Education: the Strongest Link in the Supply Chain Valuation: Beyond Transaction Value NCBFAA—April 2008
We’re here to consider the various methods of valuation acceptable to U.S. Customs for imported goods
Topics of Discussion
Transaction value & statutory additions to the price paid or payable
Alternative methods of valuation
We interrupt this program…
On January 24, 2008 CBP announced its intention to reinterpret the Value Law.
Comments were invited from the public and time extended to 4/23.
Big change from methodology in effect for more than 20 years.
MORE AFTER THIS…
Where we begin…
Transaction Value: the Preferred method
The law: 19 U.S.C. 1401a
Except as otherwise specifically provided for in this chapter, imported merchandise shall be appraised, for the purposes of this chapter, on the basis of the following:
(A) The transaction value provided for under subsection (b) of this section.
(b) Transaction value of imported merchandise (1) The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States, plus amounts equal to—
A) the packing costs incurred by the buyer with respect to the imported merchandise;
(B) any selling commission incurred by the buyer with respect to the imported merchandise;
(C) the value, apportioned as appropriate, of any assist;
(D) any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and
(E) the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.
Acronym : C-R-A-P-P
Have you asked the Importer if there are separate packing costs, commissions, assists, royalties, or additional payments to the seller not shown on the commercial invoice?
Are the importer and the seller related parties?
“ Related parties”under the statute…
the persons specified in any of the following subparagraphs shall be treated as persons who are related:
(A) Members of the same family, including brothers and sisters (whether by whole or half blood), spouse, ancestors, and lineal descendants.
(B) Any officer or director of an organization and such organization.
(C) An officer or director of an organization and an officer or director of another organization, if each such individual is also an officer or director in the other organization.
(E) Employer and employee.
(F) Any person directly or indirectly owning, controlling, or holding with power to vote, 5 percent or more of the outstanding voting stock or shares of any organization and such organization.
(G) Two or more persons directly or indirectly controlling, controlled by, or under common control with, any person.
Exclusions from T/V:
1. 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 United States.
2. 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 United States, or Transporting the goods after importation.
3. The customs duties and other Federal taxes, including any Federal excise tax for which sellers in the United States are ordinarily liable.
Does the relationship affect the price?
When the price alone won’t do…
If the merchandise cannot be appraised on the basis of transaction value, the secondary bases are considered in the following order :
Transaction Value of Identical Merchandise
Transaction Value of Similar Merchandise
Value derived under 19 CFR 152.107 if all else fails.
The importer may request the use of Computed Value instead of Deductive Value IF the request is made at the time the entry summary is filed.
“ identical merchandise” means— merchandise that is identical in all respects to, and was produced in the same country and by the same person as, the merchandise being appraised…or least merchandise that is identical in all respects to, and was produced in the same country as, but not produced by the same person as, the merchandise being appraised.
Transaction value can be “acceptable” in a related party transaction if the transaction value of the imported merchandise closely approximates any one of the following test values, provided these values relate to merchandise exported to the United States at or about the same time as the imported merchandise:
1. The transaction value of identical merchandise, or of similar merchandise, in sales to unrelated buyers in the United States .
2. The deductive value or computed value for identical merchandise or similar merchandise.
The test values are used for comparison only. They do not form a substitute basis of valuation.
In determining if the transaction value is close to one of the foregoing test values, an adjustment is made if the sales involved differ in:
The costs, commissions, values, fees, and proceeds described in A through E as additions to the price actually paid or payable
The costs incurred by the seller in sales in which seller and the buyer are not related that are not incurred by the seller in sales in which they are related
What is the Transaction Value of Identical Merchandise?
When the transaction value cannot be determined, then the customs value of the imported goods being appraised is the transaction value of identical merchandise.
NOTE: The value of the identical merchandise must be a previously accepted customs value.
The term “identical merchandise” means— (A) merchandise that is identical in all respects to, and was produced in the same country and by the same person as, the merchandise being appraised; or
(B) if merchandise meeting the requirements under subparagraph (A) cannot be found…merchandise that is identical in all respects to, and was produced in the same country as, but not produced by the same person as, the merchandise being appraised.
