freight is US$ 800 and insurance is not ascertainable. The exchange rate for customs valuation is ₹80 per US$. There is no other addition. Compute the assessable value.

Show the solution

The buyer and seller are unrelated and price is the sole consideration, so the declared FOB price is the transaction value.
FOB in rupees = 10,000 × 80 = ₹8,00,000.
Freight is actual: 800 × 80 = ₹64,000.
Insurance is not ascertainable, so use 1.125% of FOB = 1.125% × 8,00,000 = ₹9,000.
CIF value = 8,00,000 + 64,000 + 9,000 = ₹8,73,000.
Landing charges = 1% of CIF = ₹8,730.
Assessable value = 8,73,000 + 8,730 = ₹8,81,730.

Answer: Assessable value is ₹8,81,730.

Example 2

Beta Ltd imports goods from its foreign parent company. The invoice price of ₹5,00,000 is the FOB price. The proper officer finds the price is the same as that charged by the parent to unrelated buyers in India at the same time. Beta pays a royalty of ₹40,000 that relates to the imported goods and is payable as a condition of sale of those goods. Freight and insurance are ₹30,000 in total. Can the declared value be accepted, and what is the assessable value?

Show the solution

The parties are related, but the declared price equals the price to unrelated buyers. This shows the relationship has not influenced the price.
So the transaction value can be accepted under Section 14 and the Valuation Rules. The FOB price is ₹5,00,000.
CIF value = FOB 5,00,000 + freight and insurance 30,000 = ₹5,30,000.
Landing charges = 1% of CIF = 1% × 5,30,000 = ₹5,300. The royalty is not part of this base.
The royalty of ₹40,000 is added because it relates to the imported goods and is payable as a condition of their sale.
Assessable value = CIF 5,30,000 + landing charges 5,300 + royalty 40,000 = ₹5,75,300.

Answer: Yes, the declared price can be accepted. Assessable value is ₹5,75,300.

Exam tips

Case scenarios often hide a trap: related parties, royalty, or buying commission. Read the facts for these before you start calculating.
Show the CIF line separately. Marks are often awarded for correct CIF and landing charge treatment even if a later figure is wrong.
In theory answers, start with the Section 14 rule, apply it to the facts, then conclude. Do not just list the methods.
Write import and export valuation separately and name the correct Rules for each.

Practice questions from Valuation under the Customs Act, 1962

Valuation of Imported and Export Goods: Section 14 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalCustoms Valuation (Determination of Value of Imported Goods) Rules

Valuation of Imported and Export Goods: Section 14: frequently asked questions

What is transaction value in customs?

It is the price actually paid or payable for goods when sold for export to India or from India, adjusted per the Valuation Rules. It is accepted when buyer and seller are unrelated, or the relationship has not influenced price, and price is the sole consideration.

What happens if the transaction value is rejected?

The value is determined by the sequential methods in the Valuation Rules: identical goods, similar goods, deductive value, computed value, and the fallback method. You apply them in that order. The proviso is that, on the importer's request, the order of deductive value (Rule 7) and computed value (Rule 8) is reversed.

What is tariff value under Section 14?

Where the Central Government considers it necessary, it may by notification fix tariff values for any class of imported goods or export goods. Duty on those goods is then charged on that tariff value.

Is landing charge always 1%?

Under Rule 10(2), landing charges in import valuation are taken at 1% of the CIF value, where CIF is FOB + freight + insurance. Use that unless the question states otherwise. Compute it on CIF, not on a total that includes royalty or other additions.