Distortion of international trade by restrictive customs valuation practices

In some countries, special valuation procedures exist under which value for customs purposes is determined, taking into account domestic prices prevailing in the importing country or current domestic value for the same product in the exporting countries. In particular, the system of levying customs duty on the basis of FOB value or current domestic value, whichever is higher, prevalent in some countries, makes it difficult for exporters to know in advance the amount of duty payable; resulting uncertainty has adverse effects on exports. These systems act particularly to the disadvantage of developing countries as in a large number of cases, because of structural imbalances, supply scarcities and other factors, the domestic prices in these countries are maintained at artificially high levels. In addition, in some cases, goods which are produced by specially established export-oriented industries are not sold in the domestic market, which creates special difficulties in ascertaining comparable current domestic value.