Customs Valuation System in Japan

Introduction

The customs value of imported goods, which is the basis for the calculation of customs duties and import consumption taxes, is one of the most important issues that arises during import customs clearance and post-clearance audits (PSA). By properly understanding the structure of laws and regulations pertaining to the method of determining the customs valuation, it enables importers to avoid paying excessive customs duties and consumption taxes or under-declaring them. Appropriate management of customs valuation is a highly important initiative from the perspective of both import costs and compliance management.

Customs Valuation System

When Customs Duties are imposed on imported goods, it is necessary to determine the tax base for value-based duty items, which is called "Customs Valuation". The international agreement that establishes the customs valuation system is the WTO Customs Valuation Agreement (the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994). Japanese "Customs Tariff Law" is stipulated in accordance with the said agreement.

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WTO Customs Valuation Agreement

WTO Customs Valuation Agreement sets forth the following three basic factors for determining the customs value, which is also the premise of the Japanese customs valuation system.

• The value for customs purposes of imported merchandise should be based on the actual value of the imported merchandise
• The merchandise is sold or offered for sale in the ordinary course of trade under fully competitive conditions.
• When the actual value is not ascertainable, the value for customs purposes should be based on the nearest ascertainable equivalent of such value. 

A comparison of the structure of WTO Customs Valuation Agreement and Japanese Customs Tariff Law regarding the determination of customs value is as follows. While the basic structure is similar, partially, each country has its own rules and regulations.

WTO Customs Valuation Agreement	Customs Tariff Law (Japan)
Art.1　Transaction value as primary basis for customs value	Art.4　Principle for determining customs value
Art.2　Transaction value of identical goods basis	Art.4-2　Transaction value of identical or similar goods basis
Art.3　Transaction value of similar goods basis
Art.4　The right to select a method between Art.5 and 6	Art.4-3(3)　Preference for the method "cost of production" basis at the request of the importer
Art.5　Sales price of the imported goods, identical or similar imported goods basis	Art.4-3(1)　Domestic selling price basis
Art.6　Computed value basis	Art.4-3(2)　Cost of production basis
Art.7　Using reasonable means consistent with the principles and general provisions of this Agreement and of Article VII of GATT 1994	Art.4-4　Determination of customs value of special imported goods
Art.8　The items shall be added to the price actually paid or payable	Art.4(i~v)　The items shall be added to the price actually paid or payable
Art.9　Conversion of currency	Art.4-7　Foreign exchange rates used for conversion of currency
	Art.4-5　Determination of customs value of imported goods, deteriorated or damaged Art.4-6(1)　Exception for airfare Art.4-6(2)　Exception for personal goods Art.4-8　Materials to be used for calculation of customs value Art.4-9　Delegation to Cabinet Order

Ref. WTO Customs Valuation Agreement, Customs Tariff Law (Japan)

WCO Technical Committee on Customs Valuation（TCCV）

The WCO Technical Committee on Customs Valuation (TCCV) makes technical decisions and publishes them as instruments in the form of:

• Advisory Opinion
• Commentaries
• Explanatory Notes
• Case Studies
• Studies

These instruments are only referenced documents to achieve uniformity in interpretation and application of the WTO Customs Valuation Agreement and do not have legal effect in each country unless they are incorporated into the respective national laws. 

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Customs Valuation in Japan 

The basis for determining the customs value for Japanese imports is the Customs Tariff Law (in accordance with the WTO Customs Valuation Agreement).

Basically, the import consumption tax and customs duties are imposed when import declaration is made, those are calculated by multiplying the import declaration price by the tariff rate. The determination of the import declaration price should be decided by the importer under his or her responsibility.

The import declaration price (customs value) is determined by the following steps.

※Please note that this article is drafted mainly aiming to make understanding as capturing big picture, therefore it does not describe details regarding Japan Customs Tariff Law.

 

 

[1] Primary method

(1) Outline

In principle, if the import is made based on the import transaction※1, we can use the primary method.

※1：Import transaction is a transaction in that a buyer in Japan makes a sale transaction with an overseas seller for shipping the goods to Japan, and the goods actually arrive in Japan.

