Customs Special Valuation Branch – SVB

What is SVB?

The Special Valuation Branch (SVB) is a specialised division within the Customs department focused on: 

• Scrutinising transactions between Indian importers and foreign suppliers with interconnected relationships, such as joint ventures, partnerships, or holding-subsidiary ties.
• Investigating such transactions to determine if there are any influences that could potentially impact the pricing of the goods involved. 
• Ensures fair and accurate valuation of imported goods by examining the dynamics of these transactions and assessing any potential distortions in pricing.

The Special Valuation Branch (SVB) not only investigates special relationship cases but also handles:

• Complex cases involving additions or deletions to the declared transaction value by importers. These cases typically involve rules 10(1)(c), 10(1)(d), or 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
• Ensures that any relationship between parties does not unduly influence the terms and conditions of the transaction and, consequently, the transaction value itself.

Refer to the following link to access the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

Jurisdiction of SVB Units

The Special Valuation Branches are operational at several Customs locations, including:

1. Bengaluru
2. Chennai
3. Kolkata
4. Delhi
5. Mumbai 

The jurisdiction of the SVB is determined by the importer’s corporate or registered office location, whichever is more convenient for them. Importers have the flexibility to choose which SVB they want to work with for cases requiring investigation.

Investigations by SVB

Importers must declare any affiliations between their suppliers and buyers in India, especially if they are related parties. If such affiliations exist, it’s crucial to determine if they influenced the transaction’s price. In such cases, SVB investigations are necessary, and thorough review and inquiry of the transaction are required.

What triggers an investigation by the SVB?

SVB investigations are triggered when the first shipment from a foreign country arrives during an importer’s goods importation from a related party. The importer must submit a declaration, bill of entry, and a questionnaire in Annexure A.

Transactions investigated by the SVB

Investigations under SVB can be triggered by transactions involving:

1. Royalties and licensing fees: Payments related to imported goods that buyers must pay, directly or indirectly, as a condition of sale, but are not part of the actual price paid. [Rule 10(1)(c) of CVR, 2007] 

2. Subsequent resale or disposal: Any portion of the proceeds from reselling, disposing of, or using imported goods that benefit the seller, either directly or indirectly. [Rule 10(1)(d) of CVR, 2007] 

3. Other related payments: All other payments made by the buyer to the seller or a third party as a condition of sale, which are not included in the actual price paid. [Rule 10(1)(e) of CVR, 2007] 

Exemptions from SVB investigation

Initiating SVB investigations should not be based solely on the potential revenue implications in the following scenarios:

1. Cases involving imports of samples and prototypes from related suppliers.
2. Imports from foreign suppliers where the applicable duty (including additional Customs duties) is unconditionally fully exempted or set at zero.
3. Import transactions where the value of the goods imported is less than Rs. 1 Lakh individually, but the cumulative value of such transactions does not exceed Rs. 25 Lakhs within a financial year.
4. Situations where additions are requested under Rule 10(1)(a) or Rule 10(1)(b) of the Customs Valuation Rules, 2007, as these should be addressed by regular appraising groups.

Procedure for Registration with SVB in India

Importers are required to register with the Customs Special Valuation Branch (SVB) if they have any connections or affiliations with their suppliers, as outlined in specific regulations which include: 

• Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 – Conditions under which importers must disclose affiliations with suppliers to the SVB.
• Rule 2(1) of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 – Mandates disclosure of such affiliations when determining the value of SVB of exported goods.
• Section 14(1) of the Customs Act, 1962 – Requires importers to register with the SVB if they have any connections or affiliations with their suppliers, as part of the broader framework for customs regulations and valuation.

SVB Registration Process

Step 1 – Submission of declaration and accompanying documents:

• Importers are required to submit a declaration in Annexure-A along with their bill of entry to Customs Authorities.
• The declaration should be supported by the necessary documents.
• This step occurs prior to the clearance of goods from the Customs Port.

Step 2 – Examination by authorised customs officer:

• A designated customs officer thoroughly examines the details provided, including the sale circumstances and invoice value of the goods.
• If deemed necessary, the case may be referred to the Special Valuation Branch (SVB) for further investigation.

