Identifying the different U.S. CBP's approved Valuation methods for imported merchandise into the United States.

1. CUSTOMS VALUATION
• Presented by Brent Claypool,
LCB, CCS
• Experienced Customs
Compliance Manager
Seeking To Add Value to
International Logistics
Company, International
Freight Forwarding
Company, American
Importer, American Exporter,
or Medium-to-Large-Sized
Customs Brokerage
Company

2. BACKGROUND
As a result of the Dec. 8, 1993 passage of Customs Modernization or “Mod
Act,” it has been the Importer of Record’s (IOR’s) responsibility to use
“reasonable care” to “enter,” “classify,” and “value” imported merchandise
and furnish any other information necessary to allow the U.S. Customs and
Border Protection (CBP) agency to correctly assess import duties, collect
accurate statistics, and decide if all other required legal requirements are
met.
Under the authority of 19 U.S. Code 1500 (A), U.S. CBP is responsible to
correct the final appraisement of merchandise, according to 19 U.S. Code
1401A, which occurs after U.S. CBP has received the IOR’s declared value
filing (transmission).

3. THE APPRAISEMENT OF IMPORTED
MERCHANDISE
Per the Trade Agreements Act of 1979, all merchandise imported into the
United States is subject to six different Appraisement methods, in
preferential order.
The appraised value of all merchandise imported into the United States is
the Transaction Value of the products. In case the imported merchandise
can’t be appraised under Transaction Value, the following are the
identified Appraisement methods in order:
Transaction Value of Identical Merchandise

4. THE APPRAISEMENT OF IMPORTED
MERCHANDISE – CONTINUED
Transaction Value of Similar Merchandise
Deductive Value
Computer Value
Values If Other Values Can’t Be Determined
Note: At the time the Entry Summary is filed (transmitted), the IOR may request
U.S. CBP to accept Computed Value in place of Deductive Value.
.

5. TRANSACTION VALUE DEFINED
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:
• The Packing Costs incurred by the Buyer.
• Any Selling Commission incurred by the Buyer.
• The Value, as appropriately apportioned, of any Assist.

6. TRANSACTION VALUE DEFINED -
CONTINUED
• As a condition of the sale, any Royalty or License Fee that the Buyer is
required to directly or indirectly pay.
• The proceeds of any subsequent Resale, Disposal, or Use of the
imported merchandise that directly or indirectly accrue to the Seller.
The above items are additions only if each isn’t included in the price and is
based on information accurately establishing the amount.

7. PRICE ACTUALLY PAID OR PAYABLE
DEFINED
The Price Actually Paid or Payable for imported merchandise is the total
direct or indirect payment, excluding International Freight, Insurance, and
other C.I.F. (Cost, Insurance, Freight) charges, that the Buyer makes to the
Seller.
Examples of an indirect payment are when the Buyer settles all or part of a
debt owed by the Seller, or when the Seller, in order to settle a debt, he or
she owes to the Buyer, reduces the price on a current importation.
Also, other than the identified Transaction Value activities, if a Buyer
performs an activity on his or her own account, then the activity isn’t
considered an indirect payment to the Seller and isn’t part of the
Transaction Value.

8. PACKING COSTS DEFINED
Packing Costs are the costs of all Containers and Coverings of whatever
nature and of Packing, whether for Labor or Materials, used in placing
merchandise in condition, packed ready for shipment to the United States.

9. SELLING COMMISSIONS DEFINED
Selling Commission is any commission paid to the Seller’s Agent, who is
related to or controlled by, or works for or on behalf of, the Manufacturer
or the Seller.

10. HOW IS A ROYALTY OR LICENSE FEE
TREATED?
Decided on a case-by-case basis, whether a Royalty or License Fee is
dutiable will depend on whether the Buyer had to pay them as a condition
of the sale and to whom and under what circumstances they were paid.

11. HOW ARE PROCEEDS TREATED?
Any Proceeds resulting from the subsequent Sale, Disposal, or Use of the
imported merchandise that accrue directly or indirectly to the Seller are
dutiable.

12. HOW IS AN ASSIST TREATED?
The apportioned value of any Assist constitutes part of the Transaction
Value of the imported merchandise.

13. AN ASSIST DEFINED
An Assist is any of the following identified items that the Buyer of
imported merchandise provides directly or indirectly, free of charge or at a
reduced cost, for us 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.

14. AN ASSIST DEFINED - CONTINUED
• 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 required
for the imported merchandise production.
Note: “Engineering, Development, and etc.” will not be considered as an
Assist if
the Service or Work is:

15. AN ASSIST DEFINED - CONTINUED
• Performed by a person living within the United States,
• Performed while that person is acting as an employee or agent of the
Buyer of the imported merchandise, and
• Incidental to other Engineering, Development, Artwork, Design Work, or
Plans or Sketches undertaken within the United States.

