Import Customs Valuation Glossary

Terms Related to Customs Valuation

Terms related to customs valuation refer to specialized terminology used when calculating the taxable value of imported cargo.

Customs valuation is the framework used to determine how much customs duty, consumption tax, and other taxes to impose on imported goods. It involves more than just looking at the invoice price; it requires reviewing freight, insurance premiums, fees, royalties, free goods, container and packaging costs, and related-party transactions to identify amounts that should or should not be included in the taxable value.

In international logistics and customs clearance practice, misunderstanding customs valuation terminology can lead to missed additions, overstatements, requests for additional explanation by customs, amended declarations, or additional taxation.

This article serves as a glossary defining the terms necessary to understand the taxable value, highlighting points commonly confused in practice. It does not cover detailed calculation procedures, special valuation cases, or practical currency conversion methods, which should be consulted in dedicated specialist explanations.

Scope Covered in This Article

This article organizes the basic terms related to customs valuation in a way that importers, freight forwarders, and customs brokers can easily reference in actual business practice.

Item	Content Covered in This Article	Content Not Covered in This Article
Basic Terms of Customs Valuation	Clarifies the fundamental meanings of taxable value, transaction value, actual paid price, and add-on elements.	Detailed tax amount calculations for individual cases
Add-on Elements	Outlines the overview of freight, insurance charges, commission, container and packaging costs, goods provided free of charge, royalties, and others.	Detailed allocation calculations or individual judgments of each add-on element
Costs Not Added	Clarifies commonly confused costs such as domestic freight, domestic storage fees, and purchasing fees.	Detailed legal judgments regarding expense deductions
Order of Valuation Methods	Briefly defines the names and basic positioning of the first through sixth methods.	Detailed application requirements for the second method and beyond
Relationship with Incoterms	Organizes how costs included differ for FOB, CFR, CIF, FCA, CPT, CIP, etc.	Detailed practical cost allocation by each Incoterm
Relationship with Marine Cargo Insurance	Clarifies differences among insurance premium, insured amount, and taxable value.	Details of marine cargo insurance contracts, claims, and insured amount settings
Foreign Exchange Rate Published by the Director-General of Customs	Explains the meaning of the published exchange rate used to convert foreign currency prices into yen.	Weekly specific exchange rate verifications or detailed calculations involving multiple currencies; see the dedicated article on Exchange Rate Practice and Conversion Methods in Customs Declarations.
Valuation Declaration	Organizes situations where valuation declarations often become an issue.	Specific preparation methods for valuation declaration forms

Customs Valuation

Customs valuation refers to the methodology for determining the dutiable value of imported cargo.

Customs duties are generally calculated by applying the tariff rate to the dutiable value of the imported cargo. Therefore, how the dutiable value is assessed directly affects the amount of customs duties and import consumption tax payable.

In Japan, customs valuation is administered based on the Customs Tariff Law and the WTO Agreement on Customs Valuation. In practice, the principal method—the "transaction value of the imported goods"—is first examined. If this method is not applicable, alternative valuation methods are considered in sequence.

