In the eyes of the U.S. Customs and Border Protection (CBP), valuation is critical.

Customs is the second largest collector of revenue in the United States. Incorrectly reporting valuation can lead to an underpayment, and also overpayment, of duty and fees.

 The Real World of Valuation Challenges

The predicament in getting an accurate valuation for CBP is in receiving pertinent background information for the product. Minor transactions can qualify as assists by CBP. “Assists” describe items of value that a supplier receives from a customer that aid in the production of goods that are subsequently sold/shipped to that customer. Examples of assists include molds, production tools, raw materials, supplies and parts used to produce the final product. The value of the assist is added to transaction value when calculating customs value.

 What is Transaction Value?

 The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States. Typically, this value is the sales price paid by the buyer to the seller for the imported product. Under the “transaction value method,” the price paid or payable includes the following statutory additions:

  • The packing costs incurred by the buyer
  • Any selling commission incurred by the buyer
  • The value, apportioned as appropriate, of any assist (i.e., tooling, parts, design work and the like supplied by the buyer to the seller free of charge)
  • Any royalty or license fee that the buyer is required to pay, directly or indirectly, as a condition of the sale
  • The proceeds of any subsequent resale, disposal or use of the imported merchandise that accrue, directly or indirectly, to the seller. These amounts are added only to the extent that each:
  1. Is not included in the price
  2. Is based on information accurately establishing the amount

 What to Exclude

The cost, charges or expenses incurred for transportation, insurance, and related services incident to the international shipment of the goods from the country of exportation to the place of importation in the U.S.

  • If identified separately, any reasonable cost or charge incurred for constructing, erecting, assembling, maintaining or providing technical assistance with respect to the goods after importation into the U.S. or transporting the goods after importation
  • The customs duties and other federal taxes, including any federal excise tax for which sellers in the U.S. are liable

How To Utilize Financial Records for Correct Valuation

Depending on record keeping of the price payable for goods, one must utilize company’s financial records to make this determination. Get your vendors and broker to comply with established procedures. The price paid is derived from commercial invoices and payments made.

Also using entry data from the vendor’s commercial invoices can yield the Purchase Order information found in your ERP system. This information can help determine the price paid for commercial goods imported and to establish the price paid.