16. HOW TO DETERMINE AN ASSIST VALUE
The following identified rules should be applied when determining an
Assist Value:
1) The Value is either:
A) The cost of acquiring the Assist, if acquired by the IOR from an
unrelated
Seller, or
B) The cost of producing the Assist, if produced by the IOR or a person
related to the IOR.

17. HOW TO DETERMINE AN ASSIST VALUE
– CONTINUED
2) The value includes the cost of transporting the Assist to the place of
production.
3) The value of Assists (Tools, Dies, Molds) used in producing the imported
merchandise is adjusted to reflect use, repairs, modifications, or other
factors
affecting the Assist’s value. Also, repairs and modifications can result in
the
Assist value to be adjusted upwards. For a previously used Assist by the
IOR,

18. HOW TO DETERMINE AN ASSIST VALUE
– CONTINUED
the original acquisition or production cost has to be decreased.
4) If done outside the United States, for any Engineering, Development,
Artwork,
Design Work, and Plans and Sketches, the value is:
A) The cost of obtaining copies of the Assist, if the Assist is available in the
public domain.

19. HOW TO DETERMINE AN ASSIST VALUE
– CONTINUED
B) The cost of the purchase of lease if the Assist was bought or leased by
the
Buyer from an unrelated person.
C) The value added outside the United States, if the Assist was produced in
the
United States and one or more Foreign Countries.

20. HOW IS AN ASSIST VALUE
APPORTIONED?
After determining the Assist value, the next step is to apportion the Assist
value to the imported merchandise. Reasonably completed, based on
generally accepted accounting principles, the apportionment normally
involves the recording and measuring of assets and liabilities and changes
therein, the disclosing of information, and the preparing of financial
statements.
There are different methods available to apportion the Assist value. As an
example, what if the complete production using the Assist is to be
exported to the United States. In this case, the Assist value could be pro-
rated several ways:

21. HOW IS AN ASSIST VALUE
APPORTIONED? - CONTINUED
• Over the first shipment if the IOR wants to pay import duty on the entire
value at one time
• Over the number of units produced up to the time of the first shipment
• Over the entire anticipated production

22. HOW IS AN ASSIST VALUE
APPORTIONED? - CONTINUED
If the entire anticipated production isn’t to be exported to the United
States, another apportionment method, which is consistent with generally
accepted accounting principles, will be used.

23. WHAT ARE THE EXCLUDED
TRANSACTION VALUE AMOUNTS?
1) The cost, charges, or expenses incurred for Transportation, Insurance, and related
Services incident to the international shipment of the merchandise 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:
A) Constructing, erecting, assembling, maintaining, or providing Technical
Assistance with respect to the merchandise after importation into the
United States.

24. WHAT ARE THE EXCLUDED TRANSACTION
VALUE AMOUNTS? – CONTINUED
B) Transporting the merchandise after importation.
3) The U.S. CBP (Customs) Duties, other Federal Taxes, and any Federal
Excise
Tax for which Sellers in the United States are required to pay.

25. WHAT ARE THE LIMITATIONS ON USING
TRANSACTION VALUE?
If any of the following identified limitations, which are divided into four
groups, are present, the Transaction Value can’t be used as the appraised
value, and the next Value basis will be applied.
1) Restrictions on the Disposition or Use of the merchandise.
2) Proceeds of any subsequent Resale, Disposal, or Use of the
merchandise,
accruing to the Seller, for which an appropriate adjustment to
Transaction

26. WHAT ARE THE LIMITATIONS ON USING
TRANSACTION VALUE? - CONTINUED
Value can’t be made.
4) Related-Party Transactions where the Transaction Value isn’t acceptable.

27. WHEN IS TRANSACTION VALUE
“ACCEPTABLE” IN RELATED-PARTY
TRANSACTIONS?
In this context, the word “acceptable” is defined to mean the relationship
between the Buyer and Seller didn’t influence the “price actually paid or
payable.”
In making this determination, the circumstances of the Sale must be
thoroughly examined.
Also, Transaction Value can be “acceptable” if the Transaction Value of the
imported merchandise closely resembles to any of the following Test
Values that either related to merchandise exported to the United States at
or about the same time as the imported merchandise:

28. WHEN IS TRANSACTION VALUE
“ACCEPTABLE” IN RELATED-PARTY
TRANSACTIONS? – CONTINUED
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.

29. WHEN IS TRANSACTION VALUE
“ACCEPTABLE” IN RELATED-PARTY
TRANSACTIONS? – CONTINUED
In deciding if the Transaction Value is close to one of the identified
Test Values,
an adjustment is made if the Sales involved are different in:
* Commercial levels
* Quantity levels
* The Costs, Commissions, Values, Fees, and Proceeds described in
Transaction Value additions, identified as items A through E,
specifically to
the price actually paid or payable.

