One of the common issues that may arise in relation to customs operations in Iran is an offense known as “overstatement of imports or overvaluation.” Simply put, this offense refers to stating the value of goods as higher than the actual price paid for them. However, this overstatement must exceed 10 percent of the actual value of the goods in the declaration for it to be considered an offense.

What is Overstatement?

First of all, it is better to briefly familiarize ourselves with the offense of overvaluation of goods or overstatement. This offense mostly occurs with goods that have lower customs tariffs. In these cases, the owner of the goods intentionally states the value of their goods in the customs declaration higher than the actual amount. When the exchange rate of the government-subsidized currency (official currency) is significantly lower than the free-market exchange rate, the incentive for overstatement increases.

This offense occurs in two forms:

• Overstatement of Value: This means that the declared value of the imported shipment at customs is higher than its actual value.

 

• Overstatement of Quantity: This refers to when the declared volume or quantity of goods and the imported shipment at customs is greater than its actual volume or quantity.

In both methods, customs can discover the offense by thoroughly examining documents and using expert methods. If an offense is discovered, in addition to seizing excess goods or imposing a fine, the offender will also be referred to judicial authorities.

Legal Consequences of Overstatement

The main question here is: what consequences await importers in the event of an overstatement?

• Monetary Fine: If customs discovers the offense of overstatement, the offender, in addition to paying the entrance duties based on the actual value of the goods, will also be fined. The amount of the fine is determined based on the extent of the overstatement and the type of goods involved.

 

• Seizure of Goods: In some cases, customs can seize contraband goods. This occurs when the extent of the overstatement is significantly high. If intent and fraud are proven, customs can investigate the actual value of the goods through experts and specialized methods. If intent and fraud are proven, customs can seize the goods.

 

• Legal Prosecution: If intent and fraud are proven, the offender will be referred to judicial authorities. Legal penalties for this offense can include imprisonment and monetary fines. The severity of the punishment depends on the extent of the offense, the offender’s intent, and the value of the goods involved. For example, if the overstatement was done for money laundering or tax evasion, the penalties will be heavier.

 

• Denial of Government Currency Allocation: Another consequence of the overstatement of goods is the denial of government currency allocation to the importer. According to legal currency and customs processes, the offender will not be able to receive government currency for importing goods until the imbalance caused by this offense is settled. However, if the importer has obtained their imported goods using free market currency, another problem awaits them if an overstatement occurs. According to the resolutions of the Anti-Money Laundering Committee of Iran’s Customs, the value of goods without currency allocation will be sent to the Anti-Money Laundering Committee of Iran’s Customs for review and follow-up. If the export declaration states more than ten percent (10%) above the unreal value of the goods to create illegal facilities and benefits for the owner of the goods, a fine ranging from ten percent (10%) to one hundred percent (100%) of the value difference will be calculated.

What is the Amount of the Monetary Fine for Overstatement?

The amount of the fine depends on the type of goods. If the shipment is among permissible goods, the fine is calculated based on the declared value of the goods. However, if the shipment consists of prohibited goods, it is calculated based on the actual value of the goods, which will lead to their seizure.

If the extent of the overstatement is up to 10 percent, the monetary fine will be about twice the entrance duties. If the overstatement of the goods is between 10 to 50 percent, it will be four times the entrance duties, and if this offense is between 50 to 100 percent, it will be six times the entrance duties, and in some cases, it could exceed six times the entrance duties!

Objection to Overvaluation

If the value of the goods determined by customs differs from the price declared by the owner of the goods, the importer has the right to object to the customs ruling regarding overvaluation. This objection will be reviewed by the commission.

The legal steps to protest the overvaluation of goods and resolve this issue are as follows:

• Review and record information (based on imported trade shipments)

 

• Discovery of offense (by customs experts)

 

• Processing in the relevant office

 

• Objection to the Customs Dispute Resolution Commission (by the importer)

 

• Customs Appeal Commission

 

• Examination of objections by the Administrative Justice Court

If the discrepancy in the overstatement of the imported goods occurs before the release of the goods, the owner is obliged to object within thirty days from the determination of value at customs or written notification by Iran’s customs. The review of the objection after this deadline will comply with Article 135 of the Customs Law (maximum six months) with the Customs Disputes Resolution Commission. In cases where customs discovers the overstatement after the release of goods, the current procedure of customs is not to apply the deadline and to take action whenever they notice the overstatement. Customs, by reflecting the matter to the relevant bank, will address the objection if the owner does not comply.

If a final ruling is issued regarding overvaluation, the matter will be reflected to the bank, and if the owner does not comply, a complaint will be filed by the bank for legal review regarding currency violations, which will be referred to the Government Trading Organization. Overvaluation is one of the most common cases that arise in the Administrative Justice Court.