SVB Matters (Special Valuation Branch)
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Table of Contents
SVB Matters (Special Valuation Branch)
- What is an Import Export Code (IEC)?
- Circumstances When an IEC is Necessary
- Instances Where IEC is Not Required
- Steps Involved in IEC Registration
- Documents Needed for IEC Registration
- Advantages of IEC Registration
- Cost and Validity of IEC
- Restricted Goods List (as per IEC regulations)
- How to Apply for an Import-Export License Online
- FAQ’s
- Associated Services Provided by Afleo
- Conclusion
The Special Valuation Branch (SVB) of Indian customs has an important function in monitoring imports which are made between connected persons, including parent/subsidiary companies, joint ventures or associated group entities, to ensure that the true value of imports declared by buyers is genuine and that it is not affected by the relationships between buyers and sellers.
When customs suspect related-party pricing or under-valuation of imports, SVB registration or investigations may be initiated to provide a transparent mechanism to promote fair trading and accurate assessment of duties on imports.
For many companies importing from their foreign affiliated entities, the SVB process can appear complicated and time-consuming; however, Afleo provides its expertise in customs, DGFT, and foreign trade procedures to assist companies with registering, representing, and resolving SVB matters efficiently, providing total compliance and minimum disruption to ongoing import activities.
What is SVB and Why is it Required?
A Special Valuation Branch (SVB) is a special section of the India Customs Department that evaluates the price of imported products based on the possible relationship between the buyer and seller of these products.
According to Rule 2(2), the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, two companies can be considered as related when they have a direct or indirect stake in the other (such as control, ownership or shared interest).
For instance, if you have an import business in India and import a product from your parent company overseas, or from another company in the same group, or from a company that has a joint-venture with you, then the declared value needs to be checked by the SVB so that the actual transaction price at which the product was sold in the international markets is determined.
When Does SVB Investigation Apply?
SVB reviews are generally initiated by Customs when a customs officer believes that a related party transaction may be affecting the value of an imported product. The most common examples of circumstances that can lead to this include:
- Related Party Transactions, which are defined as those between related parties, as per the Customs Valuation Rules.
- Royalty, license, and technical fee amounts included within the transaction price.
- Transfer Pricing Adjustments, which affect the value at which the importer has declared it.
- Capital Goods (e.g., under EPCG Scheme or Advance License Scheme) have been purchased from the company’s parent or affiliate company.
- There is a consistent pattern of purchasing from one particular foreign seller, and there is an irregularity in the pricing trend.
Any one of these types of situations will result in the assessment officer referring the matter to the SVB for their review.
SVB Process Flow
Knowing what to expect in the SVB process allows your business to be prepared and act quickly to react when SVB investigates you. Below is a general description of the SVB investigation process, including the steps involved.
1. Declaration Upon Arrival of Goods at the Port of Entry
Upon arrival of goods at the port of entry, the importer must declare on the Bill of Entry that the imported goods was/were purchased from a related party and that there exists a relationship which has caused the valuation of the goods to vary.
2. Customs Officer Refers Case to SVB
If the assessing officer believes that the importer’s statement with regard to being a related party and having a relationship which affects the value of the goods, then he will refer the case to SVB for further examination of the valuation.
3. Submission of Documentation & Questionnaire by SVB
SVB will send the importer a comprehensive questionnaire and request that the importer submit supporting documentation; this can include, but not be limited to, agreements, pricing justification, financial statements and other relevant documentation related to the sale of the goods.
4. SVB Registers Case & Issues Registration.
Once the documentation is received, SVB will register the case and assign a unique SVB registration # for future reference and use on all subsequent imports.
5. Personal Hearing / Clarification
SVB may contact the importer for a personal hearing or to clarify the pricing methodology and/or relationship terms associated with the sale of the goods.
6. Issuance of Order (SVB Order / PD Circular).
Following the completion of SVB’s review, SVB will issue an order that will either accept the value declared by the importer or apply a loading percentage to determine a reasonable and fair assessable value for the goods.
Documents Required for SVB Registration
To have an easy and smooth registration process, the Importers must be ready with all the necessary documents and submit them in their entirety, such as:
- Copy of IEC (Importer Exporter Code) and GST Registration.
- Importers Profile/ Organizational Structure.
- Purchase Order(s)/ Invoice(s) of the concerned Foreign Supplier.
- Inter-company Agreement / Contract between the Indian Entity and Foreign Entity.
- Price List, Payment Terms and Method of Value Determination.
- Balance Sheet/ Financial Statements of both Indian Entity and Foreign Entity.