Key Terms Related to Customs Valuation

Term	Basic Meaning	Points to Confirm in Practice	Common Confusions
Taxable Value	The price used as the basis for calculating customs duties and other taxes.	Confirm whether necessary additions to the invoice price have been reflected.	It is not always the same as the invoice price.
Transaction Value	The valuation price based on the price in the import transaction of the goods.	Confirm that an import transaction exists and whether its price can be used as the valuation basis.	Different from simple sales price or reference prices.
Actual Payment Price	The price the buyer has actually paid or should pay to the seller.	Check the invoice, contracts, payment records, and separately paid costs.	Relying only on the invoice price may overlook separately paid amounts.
Addition Elements	Costs or values that should be added to the taxable value if not included in the actual payment price.	Verify freight, insurance premiums, sales commissions, royalties, free supplied goods, etc.	Do not double-count items already included in the price.
Freight	Costs related to transportation up to the import port.	Check Incoterms such as FOB, CFR, CIF, and freight details.	Distinguish from domestic freight costs after import permission.
Insurance Premium	Marine cargo insurance premiums for transportation up to the import port.	Confirm insurance policies, premium details, and applicable Incoterms.	The insurance amount itself does not automatically become part of the taxable value.
Sales Commission	Commission paid for the seller’s benefit.	Confirm who the commission is for by reviewing contracts and business details.	Often confused with purchasing commissions.
Purchasing Commission	Commission paid to purchasing agents on behalf of the buyer.	Check purchasing agency contracts, business scope, and payees.	Even if labeled as "Commission," verify the actual nature.
Royalty / License Fees	Payments related to trademarks, patents, designs, copyrights, know-how, etc.	Confirm their relevance to the imported goods and whether they are part of the import transaction conditions.	Separate payments are not always exempt from addition.
Free Supplied Goods / Services	Materials, parts, molds, designs, etc., supplied free of charge or discounted by the buyer to the seller.	Check the value of supplied goods, their relation to the imported goods, and allocation methods.	Molds or similar supplied free to overseas manufacturers are easy to overlook.
Container / Packaging Costs	Costs for containers and packaging imported together with the goods as a single unit.	Confirm costs of sales packaging, dedicated containers, and transport cases.	Distinguish from packaging for domestic delivery after import permission.
Related Parties	A situation where the seller and buyer have capital, control, parent-subsidiary, or similar relationships.	Confirm whether such relationships affect the price.	Having a related-party relationship does not automatically invalidate the use of the transaction value.
Foreign Exchange Rate Published by the Director-General of Customs	The foreign exchange rate published by customs for converting foreign currency prices to yen.	Check the declaration date, the currency involved, and the applicable period.	May differ from internal accounting or remittance exchange rates.
Valuation Declaration	The procedure of submitting necessary information to customs for calculating the taxable value.	Confirm addition elements, related parties, and valuation methods other than the transaction value.	May require valuation explanations separate from the regular import declaration.

Taxable Value

The taxable value is the base price used to calculate duties and other taxes.

In import declarations, the taxable value is not simply the overseas supplier’s invoice price. Instead, it is important to verify whether there are any costs that should be added for customs valuation purposes, or whether any costs that should not be included have been added.

Typically, issues involve freight and insurance charges to the import port, sales commissions, container and packaging costs, free goods supplied, and certain royalties or license fees. Since errors in calculating the taxable value will directly affect the tax amount, this is one of the most fundamental and critical checks in customs clearance practice.

Transaction Price and Actual Payment Amount

The transaction price refers to the price that the buyer actually paid or is obligated to pay to the seller in an import transaction of cargo.

For customs valuation, the taxable value is generally calculated based on this transaction price. However, using the transaction price requires it to be derived from the actual import transaction of the cargo, and no conditions or circumstances should affect it from a customs valuation perspective.

The actual payment amount means the total sum the buyer actually paid or should pay to the seller regarding the imported cargo. While the amount on the invoice may match the actual payment amount, there are cases where adjustments such as discounts, offsets, separate payments, payments to third parties, or payments related to sales terms mean the invoice price alone cannot determine the actual payment amount.

Additional Cost Elements

Additional cost elements refer to expenses or values that should be added to the customs valuation when they are not included in the actual amount paid.

Common additional cost elements include freight charges to the importing port, insurance premiums, sales commissions, container and packaging costs, materials, parts, molds, or designs supplied free of charge or at a discount by the buyer, as well as certain royalties and license fees.

It is not necessary to add additional cost elements that are already included in the actual amount paid to avoid double counting. However, if any additional cost elements are not included, omitting them could result in an undervalued customs price and may lead to subsequent additional assessments.

Costs Commonly Added and Costs That Should Not Be Added

In customs valuation, it is important not only to identify costs that should be added but also to distinguish costs that should not be added. Both omission and excessive addition of costs can cause errors in tax calculation.

