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Valuation of second hand machinery- (Ministry of Finance ) (05 Feb 2020)



1. Representations have been received from the trade regarding Circular No. 25/2015-Customs dated 15th October, 2015 on valuation of second hand machinery. For this purpose, the circular requires customs to rely upon inspection report either issued at the port of loading by overseas Chartered Engineer or issued upon import by a pre-shipment inspection agency (PSIA) notified by DGFT, or by a chartered engineer empanelled by the Custom House where the DGFT approved PSIAs are not available.

2. It has been represented that the PSIAs empanelled by DGFT are insufficient in number leading to delay in clearances. It has also been informed that PSIAs empanelled by DGFT are not qualified for appraising second hand machinery.

3. In this regard, DGFT vide O.M. No. 01/93/180/51/AM-16/PC II(B)/E-1500/176 dated 3rd September 2019, has clarified that PSIAs are meant only for certifying that consignments of metal scrap are free of radio-active agents and explosives. The PSIAs are not required to be qualified as engineers. Also, ascertaining the age of a second hand machine is an engineering exercise and can be performed only by a qualified engineer. Thus, certifying the age of machines is beyond the jurisdiction of PSIAs.

4. The following guidelines shall be followed:

(a) All imports of second hand machinery/used capital goods shall be ordinarily accompanied by an inspection/appraisement report issued by an overseas Chartered Engineer or equivalent, prepared upon examination of the goods at the place of sale.

(b) The report of the overseas chartered engineer or equivalent should be as per the Form A annexed to this circular.

(c) In the event of the importer failing to procure an overseas report of inspection/appraisement of the goods, he may have the goods inspected by any one of the Chartered Engineers empanelled locally by the respective Custom Houses.

(d) In cases where the report is to be prepared by the Chartered Engineers empanelled by Custom Houses, the same shall be in the Form B annexed to this circular.

(e) The value declared by the importer shall be examined with respect to the report of the Chartered Engineer. Similarly, the declared value shall be examined with respect to the depreciated value of the goods determined in terms of the circular No. 493/124/86-Cus VI dated 19/11/1987 and dated 4/1/1988. If such comparison does not create any doubt regarding the declared value of the goods, the same may be appraised under rule 3 of the CVR, 2007. If there are significant differences arising from such comparison, Rule 12 of the CVR, 2007 requires that the proper officer shall seek an explanation from the importer justifying the declared value. The proper officer may then evaluate the evidence put forth by the importer and after giving due consideration to factors such as depreciation, refurbishment or reconditioning (if any), and condition of the goods, determine whether the declared transaction value conforms to Rule 3 of CVR, 2007. Otherwise, the proper officer may proceed to determine the value of the goods, sequentially, in terms of rule 4 to 9.

5. Circular No. 25/2015 dated 15th October, 2015 stands superseded with the issue of this circular.


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