Customs, tax & compliance

Customs valuation (transaction value)

The value on which duty is calculated. Under the WTO Customs Valuation Agreement the primary basis is the price actually paid or payable (transaction value). Most countries, including the EU and Türkiye, add freight and insurance up to the point of entry (CIF basis), while some, such as the USA, use a FOB basis. Commissions, royalties and buyer-supplied assists such as moulds may also be added. If under-invoicing between related parties is found, customs applies other methods and penalties.

Related terms

Import duty (customs tariff)

A tax charged on imported goods on their customs value, according to the HS code and country of origin. It is usually a percentage of value (ad valorem), sometimes an amount per quantity (e.g. EUR per tonne). The rate can change with the general WTO rate (MFN), free trade agreements (zero or reduced rates), additional duties or anti-dumping measures. In landed-cost calculations it is computed on the CIF value including freight and insurance and is then added to the VAT base.

HS code (Harmonized System)

The World Customs Organization’s goods classification system, used in about 200 countries. The first six digits are the same everywhere (e.g. 3902.10 polypropylene); countries add their own subdivisions – 12-digit GTİP in Türkiye, 8-digit CN and 10-digit TARIC in the EU, 10-digit HTS in the USA. The correct code determines the duty rate, import licences, anti-dumping measures, preferential origin rules and trade statistics. Misclassification can lead to back duties and penalties; where unsure, a binding tariff information (BTI) ruling can be requested.

Commercial invoice

The final sales document issued by the seller after shipment, stating the description of goods, HS code, quantity, unit and total price, Incoterm, payment terms, origin and the parties’ details. It is the basis for customs valuation, duties and letter-of-credit payment; under a credit the description of goods must match the credit exactly. Unlike a proforma invoice, it records the actual sale and the amount due.

Explained in the trade handbook

Trade handbook