When Manufacturers Must Lift the Curtain: Understanding SARS’s Computed Value Method

Imagine this, you import a product, but SARS won’t accept the invoice, can’t find any identical or similar goods, and local resale data isn’t suitable. What happens next?

SARS knocks on the manufacturer’s door and says, “Show us the full breakdown. How much did it cost to make this?”

This is what Method 5: Computed Value is all about. It’s the most invasive of all customs valuation methods, and also the least used, for good reason.

But when it is applied, importers must be ready for a level of transparency many suppliers aren’t used to providing.

What is the Computed Value Method?

Under Section 66(6) of the Customs and Excise Act, SARS may use Computed Value when:

• No acceptable transaction value is available (Method 1)
• No identical or similar goods can be referenced (Methods 2 & 3)
• The goods are not sold in SA, or resale pricing isn’t reliable (Method 4)
• The foreign manufacturer agrees to share full cost data

In short, it’s a customs valuation fallback that relies on cost-plus logic, calculating the customs value from scratch.

How SARS Computes the Customs Value?

SARS builds the value using the following components:

Computed Value = Cost of Materials + Labour + Overheads + Profit + Packing

Let’s break that down:

• Materials – Raw inputs used in production (e.g., metals, fabrics, chemicals)

• Labour – Direct manufacturing labor (e.g., machine operators, assembly line staff)

• Overheads – Factory costs like utilities, rent, indirect staff, and depreciation

• Profit – A reasonable profit margin (must be justifiable)

• Packing – Export packaging and labeling costs

Example: A USD 25 Customs Value

Say your supplier produces LED lights.

• Materials: USD 12
• Labour: USD 5
• Overheads: USD 3
• Profit: USD 4
• Packing: USD 1
• Computed Value = USD 25 per unit

SARS will now use this USD 25 as the base value for duty and VAT calculation, regardless of what your commercial invoice says.

Why is Computed Value Rarely Used?

In theory, Computed Value makes sense. But in practice, it’s rarely feasible because:

• Most suppliers won’t disclose internal cost structures
• Profit margins are often confidential
• Cost data may vary month to month
• Multi-tiered supply chains make traceability difficult

Even large, reputable manufacturers may refuse to cooperate, especially if they serve many global customers.

This lack of cooperation makes Computed Value difficult to enforce without diplomatic or legal escalation.

Who is Most Affected by Computed Value?

Method 5 typically appears in cases involving:

• Custom-designed or OEM products
• First-time importers without price history
• High-tech goods with proprietary components
• Related-party transactions where pricing is questioned
• Defense, pharmaceutical, and high-compliance sectors

If your supplier is a contract manufacturer, or if you’ve negotiated atypical pricing, SARS may reject your invoice and request a computed breakdown.

How to Prepare If the Computed Value is Applied?

Even though Computed Value is uncommon, importers must be ready, especially if they operate in high-value or high-scrutiny categories.

Here’s how to prepare:

• Engage suppliers early – Ask if they’re willing to provide cost breakdowns if requested
• Maintain BoM documentation – Bill of materials, production estimates, and costings
• Use arms-length pricing logic – Especially in related-party or intra-group purchases
• Be transparent with SARS – Partial disclosures or redacted documents may raise suspicion
• Consider using valuation rulings – If a Computed Value scenario is likely, apply for a binding ruling from SARS

The Problem of Supplier Non-Cooperation

One of the biggest challenges is supplier reluctance. Many manufacturers, especially in Asia or the Middle East, simply won’t share full cost structures, for competitive or strategic reasons.

If your supplier refuses to cooperate, SARS may escalate the situation by:

Using Method 6: Fall-Back Method (next in the series)

• Applying reference values from prior imports
• Delaying clearance until valuation is resolved
• Issuing retrospective assessments during audits

That’s why early alignment, both with suppliers and customs brokers, is key to avoiding disruption.

Transglobal Cargo Helps You Stay Prepared

At Transglobal Cargo, we go beyond freight.

For importers dealing with high-value goods, related-party suppliers, or complex pricing models, we:

• Review pricing and documentation before import
• Coordinate with customs brokers for compliance assurance
• Assist in preparing supplier cost disclosures if requested
• Manage SARS valuation queries and audit support
• Handle sensitive cargo with end-to-end customs advisory

We understand that valuation isn’t just about numbers, it’s about protecting business continuity and supply chain trust.

Conclusion: When SARS Wants to See Behind the Curtain

Computed Value is the customs equivalent of asking your supplier for their recipe, ingredients, labor cost, oven time, and markup.

It’s uncomfortable, uncommon, but legally valid, and for some shipments, it’s the only way SARS can validate your declared value.

If you’re in a sector where invoices alone won’t cut it, or where product pricing is outside the norm, Computed Value may come knocking. When it does, the right logistics partner can make all the difference in how smooth or painful that process becomes.

Need help navigating customs valuation methods? Work with the best freight forwarder in Africa, Transglobal Cargo, which has you covered from documentation to delivery. Contact us today!

📌 Stay tuned for the next article in this series: When All Else Fails — SARS Uses the Fall-back Method