Please bear in mind that the Invoice Value is not always equal to the Customs Value.

This primary method is to calculate the Customs Value based on the "Value of the Import Transaction".

The definition of "Value of the Import Transaction" is that, when the import transaction of the import goods has been made, the price actually paid or payable regarding the import transaction by the buyer to or for the benefit of the seller for the import goods, and adjusted by certain additional costs such as transportation costs, to the extent that such costs have not been included in the price actually paid or payable for the imported goods.

Calculation formula

Customs value  ＝  Transaction value  ＝  Actually paid or payable※2  ＋  Additional costs※3

※2： The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods. It includes a settlement by the buyer whether in whole or in part, of a debt owed by the seller and other indirect
payment for the seller by the buyer. In principle, the price actually paid or payable shall not include the following charges or costs, provided that they are distinguished from the price actually paid or payable for the imported goods:
1) Charges for construction, erection, assembly, maintenance or technical assistance is undertaken after importation of the imported goods;
2) Transportation costs after importation;
3) Duties and taxes imposed on the imported goods in Japan.
However, if the price actually paid or payable will not be able to be grasped by the whole amount including the above costs, then it shall be the total amount including such costs.

※3：For instance, transportation fee and insurance fee (CIF basis), commissions, etc.

(2) Documents to be prepared

In the case of calculating the Customs value based on the transaction value, the calculation of the customs value should be based on invoices and other documents which are able to verify the price actually paid or payable of the imported goods and to be adjusted certain additional costs such as the transportation costs.

The principle determination method cannot be used for certain import cases, for instance, if there is no sales transaction, goods are traded free of charge, etc. In these cases, the following alternative methods are applied for the determination of the Customs Value.

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[2] Use of the transaction value of identical or similar goods method

(1) Outline

If you already imported identical or similar goods, the customs value can be determined by using those goods if the following conditions are met.

Conditions of being identical goods

1. The imported goods should have been exported approximately within one month before or after the export date of the targeting import goods.
2. The imported goods should have been produced in the same country as the target import goods.
3. The imported goods should have an identical shape, quality and value as the targeting import goods.

Conditions of being similar goods

1. Same requirement as previously mentioned 1.2. in identical goods.
2. The imported goods have similarities in terms of shape, component and functions. And it should be interchangeable with the targeting import goods.

(2) Documents to be prepared

• The materials to prove the identity and similarity. e.g. specification document, photos.
• The customs clearance documents related to the referenced identical / similar goods, such as invoice, import permissions.

[3] Use of the domestic selling price method

(1) Outline

In case of customs value cannot be determined by the previous methods, the determination method [3] using the domestic selling price or [4] using of the production cost can be applied. Upon request by importer, the priority of between [3] and [4] are selectable.

If we look at the [3] use of the domestic selling price method, the calculation is made as follows.

Customs value　＝　Domestic selling price※4　－　（general expenses required for the domestic sales of identical / similar goods, domestic transportation costs, and paid taxes & customs duties etc.)

(2) Documents to be prepared

• The evidence to prove the domestic selling price
• The materials to prove the domestic expenses (Invoice receipt from logistic companies, invoice receipt to confirm the paid taxes & customs duties)

[4] Use of the production cost method

(1) Outline

When the manufacturing cost of the imported goods can be identified, the customs value can be determined by follows.

Customs value　＝　Production cost of the import goods　＋　（general profits and expenses of export sales of identical / similar goods and the transportation costs until arrival at the port in Japan) 

(2) Documents to be prepared

• The evidence to prove the manufacturing cost, such as the accounting ledger of the producer
• The materials to prove the profit and expenses added to the production costs, such as  invoices

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[5] Other methods

(1) Outline

If the methods mentioned previously cannot be used, Other methods will be applied.

Practically, in many cases, we apply this other methods.

The Circular on the Customs Tariff Law, lists the following methods as example.

• Elastic application of the method prescribed in Article 4 of the Customs Tariff Law
• Calculating customs value by flexibly applying the method prescribed in Article 4-2 (identical/similar) of the Customs Tariff Law
• Calculating the customs value by flexibly applying the method prescribed in Article 4-3(1) (Domestic Sales Price) of the Customs Tariff Law
• Other flexible determination methods

Please feel free to contact us if you would like to discuss anything regarding your customs valuation issues.