Category	Typical Examples	Customs Valuation Considerations	Practical Points for Confirmation
Costs commonly subject to addition	Freight to the import port	If not included in the invoice price, adding to the dutiable value becomes an issue.	Check Incoterms, freight details, and payee.
Costs commonly subject to addition	Insurance premium to the import port	If insurance is separately invoiced, confirm addition to the dutiable value.	Review the insurance policy, premium breakdown, and coverage terms.
Costs commonly subject to addition	Sales commission	Commissions paid for the seller’s benefit are subject to addition.	Verify agency contracts, invoices, and scope of services.
Costs commonly subject to addition	Royalties and license fees	If related to the imported goods and are conditions of the import transaction, addition should be considered.	Check licensing agreements, sales contracts, and payment terms.
Costs commonly subject to addition	Free supplied goods or services	Items such as molds, materials, or designs provided free by the buyer to the seller may require addition.	Confirm the value of supplied items, allocation methods, and relationship to the imported goods.
Costs generally excluded from addition	Domestic freight after import permission	Considered separately from freight charges to the import port.	Check invoicing scope and transportation segments.
Costs generally excluded from addition	Domestic storage fees and domestic sales expenses	Costs related to domestic activities after import are considered separately.	Confirm timing, contract details, and billing descriptions.
Costs generally excluded from addition	Purchasing commission	Commissions paid to agents on behalf of the buyer are distinguished from sales commissions.	Confirm the party represented and agency contracts.

Freight Charges

Freight charges are an important component for customs valuation. In Japan’s import practice, as a general rule, the freight cost up to the port of import is included in the customs value.

For example, when importing under FOB terms, the invoice price usually does not include ocean freight, so freight charges up to the import port must be added. Under CFR or CIF terms, freight charges are often included in the contract price, so the relationship between the invoice price and the freight details should be confirmed.

On the other hand, domestic freight charges or inland delivery costs incurred after obtaining import permission are generally treated separately from the freight to the import port.

Insurance Premiums

Insurance premiums are also an important add-on factor for customs valuation. The cost of marine cargo insurance for transporting goods to the import port is an expense that should be included in the customs value.

Under CIF terms, the sales price generally includes the insurance premium. Under FOB or CFR terms, the buyer may arrange separate cargo insurance, and it should be confirmed whether that insurance premium needs to be added to the customs value.

In practice, the insured amount of cargo insurance and the declared customs value may differ due to their differing purposes. For example, even if the insured amount is set by adding a certain percentage to the Invoice Value, the full insured amount does not necessarily become the customs value.

Sales Commission and Purchasing Commission

Commissions are terms that are often misunderstood in customs valuation.

Sales commission refers to commissions paid on behalf of the seller. Payments to sales agents may raise issues. On the other hand, purchasing commission refers to commissions paid by the buyer to purchasing agents appointed for the buyer’s benefit.

Even if the term used is "Commission," the treatment depends on whose benefit the payment is effectively made for. In customs clearance practice, it is necessary to review contracts, invoices, agency agreements, and service details to determine whether the commission is a sales commission or a purchasing commission.

Royalty and License Fees

Royalty and license fees are terms that require particular attention in customs valuation.

If such payments are related to imported cargo and are a condition of the import transaction, their inclusion in the customs value may become an issue. For example, payments related to trademarks, patents, designs, copyrights, manufacturing know-how, or sales rights connected to the sale or use of the imported goods could be relevant.

On the other hand, payments that are not directly related to the imported goods or are not conditions of the import transaction may not be added to the valuation. Since royalty treatment depends heavily on contract details, it is necessary to review the license agreements, sales contracts, payees, and payment terms.

Goods and Services Provided Free of Charge

When the buyer provides the seller with materials, parts, molds, tools, designs, drawings, technical documents, or the like free of charge or at a discount, the value of those items may affect the customs valuation.

For example, if a Japanese buyer supplies molds free of charge to an overseas manufacturer who then produces imported goods using those molds, and the value of the molds is not included in the invoice price of the imported goods, that value should be reflected as an adjustment added to the customs value.

In actual logistics practice, it is necessary to clarify the value of the freely provided items, the method of allocation, and their relationship to the imported goods in question.

Container and Packaging Costs

Costs related to containers and packaging for imported cargo may also be relevant for customs valuation.

If the containers or packaging imported together with the cargo are not included in the actual purchase price, their costs may need to be added to the assessable value for customs duty. This can occur, for example, when special transport cases, retail packaging, or dedicated containers are part of the transaction terms for the imported goods.

On the other hand, materials for domestic sales promotion or additional packaging for inland delivery after import should be considered separately from the customs value at the time of import.

Related Parties

Related parties refer to situations where there is a capital relationship, control relationship, parent-subsidiary relationship, or officer relationship between the seller and buyer that could potentially affect the price.

