Understanding customs valuation in Pakistan is critical for importers, exporters, clearing agents, tax professionals, and businesses engaged in foreign trade. In 2026, customs values are determined under Section 25 of the Customs Act, 1969, as updated for the tax year 2026.
These rules directly affect customs duty, sales tax, income tax at import stage, and other levies.
This interactive, SEO optimized guide explains how Pakistan Customs determines the value of imported and exported goods, step by step, with practical explanations, decision flows, and compliance tips.
Why Customs Valuation Matters in Pakistan
Customs value is the tax base for:
• Customs duty
• Sales tax on imports
• Additional customs duty
• Regulatory duty
• Income tax withholding at import stage
An incorrect customs value can lead to:
• Clearance delays
• Demand notices and penalties
• Seizure of goods
• Post clearance audits
Legal Framework: Section 25, Customs Act, 1969 (Tax Year 2026)
Section 25 lays down internationally aligned valuation principles, largely based on the WTO Customs Valuation Agreement. It defines nine valuation methods for imports and a separate mechanism for exported goods.
Step 1: Transaction Value Method (Primary Method)
What Is Transaction Value?
Under Section 25(1), the customs value of imported goods is:
The price actually paid or payable for the goods when sold for export to Pakistan.
This is the default and preferred method, provided certain conditions are met.
Conditions for Accepting Transaction Value
The declared value is accepted if:
✅ No restrictions on use or resale (except legal or geographic ones)
✅ Price is not subject to unverifiable conditions
✅ No hidden proceeds flow back to the seller
✅ Buyer and seller are unrelated, or the relationship does not influence price
Mandatory Additions to Transaction Value (Section 25(2))
Even if the invoice value is accepted, customs adds specific costs if they are not already included.
A. Transport and Insurance Costs
• International freight up to port/airport of import
• Loading, unloading, and handling charges
• Insurance costs
B. Commercial Costs Paid by Importer
• Commissions (excluding buying commission)
• Indenting commission
• Containers treated as part of goods
• Packing costs (labour and materials)
C. Assists Provided by Importer
If supplied free or at reduced cost:
• Raw materials and components
• Tools, dies, moulds
• Materials consumed in production
• Engineering, design, artwork, and plans (done outside Pakistan)
D. Royalties and License Fees
• Payable as a condition of sale
• Direct or indirect payments
E. Proceeds of Subsequent Resale
• Any resale profit accruing to the foreign seller
⚠️ If sufficient information is unavailable, transaction value is rejected.
Related Party Transactions (Section 25(3) & (4))
When Buyer and Seller Are Related
Transaction value may still be accepted if:
• The importer proves the relationship did not influence the price, or
• The declared value closely matches test values, such as:
o Value of identical goods
o Deductive value
o Computed value
Customs Officer’s Powers
If customs has doubts:
• Importer is informed in writing
• Opportunity to justify price difference is given
• Failure leads to rejection of transaction value
Step 2: Transaction Value of Identical Goods (Section 25(5))
If transaction value fails:
• Customs uses value of identical goods
• Exported to Pakistan at or about the same time
• Same commercial level and quantity preferred
Adjustments are allowed for:
• Quantity differences
• Commercial level differences
• Transport and insurance variations
Step 3: Transaction Value of Similar Goods (Section 25(6))
If identical goods are unavailable:
• Value of similar goods is used
• Goods must be commercially interchangeable
• Same country of origin
Rules for identical goods apply mutatis mutandis.
Step 4: Deductive Value Method (Section 25(7))
How Deductive Value Works
Customs looks at the local selling price in Pakistan and deducts:
• Profit and general expenses
• Inland transport and insurance
• Customs duties and taxes
Timeframe
• At or about time of import
• Or earliest sale within 90 days of import
Importer’s Option
If goods are sold after processing, importer may request valuation based on post processing sale price, adjusted for value addition.
Step 5: Computed Value Method (Section 25(8))
Computed value equals:
• Cost of materials and fabrication
• Normal profit and general expenses
• International freight and insurance
This method is rarely used due to data limitations.
Step 6: Fall Back Method (Section 25(9))
If all else fails:
• Customs applies reasonable means
• Based on flexible application of earlier methods
• Arbitrary or fictitious values are not allowed
Order of Valuation Methods (Section 25(10))
• Methods may be applied flexibly
• Deductive and computed values can be reversed at importer’s request
• Approval required from Collector of Customs
Customs Verification and Audit Powers (Section 25(11) & (12))
Authorized customs officers may:
• Access business premises and warehouses
• Inspect goods and records
• Conduct audits and investigations
• Seize documents with proper receipt
Search and seizure follow Criminal Procedure Code, 1898.
Key Definitions You Must Know (Section 25(13))
• Customs value: Value for levying duties and taxes
• Identical goods: Same in all respects
• Similar goods: Same function, commercially interchangeable
• Same class or kind: Goods from same industry sector
Customs Value of Exported Goods (Section 25(15))
How Export Value Is Determined
Export value is based on:
• Open market sale price
• FOB basis (on board conveyance)
• Seller bears all costs up to export
Special Considerations
• Patents and designs
• Trademarks and brand value
• Regulatory duties, if applicable
Prescribed Time
• When goods declaration is filed, or
• When export commences
Practical Compliance Tips for 2026
• Maintain complete contracts and invoices
• Declare assists, royalties, and commissions transparently
• Keep transfer pricing documentation for related party imports
• Prepare for post clearance audits
Frequently Asked Questions (FAQs)
Q: Can customs reject invoice value in Pakistan?
Yes, if legal conditions under Section 25 are not met.
Q: Is freight added to customs value?
Yes, international freight and insurance are added.
Q: Can valuation methods be changed?
Yes, subject to law and Collector’s approval.
Final Thoughts
Customs valuation in Pakistan for 2026 is law driven, structured, and internationally aligned. Businesses that understand Section 25 can significantly reduce disputes, delays, and compliance risks.
For importers and exporters, accurate customs valuation is not optional—it is a legal and financial necessity.
Disclaimer
This article is published for general information and educational purposes only. It does not constitute legal advice, tax advice, or professional opinion under the Customs Act, 1969 or any other law in force in Pakistan. While every effort has been made to ensure accuracy in accordance with the law applicable for tax year 2026, customs laws, rules, notifications, and interpretations may change or be applied differently by authorities. Importers, exporters, and other stakeholders are advised to consult Pakistan Customs, a licensed customs agent, or a qualified tax or legal professional before making any commercial or compliance decisions based on this information.