• Japan Customs: Customs Valuation System
• Japan Customs: Details of Japan Customs Valuation System

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Why choose us?

We specialize in navigating complex issues at the intersection of customs procedures and taxation—an area where our ability to offer practical, comprehensive support from both perspectives sets us apart. Understanding the close relationship between customs duties and national taxes (especially, Japan Consumption Tax - JCT), and addressing both in an integrated manner, is crucial in the context of international trade.

• Customs and International Trade Professionals - Led by our CEO, Mr. Sawada—Certified Customs Specialist and former KPMG professional—SK Advisory provides expert-level support in Customs and international trade.
• Full Compliance with Japanese Customs Law - We ensure full adherence to Japanese Customs Law, including Importer of Record (IOR) structure, HS code classification, and customs valuation. We assist in preparing all essential shipping documents for non-resident entities.
• One-Stop Support for ACP and JCT Tax Representative Services - In collaboration with trusted partner tax accountants, we provide comprehensive support for both customs procedures through the Attorney for Customs Procedures (ACP) and Japan Consumption Tax (JCT) filings through the JCT Tax Representative.
• Multilingual Communication - Our team communicates fluently in English, Japanese, and Chinese, offering smooth coordination with global clients and authorities in Japan.
• Support for Regulated Products - Our ACP/IOR partnership system can manage regulated items, including cosmetics, PSE-products, foodstuffs, and tableware.
• Trusted by Global Clients - Serving around 100 ACP clients annually, including many Amazon sellers, we’re a certified provider on Amazon SPN (Service Provider Network) under Trade Compliance.

Track Record – Attorney for Customs Procedures (ACP) Services

We have supported import and export operations in Japan for over 200 clients across more than 40 countries.

Examples of International Logistics Partners We Have Worked With

We have a proven track record of working with a wide range of logistics providers. As the Attorney for Customs Procedures (ACP), we handle customs-related responsibilities while logistics companies manage transportation and warehousing operations.

...and many other logistics providers in Japan and around the world.

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Japanese Customs System Reform: Clarification of Importer Definitions

Starting October 1, 2023, Japanese Customs has instituted a pivotal reform aimed at addressing the issue of foreign sellers improperly designating third parties (such as forwarders or customs agents) as importers.

This revision necessitates foreign corporations to utilize an Attorney for Customs Procedures (ACP) to assume the role of Importer of Record (IOR) directly in many cases. The practice of merely nominally appointing another entity as the importer is no longer feasible.

Notably, foreign corporations that act as importers themselves, through the engagement of ACP, are eligible for Japan Consumption Tax (JCT) benefits. (link: Consumption Tax Treatment and Benefits of Using ACP).

As a dedicated ACP firm, we ensure compliance with the law to facilitate correct import procedures, allowing you to trust us with your importation requirements confidently. We are eager to engage in further discussions with you.

Revisions Effective October 1, 2023:

Definition of the Importer

• Regarding a cargo imported under import transaction, an importer is equivalent to “a person who imports a cargo” defined in Article 6-1 (1), General Notification of the Customs Act. ….. This means, the Consignee, etc., in the case of imports conducted through normal transactions between an overseas seller and a Japanese buyer
• In the cases other than above, an importer is a Person Having the Right of Disposal of the import cargo at the time of import declaration. If there is another person who acts on the purpose of the import*, that person is also included :

　In case of a cargo imported:
     - under lease contracts, a person who rents and uses the cargo.
     - for consignment sales, a person who sells the cargo in the name of himself/herself (consignee) by accepting the commission.
     - for processing or repairing, a person who processes or repairs the cargo.
     - for disposal, a person who disposes the cargo.

Importer Defined as the “Person Having the Right of Disposal”

One of the most notable aspects of the amendment is the clarification that the “person having the right of disposal” is regarded as the importer under Japan Customs law. The term “right of disposal” is similar to ownership, but not identical. Although there is no explicit definition in the customs-related legislation, according to Japan Customs, it refers to the authority to decide how the goods will be handled after being released into Japan—for example, whether to sell the goods or to enter into a sales contract.

