Primary determination method
First of all, “Customs Valuation” refers to the method of determining the Import Declaration Value of imported goods.
As a general rule, if the import is made based on the “Import Transaction”※1 between an overseas seller and a buyer in Japan, in many cases we can use the primary determination method.
※1：”Import transaction” is a transaction that a buyer in Japan makes a sale transaction with an overseas seller for shipping the goods to Japan, and the goods arrive in Japan.
Under the primary determination method, the Customs value of the imported goods is the transaction price paid by the buyer (CIF basis).
In many cases, what you have to pay as Customs Duty is calculated by multiplying the Customs Value (Transaction Value) by the Duty Rate. The tariff rate varies depending on the HS code of the goods.
What you have to pay as Consumption Tax is calculated by multiplying the Customs Value + Customs Duty by the Consumption Tax rate (currently 10%).
Exceptional determination method (e.g. when to use ACP)
On the other hand, if the non-resident company imports goods into Japan without having a sales transaction, you can’t use the primary method. You can’t simply use an Invoice Value.
It is required to apply the Exceptional Determination Method to calculate the Customs Value.
Regardless of whether an ACP or IOR service provider you use, if there is no buy/sell transaction, you should calculate the customs value based on the Exceptional determination method.
In the exceptional determination method, there are several methods you can consider using.
If you already imported goods that meet the identical or similar conditions of the import goods, you can use the “transaction value of identical or similar goods method”.
If you can identify the sales price and costs incurred in Japan, you can use the “domestic selling price method”.
If the exporter is a manufacturer and able to provide production costs, it may be possible to use the production cost method.
If any of the methods cannot be applied, lastly, we use “Other methods”.
In the practical scene, most of the cases we use this “Other methods” which is a determination method in a flexible way through considering the previously mentioned calculation methods.
Avoid any trouble caused by Customs Valuation issues
Recently, we observed many troubles due to the inappropriate setting of the Customs Value.
In the worst-case but often, the goods cannot pass the clearance. In the end, the consignee paid huge amounts of detention fees and finally shipped back.
We SK Advisory can help set an appropriate Customs Value. We can support having consultations with Japan Customs on behalf of clients, so as to avoid any problems occurring later on.
For Amazon’s FBA business, there is a recommended calculation formula of the declaration value. If you’d like to know about it, please feel free to contact us!
YouTube Video – Customs Valuation in Japan – How to calculate import declaration value, how much for import taxes
- Professional of Customs and International Trade – The CEO of SK Advisory, as a Certified Customs Specialist in Japan – Mr. Sawada has been providing consulting services in the Trade & Customs area for many years. He was in a management position at KPMG, then started with his own company – SK Advisory to continue the customs-related services to the international clients.
- Fully compliance in accordance with Japanese Customs Law – Maintaining the service quality with full compliance with Japanese Customs Law. SK Advisory is capable to manage all the necessary import compliance issues, including the classification of HS code, and setting of the appropriate Customs Valuation of the import goods to Japan.
- Experienced and credible partner – As SK Advisory has been providing ACP services to many clients as demand has increased, you can totally rely on us as a credible partner. SK Advisory registers 40+ ACP customers every year, the customers from around the world. In this way, all customers successfully became non-resident IOR – Importer of Record in Japan. You can see a list of our customers in here “Experiences”.
- Qualified ACP service provider in Amazon SPN (Service Provider Network) – SK Advisory has officially become a qualified ACP service provider in Amazon’s Service Provider Network (SPN) under the Compliance category.
Our ACP service
ACP is the best approach and solution for the IOR issue in Japan.
The following are our basic scope of works and diagram showing the operational structure of the ACP service. Once ACP registration is done, the non-resident entity can be IOR – Importer of Record in Japan.
Basic scope of works:
- The works of ACP registration at a Japan Customs Office.
- Facilitate consultation with Japan Customs Office to obtain the ACP approval
- Communication with stakeholders such as Logistics providers and the Customs Office on behalf of a non-resident client (IOR), to ensure the goods can be safely imported.
- Support of preparation of the documentation for the import clearance.
- Support of calculation of Customs Value (Customs Valuation Formula), in accordance with appropriate compliance under the Japan Tariff Customs Law.
- Documents keeping, required under article 95 – Japan Customs Law
How the Japanese New Invoice System affects? – Advantage of using ACP –
Recently, many companies register JCT (Japanese Consumption Tax) because the new invoice system for JCT will start in October 2023. The concept of the new invoice system is very similar to the EU’s VAT invoice system.
Your Japanese customer can’t claim input tax credits unless the sellers(suppliers) issue a qualified invoice that is written a JCT number. To issue a qualified invoice, sellers(suppliers) need to be a taxable entity and get a JCT number.
Since the seller becomes a taxable entity, the seller is obligated to file JCT tax returns on a regular basis.
For the case of a non-resident entity, when you import and sell to customers in Japan
(1) Pay import JCT to a customs office, 10% of the import customs value when you import
(2) Collect JCT from a customer in Japan, 10% of the sales price when you sell
(3) Submit JCT tax return to a tax office periodically
(3-1) If you paid (1) as IOR = Importer, which means you appoint ACP, then you’re required to pay only the difference amount (2) – (1)
(3-2) If you paid (1) but you were not IOR = Importer, then you’re required to pay all the amount of (2). You can’t deduct (1).
Please be careful that only the IMPORTER can deduct the import consumption tax at the time of tax filing. In other words, if another IOR service provider became the IMPORTER when you import, basically it would not be possible for the non-resident entity to deduct the import consumption tax. Therefore, you have to pay all the amount of (2) to a tax office.
On the other hand, if you import with ACP, means that you became an IMPORTER thus you can deduct the import consumption tax, when you do JCT tax return. Therefore, you only need to pay the difference amount (2) – (1) to a tax office.
This is one of the significant advantages to use ACP service, not IOR service.
For this reason, we strongly recommend using ACP so that you can become IOR.
Amazon, in seller central website, released the guideline of Customs Valuation.
For more basic information (Illustrated and Video)