The mere existence of a related party relationship does not automatically invalidate the use of the transaction price. What matters is whether the related party relationship actually influences the price of the imported goods.

Transactions between parent and subsidiary companies, group companies, or purchases from affiliated overseas companies may require customs to request an explanation of the price’s validity. Therefore, it is important to organize supporting documents such as pricing data, transfer pricing documentation, third-party transaction prices, and contracts.

Foreign Exchange Rate Published by the Director-General of Customs

Invoice prices, freight charges, and insurance fees stated in foreign currencies must be converted into Japanese yen for import declaration purposes. The foreign exchange rate published by the Director-General of Customs is used for this conversion.

For detailed practical currency conversion methods, refer to the dedicated article on Exchange Rate Practice and Conversion Methods in Customs Declarations.

In practice, the invoice currency, declaration date, and the applicable published exchange rate are confirmed to calculate the taxable value in yen. The exchange rate used for customs declaration may differ from the internal accounting rate or the bank transfer rate.

As a result, the purchase amount recorded for accounting purposes may not match the declared taxable value at customs. Terms such as “Foreign Exchange Rate Published by the Director-General of Customs,” “customs published exchange rate,” or “foreign exchange rate for customs declaration” may be used, but it is important to verify the published period and applicable currency for customs declarations.

Hierarchy of Valuation Methods

In customs valuation, the transaction value of the imported goods is generally used as the primary method. If this method cannot be applied, alternative valuation methods are considered in sequence.

Since this article serves as a glossary, only the names and basic positions of each method are summarized here. Specific application conditions and calculation details should be confirmed based on individual valuation cases.

Valuation Method	Name	Basic Meaning	Notes on Terminology
Method 1	Transaction Value of Imported Goods	Calculate the customs value by adding necessary components to the actual price paid in the import transaction.	This method should be checked first in normal sales transactions.
Method 2	Transaction Value of Identical Goods	Use the transaction value of imported goods of the same kind as a reference.	Considered when the transaction value of the imported goods themselves cannot be used.
Method 3	Transaction Value of Similar Goods	Use the transaction value of imported goods of a similar kind as a reference.	Note that "identical goods" and "similar goods" do not have the same meaning.
Method 4	Based on Domestic Sale Price	Calculate by subtracting certain costs from the domestic selling price after import.	The domestic sale price is not directly used as the customs value.
Method 5	Based on Cost of Production	Calculate by summing manufacturing costs, profit, and expenses up to the import port.	Requires documents from the manufacturer, making practical preparations heavier.
Method 6	Other Methods	Applied when the above methods cannot determine the customs value, using reasonable calculations.	This method does not allow arbitrary price setting.

Valuation Declaration

Value declaration is the procedure of submitting necessary information to customs at the time of import declaration regarding the calculation of the dutiable value.

For example, issues may arise when the invoice price differs from the actual payment price, when there are additional cost elements, when related party transactions could have influenced the price, or when valuation is based on methods other than transaction value.

Whether a value declaration is required depends on the transaction details, additional cost elements, related party relationships, and pricing method. Customs brokers and importers should prepare value declaration forms and supporting documents as needed.

Relationship with Incoterms

For customs valuation, Incoterms conditions are critical. The costs included in the sales price vary depending on terms such as FOB, CFR, CIF, FCA, CPT, and CIP.

Term	Points to Confirm for Customs Valuation	Practical Considerations	Reference Documents
FOB	Freight and insurance charges up to the import port are often not included in the invoice price.	Watch for omission of separately invoiced freight and insurance charges.	Freight details, insurance details, B/L
CFR	Freight is often included, but insurance charges require separate confirmation.	If the buyer arranges insurance, verify how the insurance charges are handled.	Invoice, insurance policy, insurance details
CIF	Freight and insurance charges are typically included in the sales price.	If the breakdown is unclear, be cautious to avoid double counting.	Invoice, contract, insurance policy
FCA	Check transportation and insurance costs beyond the delivery point.	Clarify the scope of costs through to the import port.	Transport contract, freight details, Incoterms condition
CPT・CIP	Confirm up to which point freight and insurance charges are included.	For multimodal transport, separate out costs up to the import port.	Contract, freight details, insurance details

Relationship with Marine Cargo Insurance

Marine cargo insurance is closely related to customs valuation. For customs valuation, insurance premiums up to the import port may affect the taxable value.

