Although complex, U.S. Customs guidelines for valuation should be carefully followed by importers to avoid unwanted penalties. U.S. Customs Valuation can be very nuanced and hard to understand even for seasoned members of the Trade Community. Providing U.S. Customs with an accurate valuation for the products you plan to import is paramount to ensuring that you do not incur any additional fees for failing to do so. No company wants to pay more than they must during a transaction. This is especially true for importers who aim to avoid penalties when passing merchandise through U.S. Customs. Penalties can be avoided by properly adhering to valuation guidelines so that you can provide an accurate valuation as an importer.
The importer of record (IOR) is responsible for giving U.S. Customs an accurate valuation of any merchandise they plan to bring into the U.S. In doing so they must operate with a certain degree of “reasonable care” under Section 484 of the Tariff Act. This is especially important given that failure to do so could result in penalties. There are six (6) methods enumerated in the Trade Agreements Act of 1979 (the Act) which an IOR can use to calculate the valuation of merchandise. They are as follows in order of the Act’s preference:
Transaction Value of goods
Transaction Value of Identical Merchandise
Transaction Value of Similar Merchandise
Values if Other Values Cannot be Determined
IORs typically rely on Transaction Value of goods (or merchandise), as it is preferred under the Act. Transaction Value of goods is the actual amount paid for merchandise when sold for exportation to the U.S. plus packaging costs, selling commission, assisting materials value, licensing or royalty fees incurred by the sale, and its proceeds. The actual amount paid is determined by taking the total amount the buyer paid and subtracting any international freight, insurance, and additional C.I.F. charges. Indirect payment, such as a buyer settling the seller’s debts on their behalf, may also be part of the transaction value.
The packaging cost of a transaction is simply the cost of any shipping materials used to ship merchandise to the U.S. This includes costs of labor related to packaging.
A selling commission is a fee paid to the seller’s agent that is related to the seller or manufacturer of the merchandise.
The prorated portion of the value of an assist is applied to the merchandise.
Licensing or royalty fees are applied to the Transaction Value of goods if they are determined to be dutiable. The subsequent resale, disposal, or use of the merchandise may also be considered dutiable.
Certain amounts may be excluded from the Transaction Value of goods. This includes any monetary expenses from transportation, insurance, or other services related to the shipment of merchandise from the country of origin to the U.S. Transportation or assembly of the merchandise after it has been imported to the U.S. are exempt. Also, excluded from the transaction value are any customs duties, Federal excise tax, and other Federal taxes. Additionally, there are four (4) areas which limit the Transaction Value of the Goods. They are as follows:
Restrictions on the disposition or use of the merchandise
The conditions with indeterminate value
Resale proceeds of the merchandise
Disposal proceeds of the merchandise
Use proceeds of the merchandise
Related party transactions where the transaction value is not acceptable
Lastly, bear in mind that the transaction value may be considered unacceptable if the relationship between buyer and seller influenced the amount paid for the merchandise.
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