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Cost Subtraction Method - Method 4

Method 4 customs valuation is based onthe unit price of goods at which the goods being valued (identical or similar) are sold in the largest batch on the territory of the Russian Federation no later than 90 days from the date of import of the goods being valued to the transaction participant,a person who is not related to the seller.

In order to use the sale price on the domestic market of goods being valued or identical or similar goods as the basis for determining the customs value, this sale must meet the following conditions:

• goods must be sold in Russia inunchanged(in the same one in which they were imported);
• imported goods (identical, homogeneous) must be soldsimultaneouslywith the importation of the goods being valued or at a time sufficiently close to the time of their importation, but no later than 90 days from the date of importation of the goods being valued;
• if there are no cases where the goods being valued are sold identical or similar in the same condition as they were at the time of importation, the declarant may use the unit price of the processed goods with an appropriate adjustment for the value added as a result of processing. However, method 4 cannot be applied to goods that have undergone processing if, as a result of processing after import, the goods have lost their properties, and also if the imported product has not lost its qualities after processing, but makes up a very small part of the final product (car radios are imported , which are installed on domestic cars; although radio tape recorders retain their consumer qualities after installation, it is impossible to determine their customs value based on the sale price of a finished car);
• the Russian participant in the transaction must not directly or indirectly supply the foreign participant in the transaction free of charge or at a reduced price with goods and services used for the production and sale for export to the Russian Federation of imported goods;
• the first buyer of imported goods on the domestic market of the Russian Federation must not be associated with a Russian participant in a foreign economic transaction (importer of valued, identical or similar goods).

Determination of customs value based ondomestic pricegoods provides for the selection from the latter of those elements that are characteristic only for the domestic market, that is, those costs that are incurred after the importation of the goods being valued into the territory of the Russian Federation and are not subject to inclusion in the customs value.

Part 3 of Art. 22 of the Law establishes that the following components are deducted from the price of a unit of goods:

• but)expenses for the payment of commissions, ordinary profit margins and general expenses in connection with the sale in the Russian Federation of imported goods of the same class and type;
• b)amounts of import customs duties, taxes, fees and other payments payable in the Russian Federation in connection with the importation or sale of goods;
• in)ordinary expenses incurred in the Russian Federation for transportation, insurance, loading and unloading.

Also, in accordance with part 4 of Art. 22 of the Law, the value added as a result of assembly or further processing is deducted from the price of the goods, if necessary.

When choosing sales, it is necessary to take into account that

• for method 4, the same concepts of identity and homogeneity of goods are used, which are defined by the Law in Art. 20 and 21;
• the interdependence of the parties (unlike article 19 of the Law) is understood as the interdependence between the importer and the buyer in the domestic (Russian) market, however, the same interdependence criteria are used, defined in part 2 of Art. 19 of the Law.

concept"sale of goods in unchanged condition" meansthat production operations (including assembly), further processing of goods, etc. considered as operations that change the state of the imported goods. Not considered as such unpacking, simple repackaging for the domestic market; natural changes (shrinkage of goods, for liquids - evaporation) are also considered as their preservation in an unchanged state.

One of the main problems in applying method 4 is the choice of the price at which the largest aggregate (cumulative) quantity of the product was sold after importation into the country to domestic buyers of the first commercial level, not related to the importer. To determine this quantity, you should summarize the data for all sales of a product at a certain price. The largest total number of units sold at the same price will represent the largest aggregate number of units.

The largest number of units sold at one price in this case is 130. Thus, the unit price for the largest aggregate lot of US$180 will be used as the basis for Method 4 customs value determination.

If it turns out that the same consignments of goods were sold at different prices per unit, then the lowest of them will be used as the basis for determining the customs value.

If not the entire batch of goods is sold, but only part of it, then the decision on the sufficiency of the quantity sold for the application of method 4 should be made individually for each specific case. For an expensive product (equipment), the sale of two or three units may be sufficient, and for the sale, for example, of small spare parts, the sale of 200–300 units may be considered insufficient. ¨