Step 3 – Information request using Annexure-B:

• In cases referred to the SVB, the customs office may request additional information from the importer through Annexure-B.
• Importers are required to furnish all requested information and documents to the SVB within a stipulated time frame of 60 days.
• Failure to respond within the prescribed time may result in the imposition of an additional Extra Duty Deposit, calculated up to five percent of the declared assessable value of goods, on subsequent imports provisionally cleared for a period of three months.

Step 4 – Provisional Assessment:

• The proper officer will present their findings to the Commissioner, who will then make a decision after carefully considering the preliminary findings.
• Once the provisional assessment is completed and all required documents are received, the case will be transferred to the relevant SVB within three working days.

Step 5 – Assignment of case number:

• Upon receiving the information, SVB will assign a case number and update it in the Central Registry Database. Then, an enquiry will be initiated, and the DC/AC may request additional information from the importer if necessary.

Step 6 – Investigation

• SVB must complete investigations within two months of receiving information in Annexure B. If more time is needed, approval from the jurisdictional commissioner is required. If the investigation goes beyond four months, approval from the Chief Commissioner is necessary. 
• SVB should then submit findings to the Commissioner, quantifying any influence on transaction value, and prepare an Investigation Report upon approval.

Step 7 – Finalization of assessment

Upon receiving the investigation report from the Customs Special Valuation Branch, there are two potential outcomes that could affect the assessment:

1. If the declared value aligns with Rule 3 of the CVR, 2007, the provisional assessment by customs houses stands as final.
2. If the declared value does not align with Rule 3, the customs house will issue a show cause notice to the importer within 15 days of receiving the Investigation Report from the SVB.

Documents required for SVB Registration Process

To complete the SVB Certificate registration process, importers may need to provide several documents, including:

1. Copies of relevant Bills of Entry.

2. Sample invoices of imports from the past three years.

3. Annual reports for the previous three years (if the importer is a Company).

4. Current price list of products imported from the foreign supplier.

5. Agreements with the foreign supplier (such as Collaboration agreement or Joint Venture agreement).

6. CIF value statements for the last three years, certified by a Chartered Accountant, including:

• CIF value and landed cost of imports from related foreign suppliers.
• CIF value and landed cost of imports from other suppliers.
• Ex-factory value of the goods.
• Royalty payments.

7. Statement of equity capital held in a foreign company (if applicable).

8. Shareholding details in an Indian company along with particulars of common Directors.

9. Sample invoices and bill of entries of similar goods imported by others.

10. Payment details, including any deferred payments.

11. Details of any other payments made to or on behalf of the supplier.

Exemptions from SVB Registration

SVB registration is not required under certain circumstances:

1. Importing goods as samples or prototypes from related suppliers doesn’t necessitate SVB registration.
2. SVB registration isn’t mandatory when importing goods from related suppliers if the customs duty is fully exempt or nil.
3. Transactions involving imported goods valued below INR 100,000 don’t require SVB registration, provided the total doesn’t exceed INR 2.5 million within a financial year.

Related Party Transactions

Transactions involving related parties can vary widely, and their value may be influenced by the nature of the relationship.

• Definitions of related parties differ across various legal frameworks, including tax laws, company regulations, accounting standards, and more.
• Compliance with relevant provisions and considerations such as valuation and assessment may require adjustments to pricing structures.
• It is essential to reference the appropriate legal provisions and consider other relevant factors when determining transaction values.

‘Related Party’ defined 

Under the Customs Act of 1962, the Special Valuation Branch (SVB) has the authority to conduct investigations into transactions between an Indian importer and a foreign supplier who are considered to be “related” according to Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

Rule 2(2) of the Customs Valuation Rules specifies the conditions under which a relationship is considered “related” for customs valuation purposes. According to this rule, the following individuals or entities are considered “related”:

• Those who hold positions as officers, directors, or partners in each other’s businesses.
• Parties involved in an employer-employee relationship.
• Individuals who directly or indirectly own or control at least five percent of the voting stock or shares in both entities.
• Situations where a third person directly or indirectly controls both entities or when they jointly control a third person.
• Parties sharing familial ties.
• Instances where one entity acts as the sole agent or sole distributor of the other.

