Classification and Valuation
Classification and Valuation
This domain is the highest-yield area of the exam. It tests the General Rules of Interpretation (GRI), the Additional U.S. Rules, and the six valuation methods of 19 U.S.C. 1401a.
Classification method
Apply the GRI in order and stop at the first that resolves the issue:
- GRI 1: heading text and section/chapter notes control.
- GRI 2(a): incomplete or unassembled goods with the essential character of the complete article.
- GRI 3(a): the most specific description beats a general one.
- GRI 3(b): essential character for mixtures, sets, and composite goods.
- GRI 3(c): when 3(a) and 3(b) fail, use the heading occurring last in numerical order.
- GRI 4: goods most akin; GRI 5: packing; GRI 6: subheadings, applying GRI 1-5 at each level.
Valuation method
The primary method is transaction value - the price actually paid or payable, plus assists, selling commissions, royalties that are a condition of sale, proceeds, and packing. Deduct international freight and insurance, post-importation construction, and duties. If transaction value cannot be used, proceed in order: identical, similar, deductive, computed, then the other method.
Worked example
A U.S. buyer pays a Hong Kong trader $50 per unit; the Vietnamese factory sells to the trader for $30, and the goods are clearly destined for the United States. A first-sale valuation at $30 is supportable. Add a $5,000 mold supplied free to the factory, amortized over production. Freight of $2,000 is not added to customs value.
Traps
- Reaching GRI 3(b) before checking specificity under 3(a).
- Adding international freight or buying commissions to transaction value.
- Using deductive value before identical and similar goods.