How does customs decide the value of my imported goods if it does not accept my invoice price?

What does the law say?

Section 25 of the Customs Act, 1969, amended to 30 June 2025, sets out the methods in turn.

Method	Sub-section	Basis
Transaction value	25(1) and (2)	Price actually paid or payable for the goods when sold for export to Pakistan, with set additions
Identical goods	25(5)	Transaction value of identical goods sold for export to Pakistan at or about the same time
Similar goods	25(6)	Transaction value of similar goods, same timing
Deductive value	25(7)	Unit price at which the goods, or identical or similar goods, are sold in Pakistan, less commission or profit, inland transport and insurance, and duties and taxes
Computed value	25(8)	Cost of materials and processing, plus usual profit and general expenses, plus the section 25(2)(a) costs
Fall-back	25(9)	Reasonable means, applying the above methods flexibly

What is added to the invoice price. Section 25(2) adds, where not already included: transport to the port or airport of importation, loading, unloading and handling charges to that point, and insurance; commissions and brokerage (but not buying commissions), containers and packing; materials, tools, moulds or design work the importer supplies free or cheaply to the producer; royalties and licence fees payable as a condition of sale; and any share of resale proceeds going back to the seller.

When the invoice price is not accepted. Section 25(1) accepts transaction value only if there are no restrictions on the buyer’s use of the goods (other than ones the Act allows), the price is not subject to a condition that cannot be valued, no resale proceeds go to the seller unless added, and the parties are unrelated or the relationship did not influence the price. Section 25(2)(f) adds that if information for the required additions is not available, transaction value is treated as one that cannot be determined.

Order of methods. Each method from 25(5) onward begins “if the customs value … cannot be determined” under the previous one, which reads as a sequence. Section 25(10), however, says the methods “may or may not be applied in a sequential order”, except that the importer may ask, with the Collector’s agreement, to reverse deductive and computed value. The words “may or may not” replaced “are required to” by the Finance Act, 2007. The text does not reconcile these two readings, and this page does not either.

Valuation rulings (section 25A). The Director of Customs Valuation may determine the customs value of any goods or category of goods, following the section 25 methods, and may consult internationally published prices. That value becomes the applicable value for assessment, but if the declared or invoice value is higher, the higher value is used. The value stays in force until revised or rescinded.

How does customs question my price in practice?

• Asking for explanation. Under rule 109 of the Customs Rules, 2001, an officer who doubts the particulars or documents may ask for further explanation, documents or other evidence. If reasonable doubt remains, the value may be treated as not determinable under section 25(1). The final decision and grounds must be given in writing.
• Demanding documents and information. Section 26(1) lets an officer not below Assistant Collector require, in writing, information about import, purchase, sale, transport or storage of the goods, production of records, copies or extracts, and personal appearance to answer questions. Section 26(4) says the information must be supplied within the time in the notice.
• Using exchanged data. Section 25AA allows information received under data-sharing arrangements with foreign customs (section 219A(1)(b)) to be used for assessment, including valuation.
• Limits on customs. Rule 110 bars values based on the local selling price of goods produced in Pakistan, arbitrary or fictitious values, and the origin country’s domestic price without deducting local taxes and profits.

Worked example (illustrative figures)

Adeel imports 500 kitchen blenders into Karachi. The figures are invented.

1. Invoice price: Rs. 3,000,000, ex-factory.
2. Section 25(2)(a) additions: sea freight Rs. 150,000, loading and handling to Karachi Rs. 20,000, insurance Rs. 30,000. Total Rs. 200,000.
3. Section 25(2)(b) addition: export cartons paid by Adeel separately, Rs. 50,000.
4. Transaction value: Rs. 3,000,000 + Rs. 200,000 + Rs. 50,000 = Rs. 3,250,000, or Rs. 6,500 per unit.

Suppose the officer doubts this price, asks for the sales contract and bank payment record under rule 109, and after reviewing them still has reasonable doubt. Transaction value is set aside. The officer finds identical blenders from the same manufacturer, cleared within the same period at the same commercial level and similar quantity, at Rs. 7,000 per unit including freight and insurance. Under section 25(5): 500 x Rs. 7,000 = Rs. 3,500,000, which is Rs. 250,000 more than Adeel’s figure.

If a valuation ruling under section 25A covered these blenders at, say, Rs. 6,800 per unit, the value would be 500 x Rs. 6,800 = Rs. 3,400,000, since that is higher than the declared Rs. 3,250,000.

What if the buyer and seller are related?

Section 25(3) accepts transaction value if the circumstances show the relationship did not influence the price, or if the price closely approximates a test value (sales to unrelated buyers, or deductive or computed values of identical or similar goods). Under section 25(4), if the officer is not satisfied, he must put the reservations to the importer in writing and give an opportunity to justify the difference.

Common mistakes

• Declaring the ex-factory price only. Section 25(2)(a) requires freight, handling and insurance to the port to be added.
• Ignoring moulds or designs supplied to the factory. Section 25(2)(c) adds their value.
• Assuming the lowest ruling value always applies. Section 25A(2) uses the higher of the ruling and the declared or invoice value.
• Ignoring a section 26 notice. Section 26(4) requires the information within the time specified.

What to check in the official text

Read sections 25, 25A, 25AA and 26 of the Customs Act, 1969, and rules 107 to 125 of the Customs Rules, 2001. In the parsed site text of section 25A, an older version of sub-sections (1) to (3), the wording replaced by the Finance Act, 2007, is printed after the current text. The first version is the operative one; the official PDF shows the older wording as a footnote. Specific valuation rulings are not in this corpus. Reviews of a ruling are covered on the valuation ruling page linked below.