On the other hand, the insured amount for marine cargo insurance is often set at a percentage above the Invoice Value and may not match the taxable value used for customs valuation.

For example, even if the insured amount is set at 110% of the CIF price, the entire amount is not necessarily included in the customs taxable value. In customs clearance practice, the actual insurance premium paid, insurance policy, insurance premium details, and Incoterms are reviewed to determine the insurance premium amount that should be added to the taxable value.

Common Issues in Customs Valuation

Case	Potential Issues	Documents to Verify	Practical Measures
Forgot to add freight and insurance in FOB imports	Declaring only the invoice price may omit costs up to the import port.	Freight details, insurance details, B/L, Incoterms	Confirm freight and insurance costs up to the import port.
Double counting freight and insurance in CIF imports	Adding costs already included in the price leads to over-declaration.	Invoice, contract, insurance policy	Check breakdown of costs included in the invoice price.
Confused selling commission with purchasing commission	The treatment varies depending on who the commission is paid to, despite both being “commission.”	Agency contracts, invoices, scope of work explanations	Clarify whether the commission is for the seller (selling commission) or buyer (purchasing commission).
Paid royalties separately	If related to imported goods and part of import transaction terms, including royalties could be an issue.	License agreements, sales contracts, payment terms	Check the relevance to imported goods and whether royalties are part of the import transaction terms.
Provided molds free of charge to an overseas manufacturer	If mold cost is not included in the import price, it may be added to the customs value.	Mold purchase documents, provision records, manufacturing contracts, allocation documents	Organize the mold cost and the allocation method to the related imported goods.
Asked to explain pricing in intercompany transactions	Whether special relationships affect pricing is a key concern.	Pricing documentation, transfer pricing records, contracts, third-party transaction data	Prepare to explain any special relationships and their influence on pricing.
Converted using internal exchange rates	Differences from the foreign exchange rate published by the Director-General of Customs may cause issues in declarations.	Foreign exchange rates published by the Director-General of Customs, declaration date, internal conversion documents	Confirm the applicable published exchange rate corresponding to the declaration date and period.
Included inland delivery costs in dutiable value	Mixing costs up to the import port with domestic expenses after import permission.	Delivery invoices, consignee details, cost breakdowns	Check timing and transportation segments where costs occurred.

Scope of Involvement for Freight Forwarders and Customs Brokers

Freight forwarders and customs brokers do not independently determine customs valuation. However, they play a crucial role in supporting the collection of documents required for import customs clearance, verifying freight and insurance charges, confirming Incoterms, and organizing any applicable additional cost elements.

Category	Support Areas	What Should Not Be Determined Definitively	Practical Handling
Incoterms Confirmation	Clarifying how freight and insurance are included based on the sales terms	Determining the taxable value without reviewing the contract details	Check invoices, contracts, and freight charge details.
Freight Verification	Obtaining and verifying freight details up to the port of import	Deciding whether to include inland delivery charges without supporting documents	Separate costs by transportation segment.
Insurance Premium Verification	Checking cargo insurance premiums, insurance policies, and coverage terms	Equating the full insured amount to the taxable value	Differentiating between the actual premiums paid and the insured amount.
Commission Verification	Confirming the payee, contract, and scope of work for commissions	Judging the necessity of adding costs based solely on the term "Commission"	Distinguish whether it is a sales commission or a purchasing commission.
Royalty Verification	Confirming with the importer the presence of license agreements or payment terms	Assuming no additional costs without reviewing contract terms	Verify relevance to imported goods and conditions of the import transaction.
Related-Party Confirmation	Checking whether the buyer and seller are related parties or part of a group transaction	Assuming related parties always invalidate the transaction price	Organize documentation to confirm whether there is an impact on pricing.
Valuation Declaration	Supporting the collection of necessary documents and preparation for declaration	Making immediate judgments on the necessity of valuation declaration without documentation	Coordinate with customs brokers, importers, and customs authorities as needed.