30. WHEN IS TRANSACTION VALUE
“ACCEPTABLE” IN RELATED-PARTY
TRANSACTIONS? – CONTINUED
* The Costs incurred by the Seller in Sales, in which he or she and the
Buyer
are not related that are not incurred by the Seller in Sales in which he
or
she and the Buyer are related.

31. TRANSACTION VALUE OF IDENTICAL
MERCHANDISE DEFINED
When the Transaction Value can’t be determined, the appraised (U.S. CBP)
Customs Value for imported merchandise is the Transaction Value of
Identical Merchandise.
The Identical Merchandise Value must be a previously accepted (U.S. CBP)
Customs Value.

32. TRANSACTION VALUE OF SIMILAR
MERCHANDISE DEFINED
If the Transaction Value for Identical Merchandise doesn’t exist or can’t be found, the
appraised (U.S. CBP) Customs Value for imported merchandise is the Transaction Value of
Similar Merchandise.
The Similar Merchandise Value must be a previously accepted (U.S. CBP) Customs Value.

33. DEDUCTIVE VALUE DEFINED
If the Transaction Value for Identical or Similar Merchandise can’t be
determined, the appraised (U.S. CBP) Customs Value for imported
merchandise is the Deductive Value.
Deductive Value, which is the Resale Price in the United States after
importation of the merchandise, is calculated by starting with a Unit Price
and making certain additions to and deductions from that Price.

34. DEDUCTIVE VALUE DEDUCTIONS
ALLOWED
The following identified items aren’t part of Deductive Value and have to
be deducted from the Unit Price of the imported merchandise:
1) Commissions usually paid or the addition usually made for Profit and
General
Expenses, in connection with Sales in the United States of imported
merchandise of the same class or kind as the concerned merchandise.
2) Transportation / Insurance Costs

35. DEDUCTIVE VALUE DEDUCTIONS
ALLOWED - CONTINUED
3) Customs Import Duties / Federal Taxes
4) Further Processing Value (Only used when the merchandise isn’t sold in
the
condition as when it was imported.)

36. ARE DEDUCTIONS PERMITTED FOR
COMMISSIONS AND PROFITS?
No, the imported merchandise’s Unit Price is reduced by either a paid
Commision or the addition made for Profit and General Expenses>

37. COMPUTED VALUE DEFINED
If Valuation can’t be based on any of the previously identified
appraisements, the final appraised (U.S. CBP) Customs Value for imported
merchandise is Computed Value.
As a basis of appraisement, the Computed Value is the one the Importer of
Record can select instead of Deductive Value. Computed Value consists of
the total of the following identified items:

38. COMPUTED VALUE DEFINED -
CONTINUED
1) Materials, Fabrication, and Other Processing used in producing the
imported
merchandise
2) Profit and General Expenses
3) Any Assist, if not included in the above identified Item Number’s 1 and 2
4) Packing Costs

39. COMPUTED VALUE DEFINED -
CONTINUED
Important Reminder: As only data available in the United States is to be
used, the
determined Value for the imported merchandise
should be
based on previously determined Values that are
derived
from one of the five identified appraisement methods.

40. IMPORTER OF RECORD’S LEGAL OBLIGATION
TO PROVIDE INFORMATION TO U.S. CBP
The Mod Act requires the Importer of Record, or Authorized Agent, to
complete an Import Entry by filing (transmitting) with U.S. CBP the
Declared Value of the imported merchandise, and other import
documentation and information as required to allow U.S. CBP to correctly
assess Duties on the imported merchandise.
The Entry Summary (Customs Form 7501) requires the Importer of Record,
or Authorized Agent, to declare to the best of their (Declarant’s)
knowledge, the Import Entry fully discloses the true Prices, Values,
Quantities, Rebates, Drawbacks, Fees, Commissions and Royalties, and is
true and correct, and that all

41. IMPORTER OF RECORD’S LEGAL OBLIGATION
TO PROVIDE INFORMATION TO U.S. CBP -
CONTINUED
Products or Services provided to the Seller of the merchandise, either Free
or at Reduced Cost, are fully disclosed.
For the Importer of Record to ensure the Value information provided to
U.S. CBP is complete, the Importer of Record might need to effectively
coordinate with all relevant Corporate or Company Departments, such as
Research and Development, Contracting, Shipping, Logistics, Supply Chain,
Traffic, Accounting, Finance, Quality Assurance, Engineering, Overseas
Manufacturing.

42. IMPORTER OF RECORD’S LEGAL OBLIGATION
TO PROVIDE INFORMATION TO U.S. CBP -
CONTINUED
Important Reminder: The Mod Act requires the Importer of Record to use
“reasonable care” in filing (transmitting) the
information
with U.S. CBP. A failure to exercise “reasonable care”
by
the Importer of Record can lead to U.S. CBP delaying
the
imported merchandise’s release and/or issuing
penalties
against the Importer of Record.