- Transfer Pricing Study Report (in case of availability).
- Sample of Bill of Entry and Sample of Import Data for Reference.
Submission of proper documentation minimizes delay and will help in expediting Case Registration & Approval.
SVB Outcomes
Following evaluation of the case by SVB, it will issue an order as to whether the stated value of the transaction is accurate, in which no adjustment will be made or if the value will need to be adjusted to accurately represent the Fair Market Price.
Options For Finalizing The Case Include:
Acceptance of Stated Value.
SVB determines that the assessed price is valid; therefore, no “loading” will occur.
Loading on Value.
An established percentage will be added to the original assessed value to establish the true value.
Refund or Adjustment.
When a final determination has been made regarding the amount of duties that were paid through the use of the Provisional Assessment, then SVB can process a refund for the overpayment of duties.
Note: Following issuance of the Order, the SVB Number must be included with each subsequent Bill of Entry submitted for that Supplier.
SVB Renewal / Review
A typical order from SVB is usually valid for a period of three (3) years. Therefore, if an importer wishes to continue transacting the same type of related party business as during the initial three (3) year period, they will need to file for either a renewal or review of their original SVB prior to its expiration date.
In addition, the following may necessitate a new SVB Renewal Application:
- Changes occur to the inter-company agreement(s).
- Revisions to pricing/royalty arrangement(s) occur.
- Changes occur to the importer/supplier entity’s structure.
Afleo provides timely assistance to clients in the preparation and filing of their SVB Renewal Applications to ensure compliance continues to be maintained and customs clearance remains uninterrupted.
Common Issues Faced in SVB Matters
Businesses typically encounter challenges when attempting to register for an SVB investigation or SVB registration process, including:
- The time it takes to receive registration for the case and/or the time frame for receiving the order from the customs authority.
- The unclearness regarding what documentation or information is needed for the SVB questionnaire.
- Differences between the prices that were declared on an SVB questionnaire and those that were actually charged for imports.
- Changes made to an importer’s pattern of importing goods or the method(s) used to determine the value of imported goods (valuation terms).
- Confusion about whether SVB registration is required.
Afleo assists in resolving these issues by interfacing with Customs Authorities, defining the valuation methodology utilized for imports, and facilitating clearance of imported goods regardless of whether SVB proceedings have commenced.
How Afleo Helps with SVB Matters
Afleo has experience handling all aspects of a company’s SVB issues that pertain to their use of related-party imports. With Afleo, you will be able to stay in compliance as well as have a smooth relationship with Customs at each step of the process.
Our Services Include:
- Whether or not your transactions need an SVB registration.
- Preparation and submission of SVB application forms and SVB questionnaire forms.
- Communication with Customs and SVB agencies regarding SVB registrations and hearings.
- Creation of comprehensive answers and explanations to support declared values.
- Management of SVB renewal requests, SVB appeals and SVB case closures.
With Afleo, importers can save time and money by reducing compliance risk while maintaining good standing with Customs agencies.
At Afleo, our experienced consultants provide services for SVB compliance so your related party imports are compliant and therefore do not have to deal with unnecessary duties and delays.
Why Choose Afleo
- Afleo has over a decade of experience in customs and foreign trade related to DGFT (Directorate General of Foreign Trade) regulations.
- We have had extensive experience in assisting both large and small corporate entities with SVB registrations and SVB renewals.
- Our SVB registration services include assistance with detailed documentation, questionnaire completion and representation before all government authorities.
- Afleo is closely associated with the customs authority, which enables us to facilitate a quicker resolution of any issues that may arise.
At Afleo, we provide you with transparent advice and communicate proactively throughout the entire process, so you know exactly where you are at each stage.
FAQ’s
1. What is the role of the Special Valuation Branch (SVB)?
SVB determines if related party transactions have an impact on the declared value of imports from foreign suppliers and makes sure that customs valuation is fair.
2. Who needs SVB registration?
Any importer involved in related foreign entity transactions under the Customs Valuation Act and Rules.
3. How long does SVB registration take?
4. Is SVB registration mandatory for every related-party import?
Yes, when the relationship may affect the price or value of imported goods.
5. What happens if SVB registration is not done?
Need Assistance with SVB Registration or Investigation?
Want to make sure that your related party transactions for imported goods are compliant and trouble-free?
Afleo’s experienced team assists with SVB registration, documentation, SVB Renewals and representation with Customs to ensure your case is handled quickly and resolved efficiently.
Call Afleo today or speak with our expert to help you navigate through the complex SVB compliance process.