Customs Valuation
This domain tests the six sequential methods of appraisement and the adjustments that turn an invoice price into a customs value. The United States uses a FOB-type value: foreign costs to the port of export are dutiable, while post-exportation international freight and insurance are not.
The sequence (19 U.S.C. §1401a)
- Transaction value - the price actually paid or payable, plus statutory additions.
- Identical merchandise. 3. Similar merchandise. 4. Deductive value. 5. Computed value. 6. Fallback (modified deductive or computed, with prohibitions). Each method is available only if the preceding one fails.
Additions and exclusions
Add: selling commissions; assists (tooling, engineering, materials supplied free or at reduced cost); royalties or license fees the buyer must pay as a condition of sale; packing; proceeds of resale accruing to the seller. Exclude: international freight and insurance after exportation, duties and taxes, post-importation construction or assembly, and buying commissions.
Related-party prices are acceptable only if the circumstances of sale show an arm's-length negotiation or a test value is met.
Worked example
Invoice FOB $10,000; the buyer supplies free tooling worth $1,500 to the factory; the buyer pays a $500 royalty to a third party as a condition of sale; ocean freight is $800. Customs value = 10,000 + 1,500 + 500 = $12,000. Freight is excluded; the assist and the royalty are included.
Traps that cost marks
- Adding freight and insurance to be conservative.
- Missing assists because they never appear on the invoice.
- Accepting a related-party price without the circumstances-of-sale or test-value analysis.
- Reordering the methods, for example reaching for deductive value because transaction value is inconvenient.