On February 4, 2009, China's State Customs Office released the Measures for Calculating Value of Goods and Articles in Violation of the Customs Supervision Provisions (the "Measures"), effective June 1, 2009. According to the Measures, goods that are not declared as required by the Customs authorities or declared incorrectly when being imported or exported, the effects of which may negatively impact permit management or tax collection by the authorities, will be declared illegal goods. The Measures further clarify detailed methods of how to determine the illegal goods or articles, and how to calculate the value of illegal goods or articles. Under the Measures, the value of illegal goods, which will be used for made-up tax and financial penalty purposes, generally is the total amount of the dutiable value of the goods, the duty of the goods and other taxes already collected or which should have been collected by Customs. The calculation of dutiable value, duty and other taxes of goods often varies depending on specific circumstances. For example, if goods imported with free duty and tax are in the Customs' supervision but were transferred or mortgaged without the Customs' permission, such goods will be deemed illegal goods and its dutiable value will be the value verified by Customs at the time of importation minus the depreciation cost.
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