Checklist for Freight Forwarder Decisions

Check Point	Contact Party	Items to Confirm	Action if Issues Arise
At Quotation and Customs Clearance Request	Importer, Sales Representative	Incoterms, Invoice Price, Transaction Terms	If the cost inclusions are unclear, verify the contract and quotation documents.
Before Import Declaration	Customs Broker, Freight Forwarder	Freight, Insurance Premium, B/L, Insurance Policy, Insurance Premium Details	If separate charges apply, confirm their reflection in the customs value.
If Handling Fees Apply	Importer, Agent, Customs Broker	Whether Sales Commission or Procurement Fee	Review contracts, nature of services, and payee details.
If License Fees Apply	Importer, Legal Department, Customs Broker	Royalty Payment Terms and Relationship to Imported Goods	Check license agreements and sales contracts.
If Free Supplied Items Are Involved	Importer, Purchasing Department, Manufacturing Department	Provision of Molds, Materials, Designs, Technical Documents	Organize valuation data and allocation methods.
For Related-Party Transactions	Importer, Accounting/Tax Department, Customs Broker	Existence of Special Relations and Impact on Price	Prepare pricing documentation and comparisons with third-party transactions.
If Priced in Foreign Currency	Customs Broker, Importer	Foreign Exchange Rate Published by the Director-General of Customs, Declaration Date, Relevant Currency	Confirm not to use internal or remittance rates as-is.
When Receiving Inquiries from Customs	Importer, Customs Broker, Relevant Departments	Supporting Documents for Customs Value, Additional Elements, Need for Valuation Declaration	Organize contracts, remittance records, details, and explanatory materials.

Common Misunderstandings

Misunderstanding	Correct Perspective	Practical Notes
The invoice price is the taxable value as is	If there are additional elements not included in the invoice price, the taxable value will change.	Check freight charges, insurance premiums, fees, and royalties.
No need to check anything if it’s CIF	Even with CIF, you need to verify the breakdown, separate payments, additional costs, and treatment of insurance premiums.	Review contracts, insurance policies, and invoice breakdowns.
All commissions are treated the same	Sales commissions and purchasing commissions are handled differently.	Confirm who the commission is paid to.
If royalties are paid separately, no addition is required	If related to imported goods under the terms of the import transaction, adding is an issue.	Check license agreements and sales contracts.
If a special relationship exists, transaction price cannot be used	The issue is whether the special relationship affects the price.	Confirm pricing documentation and third-party comparisons.
It is acceptable to convert currency using internal rates	For customs declaration, the foreign exchange rates published by the Director-General of Customs should be used.	Check the declaration date and applicable period.
The insured amount is the taxable value	The insured amount and taxable value serve different purposes and may not match.	Distinguish actual insurance premiums from insured amounts.
Only watch out for missing additions	Including costs that should not be added results in over-declaration.	Check for both missing additions and excessive additions.

Example 1: Case Where Freight and Insurance Charges Were Omitted in FOB Import

When an importer purchases goods under FOB terms, the invoice price typically does not include ocean freight or cargo insurance charges.

If only the invoice price is declared as the customs value in this situation, there is a risk of failing to include freight and insurance costs up to the port of import.

In such cases, the importer or customs broker should review the freight and insurance detail statements from the carrier or freight forwarder and properly account for these costs in the customs value.

Specific Example 2: Case of Confusing Sales Commission with Purchasing Commission

When an importer pays a commission to an overseas agent, it is necessary to confirm whether that commission is a purchasing commission on behalf of the buyer or a sales commission for the seller.

Even if the fee is labeled as "Commission," its treatment for customs valuation may differ depending on the actual circumstances. It is important to verify for whom the agent is acting and how they are involved in the formation of the sales contract.

In this case, reviewing the agency agreement and the scope of work is necessary to clarify whether the fee is a sales commission or a purchasing commission.

Example 3: Case of Separate Royalty Payments

In some cases, imported cargo is subject to trademarks or technical licenses, and the importer makes separate royalty payments.

If these payments are related to the imported cargo and constitute terms of the import transaction, their inclusion in the customs valuation price becomes an issue. Conversely, payments not directly related to the imported goods or not part of the import transaction terms may be treated differently.

In this situation, it is necessary to review the sales contract and the license agreement to clarify the royalty payment conditions and their relationship to the imported cargo.

Example 4: Case of Price Validation in Transactions between Parent and Subsidiary Companies

When importing goods from an overseas subsidiary to the Japanese headquarters, there may be a special relationship between the seller and the buyer.

