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2.23 The UN guidelines recommend the adoption of the World Trade Organization (WTO) Agreement on Valuation as the basis for valuing international merchandise trade for statistical purposes. The General Agreement on Tariffs and Trade (GATT) Agreement on Valuation, which was implemented by Australia in November 1981, is the basis (with minor changes) for the WTO Agreement on Valuation. The Uruguay Round of Multilateral Trade Negotiations, completed in 1994, provided for the establishment of the WTO as the successor to the GATT from July 1995.
2.5 PHYSICAL MOVEMENT OF GOODS
Australian Customs Value
2.28 The Australian Customs Value is the value of an import as determined by Customs. The starting point for establishing the Australian Customs Value is the price actually paid or payable to the supplier (transaction value), provided a number of conditions are met. The most important of these is that the buyer and seller must be independent of each other (i.e. it is an arms length transaction).
2.29 If the conditions are not met, Customs applies the rules set out in the WTO Agreement on Valuation to determine a substitute price to be used in calculating an import's value. The substitute price is intended to be as close an approximation as possible of the transaction price that would have been struck, had the prescribed conditions been met. Customs legislation and a range of case law has defined the application in Australia.
2.30 The Australian Customs Value includes inland freight, insurance and other distributive services in the exporting country, up to the place of export and is usually the same as, or very close to, the f.o.b. value. In relation to Australia's import and import clearance statistics it is commonly referred to as Customs value.
2.31 A change in Customs valuation in July 1989, likely to have marginally raised Customs valuations, means that data prior to this date are not fully comparable with data for more recent periods. Investigations of imports valuations, for years before and after the change have shown no measurable effect that can be attributed to this change. This change is explained in the note 'Change in the Valuation of Imports' at the beginning of the Explanatory notes of the 1989-90 issue of Foreign Trade, Australia: Comparative and Summary Tables (Cat. no. 5410.0).
2.32 The compilation of international merchandise trade statistics can be complicated by the fact that transaction values may initially be expressed in a variety of currencies. The conversion of these values into a single currency is a prerequisite for the construction of consistent and meaningful statistics. Where currency conversion is necessary, the UN recommends, in accordance with the WTO Agreement on Valuation, the use of market rates of exchange which are in effect at the time of importation or exportation. These are published by the national authorities of the reporting country. In Australia's case, the data are presented in terms of Australian dollars, though for international comparisions it is customary to convert to US dollars. For countries where the exchange rate is volatile it may be more meaningful to present the time series in US dollars.
2.33 In Australia, import values are reported to Customs in the invoice currency of the transaction. Customs' computerised processing system automatically converts the values to Australian dollars, using exchange rates applicable on the date of export. The rates used are the daily average selling rates of currencies against the Australian dollar, as advised by the RBA. The ABS receives details of the reported invoice currency, together with the value of the import transaction in Australian dollars.
2.34 Currently, for export transactions, the f.o.b. value may only be reported to Customs in one of seven currencies: US dollars, Japanese yen, pounds sterling, New Zealand dollars, Deutsche marks, Euros or Australian dollars. Goods invoiced in all other currencies need to be converted to Australian dollars, or one of the six major foreign currencies, by the exporter, before the f.o.b. value is reported on the Customs entry. Customs is reviewing their requirements regarding the manner of reporting f.o.b. values, with a view to increasing the number of allowable currencies.
2.35 The ABS receives export data as reported to Customs and converts any values reported in one of the six major foreign currencies to Australian dollars, using a representative mid-point of the buy and sell rates on the date of departure of the goods from Australia. The invoice currency in which the transaction was negotiated is also reported to Customs.
2.36 Australia's international merchandise trade statistics may depart from strict adherence to international standards due to any inappropriate currency conversion practices applied. Exporters may undertake currency conversions using a different exchange rate, or one applying on a different day to that at the time of exportation. This includes practices such as hedging which are designed to offset adverse currency movements. However, as the majority of exports are negotiated in one of the seven reportable currencies, any inappropriate conversion practices in the remaining exports will have limited impact on the statistics.