Calculating Customs Value

Don’t underpay or overpay in Customs duties!

Importers need to know how to calculate the value of their goods in an international transaction, including additions and deductions that have to be factored into the valuation.

In this post, we will discuss a particular type of Customs valuation known as “Transaction value.”

Why is Customs valuation important?

Importers who understand the Customs valuation process can be more certain that they are not underpaying or overpaying Customs duties.

Transaction value

“Transaction Value” is a legal term, a specific process used by CBP to determine duties and taxes you owe to the Treasury.

It is the preferred way to determine the value of imported goods, but there are other valuation methods in the regulations if transaction value cannot be determined.

CBP defines transaction value as “the price actually paid or payable for the merchandise when sold for exportation to the United States”¹ plus some important items that will be considered below.

We will be looking at additions and deductions to the “price actually paid or payable” that are key to determining the transaction value of an import shipment.

No one wants to pay too much in duties — but you also don’t want to understate your entry value and have to pay Customs penalties.

Transaction value: additions

As mentioned above, the transaction value refers to “the price actually paid or payable” for the goods plus several items that may not be as obvious.

CBP’s Informed Compliance Publication on “Customs Value” details the below additions:

A. The packing costs incurred by the buyer.
B. Any selling commission incurred by the buyer.
C. The value, apportioned as appropriate, of any assist.
D. Any royalty or license fee that the buyer is required to pay, directly or
indirectly, as a condition of the sale.
E. The proceeds of any subsequent resale, disposal, or use of the imported
merchandise that accrue, directly or indirectly, to the seller.

These amounts (items A through E) are added only to the extent that each 1) is
not included in the price, and 2) is based on information accurately establishing the
amount. If sufficient information is not available, then the transaction value cannot be
determined and the next basis of appraisement, in order of precedence, must be
considered.

CBP – Informed Compliance Publication – Customs Value, pg. 8

What are assists?

One of the additions mentioned above is an “assist.” Assists are an often overlooked or misunderstood aspect of the transaction value.

We have included CBP’s definition below, but would encourage our readers to consult CBP’s Informed Compliance Publication on “Customs Value” for further information on how to calculate the value of an assist.

An assist is any of the items listed below that the buyer of imported merchandise provides directly or indirectly, free of charge or at a reduced cost, for use in the production or sale of merchandise for export to the United States.

Materials, components, parts, and similar items incorporated in the imported merchandise.

Tools, dies, molds, and similar items used in producing the imported merchandise.

Merchandise consumed in producing the imported merchandise.

Engineering, development, artwork, design work, and plans and sketches that are undertaken outside the United States and are necessary for the production of the imported merchandise. “Engineering, development,” etc. will not be treated as an assist if the service or work is 1) performed by a person domiciled within the United States, 2) performed while that person is acting as an employee or agent of the buyer of the imported merchandise, and 3) incidental to other engineering, development, artwork, design work, or plans or sketches undertaken within the United States.

CBP – Informed Compliance Publication – Customs Value, pg. 11

Transaction value: deductions

Sometimes certain costs are included in the “price actually paid or payable” that must be deducted in order to reach a correct transaction value and for the importer to pay the correct amount in duties.

CBP explains: “the importer of record must deduct the actual cost of freight, insurance and other costs incident to international shipment, if they are included in the price actually paid of payable or referred to in the terms of sale…” ²

This will lower the transaction value, and therefore the amount of duties owed. However, you must be able to back up the deductions with supporting documents.

Customs provides additional instructions for importers if these costs are unknown.

The phrase “incident to international shipment” is important, because the above costs (freight, insurance, etc.) are not always deductible at every point in the shipping process.

CBP clarifies, “the cost or charge for foreign inland freight and post importation transportation may or may not be deducted depending on how the transaction is structured and identified on the Customs entry documentation.” ³

Learn more

• CBP’s Informed Compliance Publication on Customs Value
• CBP’s Informed Compliance Publication on Proper Deductions of Freight and Other Costs from Customs Value

Sources

1. CBP, What Every Member of the Trade Community Should Know About: Customs Value, revised July 2006. Page 8.
2. CBP, What Every Member of the Trade Community Should Know About: Proper Deductions of Freight and Other Costs from Customs Value, published March 2000. Page 8.
3. CBP, Proper Deductions of Freight and Other Costs from Customs Value, Page 8.

Our blog posts are for informational purposes only. While we use reasonable efforts to furnish accurate information, C J is not liable or responsible for the accuracy or reliability of any information contained herein.