What is the Transaction Value of Similar Merchandise?
If merchandise identical to the imported goods cannot be found or an acceptable transaction value for such merchandise does not exist, then the customs value is the transaction value of similar merchandise.
Again, the value of the similar merchandise must be a previously accepted customs value.
The term “similar merchandise” means— merchandise that— (i) was produced in the same country and by the same person as the merchandise being appraised,
(ii) is like the merchandise being appraised in characteristics and component material, and
(iii) is commercially interchangeable with the merchandise being appraised; or
if such merchandise cannot be found, merchandise that— (i) was produced in the same country as, but not produced by the same person as, the merchandise being appraised, and
(ii) meets the requirement set forth in subparagraph (A)(ii) and (iii).
Deductive Value is the resale price in the United States after importation of the goods, with deductions for certain items.
Generally, the Deductive Value is calculated by starting with a unit price and making certain additions to and deductions from that price.
“From the top down”---versus Computed Value “from the bottom up”
Allowed Deductions from Deductive Value
1. Either commissions usually paid or the addition usually made for profit and general expenses, in connection with sales in the U.S. of imported merchandise of the same class or kind as the merchandise concerned
2. Transportation/Insurance Costs
3. Customs Duties/Federal Taxes
4. Value of Further Processing (used only when the merchandise is not sold in the condition as imported)
… consists of the sum of the following items:
1. Materials, fabrication, and other processing used in producing the imported merchandise
2. Profit and general expenses
3. Any assist, if not included in items 1 and 2
4. Packing costs
Back to the Statute… using what you couldn’t use?
Value if other values cannot be determined or used…
If the value of imported merchandise cannot be determined, or otherwise used for the purposes of this chapter, under subsections (b) through (e) of this section,
the merchandise shall be appraised for the purposes of this chapter on the basis of a value that is derived from the methods set forth in such subsections, with such methods being reasonably adjusted to the extent necessary to arrive at a value
§ 152.108 Unacceptable bases of appraisement.
For the purposes of this subpart, imported
merchandise may not be appraised
on the basis of:
(a) The selling price in the United
States of merchandise produced in the
(b) A system that provides for the appraisement
of imported merchandise at
the higher of two alternative values;
(c) The price of merchandise in the
domestic market of the country of exportation;
(d) A cost of production, other than a
value determined under § 152.106 for
merchandise that is identical merchandise,
or similar merchandise, to the
merchandise being appraised;
(e) The price of merchandise for export
to a country other than the
(f) Minimum values for appraisement;
(g) Arbitrary or fictitious values.
What is Reconciliation? The official description:
The reality of modern international trade is that many elements of a transaction may be undeterminable at the time the merchandise is entered. For example, the final value of equipment provided as an assist may not be known until the close of an accounting period, so the correct value of the merchandise is not known until that time.
Reconciliation allows the importer, using reasonable care, to file entry summaries with CBP with the best available information, with the mutual understanding that certain elements, such as the declared value, remain outstanding. At a later date, when the specifics have been determined, the importer files a Reconciliation which provides the final and correct information. The Reconciliation is then liquidated, with a single bill or refund, as appropriate.
In the ACS Reconciliation Prototype, the following issues are allowed Reconciliation:
Value (Assists, Royalties, etc.)
HTS 9802 Value
* Because classification is closely linked to the admissibility of merchandise, Reconciliation of classification will be limited to certain situations
Reconciliation is NOT mandatory. Importers may still make prior disclosures, file protests, individual claims under section 520, request withholding of liquidation , and make changes to individual entry summaries on a per-entry basis.
Back to our lead story…
The reinterpretation of the Value Law….
The January 24, 2008 BOMBSHELL…
Nissho Iwai 1992
Sale for export to the United States?
First or last?
Akin to “Purchaser in Canada?”
WHAT TO DO, WHAT TO DO…
Protests, summonses…all the way to the Supreme Court??
A surrender of sovereignty??
And now for something completely different…
Where our audience competes for prizes.
Statute: 19 USC 1401a
Regulations: 19 CFR 152.100-108
Informed Compliance Publication:Customs Value (7/06)