Judicial precedents on ‘Related Party’ transactions

• CCE vs. Sanjivani Non-Ferrous Trading (P) Ltd., [2019 (365) E.L.T. 3 (S.C.)]

“Denying the value of a transaction solely based on the relationship between parties requires more than just knowing they’re connected. It’s crucial to establish if their relationship actually influenced the price. Rejecting the transaction value should only happen after thorough investigation and providing clear reasons for why the price isn’t solely determined by their connection.”

• Commissioner of Customs, Calcutta vs. South India Television (P) Ltd. [2007 (214) E.L.T. 3 (SC)]

“The burden of proof lies with departments to show that the value in question isn’t appropriate. If they can’t do that, the benefit of the doubt goes to the importer. To prove that the transaction value was influenced by a relationship, relevant comparable evidence is needed, including adjustments based on the supplier’s declaration in their exporting country. The method of obtaining that declaration isn’t the focus.”

SVB Certificate Registration Services by JPARKS INDIA

Ready to streamline your customs compliance and valuation processes with ease? Register with JPARKS INDIA today for expert guidance and support in navigating the Special Valuation Branch’s regulations. Don’t let complex rules and procedures overwhelm you—let our experienced team handle it all for you. Here’s why you should choose JPARKS INDIA:

• Expertise in customs regulations: We specialise in navigating customs regulations and compliance requirements, including those related to special valuation rules.
• Valuation analysis: Our team conducts thorough valuation analysis to ensure compliance with SVB regulations. We determine the appropriate value of SVB of imported goods, helping you avoid potential issues or penalties.
• Documentation assistance: We assist in preparing and submitting the necessary documentation required by the SVB, such as applications, declarations, and supporting documents. 

Apply for SVB Registration I FAQs

What is a special valuation branch in customs?

The Special Valuation Branch operates within the Custom House, focusing on scrutinising transactions related to supplier-importer relationships and special factors like technical collaborations.

How many Special Valuation Branches are there in India?

In India, there are five specific valuation branches located in Mumbai, Chennai, Kolkata, Delhi, and Bengaluru.

What is the SVB declaration?

SVB investigation typically begins as soon as the importer declares that their supplier is related to them while filing customs clearance paperwork for their initial import of goods.

Who is required to obtain SVB registration?

Importers who are associated with suppliers as outlined in certain sections and rules, including Rule 2(1) and Rule 2(2) of the Customs Valuation Rules and Section 14(1) of the Customs Act, 1962, must obtain SVB registration.

When is the Special Valuation Branch (SVB) investigation exempted?

The SVB investigation is exempted in the following instances:

• Prototypes and samples imported from related sellers are exempt.
• Imports from related sellers with zero or fully exempt customs duty are exempt.
• Imports valued at less than Rs. 1 lakh and totaling under Rs. 25 lakhs in a financial year are exempt from investigation.

Whether Special Valuation Branch investigation is possible in case of imports from unrelated persons?

Yes. If an importer pays the supplier more than the value of the goods imported, it may trigger SVB investigations to understand the purpose of those extra payments.

When does the SVB investigation get triggered?

SVB valuation and investigation are initiated upon the initial import from the affiliated seller. Once the importer designates the seller as related in the customs clearance documentation, the SVB investigation begins.

How long does it take to complete the investigation and issue of the SVB order?

Typically, the Special Valuation Branches (SVBs) in customs aim to complete their investigations and issue the SVB order within two months after receiving information in Annexure B.

What is the validity of the SVB order?

The SVB order remains valid for three years, after which the importer must seek renewal if imports continue beyond that timeframe.

Where can I find an agent to help me register with the SVB?

You can find assistance with registering for the SVB through JPARKS INDIA Pvt. Ltd. We specialise in facilitating such processes and ensuring that everything is handled efficiently and accurately. You can reach out to us through our website or contact us directly to speak with one of our agents who will guide you through the registration process.