The existence of a special relationship does not automatically result in rejection of the transaction price, but it becomes important to determine whether that relationship has affected the pricing.

In this case, it is necessary to organize documentation such as price-setting materials, comparisons with third-party transactions, transfer pricing documents, and contracts, to be prepared for inquiries from customs.

Example 5: Confusing the Foreign Exchange Rate Published by the Director-General of Customs with Internal Company Rate

Sometimes, invoices denominated in foreign currency are converted to yen using the company’s internal accounting rate and then directly used as the basis for the declared customs value.

However, for customs declaration, it is necessary to check the foreign exchange rate published by the Director-General of Customs corresponding to the declaration date and applicable period. This rate may differ from the company’s accounting rate or the exchange rate used for bank remittances.

In such cases, the relevant currency, import declaration date, and the applicable period for the foreign exchange rate published by the Director-General of Customs should be confirmed. It is essential to distinguish and organize the accounting conversion amount separately from the customs valuation amount for tax purposes.

Documents to Verify

Document	Items to Check	Related Terms	Practical Notes
Sales Contract	Price terms, payment terms, Incoterms, separately paid costs	Transaction price, actual payment price, additional elements	Check conditions not shown on the invoice.
Commercial Invoice	Product name, price, currency, terms, quantity	Customs value, actual payment price	Confirm what the price includes.
Packing List	Quantity, weight, packaging, cargo details	Container/packaging costs, quantity verification	Verify consistency with pricing documents.
B/L or Air Waybill	Transport route, carrier, loading port, destination	Freight charges, costs up to import port	Match freight details with transport route.
Freight Statement	Ocean freight, air freight, surcharges, domestic section costs	Freight, additional elements	Distinguish costs up to import port from domestic costs.
Insurance Policy / Premium Details	Insured amount, premium, insured sections, insurance terms	Insurance premium, cargo insurance	Differ between insured amount and actual premium.
Proof of Payment	Actual payment amount, payee, presence of separate payments	Actual payment price	Confirm payments outside the invoice.
Commission Agreement / Agency Agreement	Agent’s role, payee, scope of work	Sales commission, purchasing commission	Clarify which party the commission is for.
Royalty Agreement / License Agreement	Payment terms, applicable rights, connection to imported goods	Royalty, license fee	Confirm if it relates to the import transaction.
Documents on Free Supplied Goods	Mold, materials, design, value of technical information and supplied items	Free supplied goods and services	Organize valuation and allocation method.
Price Determination Documents / Related Party Documents	Pricing policy, related-party transactions, third-party comparisons	Related parties, transaction price	Be prepared to explain price influences.
Valuation Declaration / Inquiry Response Records	Basis of customs value, explanations to customs	Valuation declaration, additional elements	Keep for future reference.

Practical Points to Note

• In customs valuation, relying solely on the invoice price to determine the taxable value may lead to errors.
• If freight and insurance charges are invoiced separately, there is a higher risk of omission in adding these costs.
• Sales commissions and purchasing commissions should be assessed based on their actual substance, not just their stated names.
• Customs may request additional explanations for royalties, license fees, free goods provided, or transactions involving special relationships.
• Including costs that should not be added to the taxable value can result in over-declaration.
• The insured amount in marine cargo insurance and the taxable value for customs purposes do not represent the same valuation objective.
• When converting foreign currency prices into yen, confirm the applicable period of the foreign exchange rate published by the Director-General of Customs.
• It is important not only to understand the terminology but also to cross-check contracts, invoices, remittance records, freight statements, and insurance documents together.

Summary

Terms related to customs valuation provide the foundation for accurately determining the dutiable value of imported cargo.

Without a clear understanding of valuation price, transaction value, actual price paid, additive elements, freight charges, insurance premiums, selling commission, purchasing commission, royalties, free goods, special relationships, and the foreign exchange rates published by the Director-General of Customs, omissions or excessive declarations of value are more likely to occur.

This article serves as an introduction to properly organizing these terms rather than a detailed step-by-step guide to customs valuation calculations. In practice, it is important to verify not only the invoice price but also contracts, freight details, insurance policies, commission agreements, license contracts, and customs valuation documentation collectively.