For additional information, please refer to the following resources:

• Japan Customs: Leaflet(English)  Revision of Import Declaration Items and Attorney for Customs Procedure (ACP) System
• English: Announcement from Japan Customs | Mandatory to Use ACP in Many Cases – Attorney for Customs Procedure 

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Our ACP Service: The Best Solution for the Japan Importer of Record (IOR) and Exporter of Record (EOR)

ACP is an effective solution for addressing Importer of Record (IOR) and Exporter of Record (EOR) requirements in Japan. Through our ACP service, non-resident entities located outside Japan are able to import and export goods as Non-Resident IOR and EOR.

Below is an overview of our basic scope of work, together with a diagram illustrating the operational structure of the ACP service. Once ACP registration is completed, the non-resident entity can act as the Importer of Record (IOR) and Exporter of Record (EOR) in Japan.

Scope of Work – How We Can Assist

• Consultation with Japan Customs to support successful ACP registration.
• Liaison with relevant stakeholders, including freight forwarders and Japan Customs, to ensure the smooth and compliant import and export of goods.
• Assistance in preparing and reviewing import and export clearance documentation.
• Support in the calculation of customs value, in accordance with the Japan Customs Tariff Act.
• Assistance with advance rulings on HS classification, customs valuation, and rules of origin.
• Import compliance support for regulated products, including Domestic Administrator (sometimes referred to as “Domestic Representative”) Services under the Product Safety Acts (PSE/PSC) and food-related products regulated under the Food Sanitation Act.
• Support for security export control, including list-based classification, catch-all control assessment, and assistance with export license applications to the Ministry of Economy, Trade and Industry (METI).
• Record-keeping support in accordance with Article 95 of the Japan Customs Law.
• Provision of professional trade and customs advisory services to address and resolve issues that may arise during import or export operations.

**Both import and export activities can benefit from the use of an ACP (Attorney for Customs Procedures). This support is applicable in scenarios where a non-resident acts as the Importer of Record (IOR) for imports and as the Exporter of Record (EOR) for exports.

Three Steps to Initiate Shipments Under the ACP Program:

1. Quotation Review to Contract Conclusion: Upon receiving your contact details, we will promptly provide a quotation for your review.
2. Commencing the Registration of ACP (Attorney for Customs Procedures) to Japan Customs: This process is generally completed in about two weeks.
3. Initiation of First Shipment, Import/Export

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FAQ for ACP (Attorney for Customs Procedures)

What is the role of ACP (SK Advisory)?

• Representation: ACP (SK Advisory) represents the foreign importer and liaises with Japan Customs and the Forwarding Company/Customs Broker.
• Documentation and Compliance: ACP assists in preparing essential import documents (e.g., Invoices) in compliance with Japan Customs Law and formally requests the Customs Broker to proceed with customs clearance.
• Expert Consultation and Troubleshooting: We are a team of legal experts in Customs Laws, providing direct consultations with Japan Customs to ensure compliance and address issues, including troubleshooting unique challenges in non-resident imports.

How long time does it require to get ACP’s registration?

It will take approximately 2 weeks until getting an approval from Japan Customs Office.
The breakdown of the task is as follows.

• Prepare the necessary documentation between us
• Start pre-consultation with Japan Customs Office and proceed initial review
• Submit paper-based set of application documents to Japan Customs Office for final review

What kind of documents to be necessary for ACP application?

Not limited, but for instance - Power of Attorney, Company Registry, The calculation method of Customs Valuation, Catalog of the import goods, business/logistic flow

ACP can handle all kinds of goods?

While many ACP service providers do not handle the regulated items, our ability to handle those regulated items has become a competitive advantage of our company. We can support the regulated items including cosmetics, PSE-regulated products, foodstuffs, and tableware.

Which regions in Japan are we covering?

Any region in Japan, we can handle.

What is difference between ACP and IOR?

ACP is not the Importer. ACP enables non-resident entities to become IOR (Importer of Record).

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