PRESENTED BY BRENT CLAYPOOL, LCB, CCS

IMPORT COMPLIANCE: CUSTOMS VALUATION

Regulatory Requirements

Since the Dec. 8, 1993 U.S. Congress passage of the Modernization Act (“Mod Act,”) it has been the legal responsibility of the Importer of Record to apply “reasonable care” in identifying the correct Value on all of it’s imported merchandise to Customs and Border Protection (CBP), which will properly assess import duties, record accurate statistics, and determine if all other necessary legal requirements have been satisfied.

Under the “Mod Act,” which is codified at 19 U.S.C. 1401a, et. Seq., there are six different

Appraisement Methods

Appraisement methods, in order of the following preferential order:

1) Transaction Value

2) Transaction Value of Identical Merchandise

3) Transaction Value of Similar Merchandise

4) Deductive Value

5) Computed Value

6) Values if Other Values Can’t Be Determined

Appraisement Methods - Continued

In case imported merchandise can’t be appraisedby Transaction Value, then the next Appraisement Value method should be applied.

Note: At the time the Entry Summary is filed, the Importer of Record can request to CBP for writtenauthorization to use the Computed Value Appraise-ment method instead of using the Deductive Value Appraisement method.

Transaction Value - Defined

For the imported merchandise when it’s sold for exportation to the United States of America (USA), the Transaction Value is the price actually paid or payable, plus amounts equal to:

1) The Packing Costs incurred by the Buyer.

2) Any Selling Commission incurred by the

Buyer.

3) The appropriate apportioned Value of any

Assist.

Transaction Value – Defined - Continued

4) As a condition of the sale, any required direct

or indirect payment by the Buyer for any

Royalty or License Fee.

5) Any direct or indirect proceeds of any subse-

quent Resale, Disposal, or Use of the import-

ed imported merchandise to the Seller.

Price Actually Paid or Payable - Defined

As the payment can be direct or indirect, the “Price Actually Paid or Payable” for the imported

Merchandise is the total payment, excluding

International Freight, Insurance, and other C.I.F. charges, that the Buyer makes to the Seller.

Packing Costs - Defined

Packed available for shipment to the USA, and used in placing merchandise in condition, the Packing Costs are the costs of all imported con-

tainers and coverings of any nature, and of

Packing, either for Labor or Materials.

Selling Commissions - Defined

Related to or controlled by, or working for or on behalf of the Manufacturer or the Seller, the Seller’s Agent is paid any commission.

Assists - Defined

For use in the production or sale of merchandise for export to the USA, an Assist is any of the following identified items that the Buyer of the imported merchandise provides directly or in-directly, or free of charge, or at a reduced cost:

1) Incorporated in the imported merchandise, any materials, components, parts, and any similar items.

2) Used in producing the imported merchandise, any tools, dies, molds, and similar items.

‘’’’’’’’’’’’’’’’’’’’’’’’’'

Assists – Defined - Continued

3) Any merchandise consumed in producing the

imported merchandise.

4) Undertaken outside the USA, and necessary

for the imported merchandise’s production,

any Engineering, Development, Artwork, De-

sign Work, and Plans and Sketches.

Assist Values Determined

The following rules must be followed when

determining an Assist Value:

1) The Assist Value is either the cost of acquir-

ing the assist, if acquired by the Importer

of Record from an unrelated Seller, or the

cost of producing the assist, if produced by

the Importer of Record or a person related

to the Importer of Record.

Assist Values Determined - Continued

2) The Assist Value includes the Assist’s trans-

portation cost to the production facility.

3) The Assist Values used in the imported mer-

chandise production are adjusted to identify

use, repairs, modifications, tools, dies,

molds, or other factors affecting the Assist

Values.

Assist Value Apportionment

With the Assist Value determined, it’s important to apportion the Assist Value to the imported

merchandise.

For clarification, suppose an imported merchan-

dise’s complete production using the Assist will be exported to the USA. In this scenario, the Assist Value can be pro-rated several ways:

1) Over the first shipment if the Importer of

Assist Value Apportionment - Continued

Record wants to pay Import Duty once on the

entire Value.

2) Over the number of units produced up to the

time of the first shipment.

3) Over the entire anticipated production.

Royalty & License Fee Treatment

Required from the sale of imported merchandise for export to the USA, the direct or indirect Royalty or License fees a buyer pays must be included in the Transaction Value.

A Royalty or License fee will be dutiable depend-

ing upon if the buyer had to pay them as a condition of the sale, and to whom, and under what circumstances they were paid.

Proceeds Treatment

Any accrued proceeds, either directly or indirectly to the seller, are dutiable, resulting

from the subsequent sale, disposal, or use of the imported merchandise.

Excluded Transaction Value Amounts

The excluded Transaction Value amounts are:

1) Incidental to the international shipment of

the merchandise from the export country

to the USA import place, the cost, charges,

or expenses incurred for transportation,

insurance, and related services.

2) If separately identified, the reasonable cost

or charge incurred for:

Excluded Transaction Valve Amounts - Continued

A) In regards to the merchandise already

imported into the USA, the constructing

erecting, assembling, or the maintaining or

providing of technical assistance.

B) After importation, the transportation of the

merchandise.

3) With mandatory USA seller’s liability, the

CBP duties, Federal taxes, and Federal excise tax.

Transaction Value Limitations

The Transaction Value can’t be applied as the appraised value if any of the following identified limitations exist:

1) Any restrictions on the disposition or use of

the imported merchandise.

2) The Transaction Value can’t be determined.

3) If a suitable adjustment to the Transaction

Transaction Value Limitations - Continued

Value can’t be made, any seller accrued

proceeds from any subsequent resale, dis-

posal or use of the imported merchandise.

4) Where the Transaction Value isn’t accept-

able, any related-party transactions.

Acceptable Transaction Value Related-Party Transactions

The term “acceptable” defined. In determining the circumstances of the sale, the term “accept-

able” directly refers to if the relationship between the buyer and seller didn’t influence the “price actually paid or payable.”

An “acceptable” Transaction Value exists if the

Imported merchandise’s Transaction Value closely approximates any of the following test values, which directly relate to exported merchandise to the USA around the identical

Acceptable Transaction Value Related-Party Transactions - Continued

time as the imported merchandise:

1) In sales to unrelated buyers in the USA, the

Transaction Value of identical merchandise,

or of similar merchandise.

2) The Deductive Value or Computed Value for

identical merchandise or similar merchandise.

Acceptable Transaction Value Related-Party Transactions - Continued

An adjustment is necessary to determine if the Transaction Value is similar to the following test values, dependent upon if the sales involved are different in:

1) Commercial levels

2) Quantity levels

3) The Costs, Commissions, Values, Fees, and

Proceeds previously identified as “additions

to the price actually paid or payable.” (Review

Slide/Page 5 and 6.

Acceptable Transaction Value Related-Party Transactions - Continued

4) The Costs acquired by the seller in sales

whereby the seller and the buyer aren’t

related that aren’t acquired by the seller in

sales in which the seller and the buyer are

related.

Other Appraisement Methods

If imported merchandise can’t be appraised applying the Transaction Value method, the following listed, in order, Appraisement methods will be used:

1) Transaction Value of Identical Merchandise

2) Transaction Value of Similar Merchandise

3) Deductive Value

4) Computer Value

5) Values of other Values can’t be determined

Transaction Values of Identical and Similar Merchandise

The next Appraisement method after Trans-

Action Value, the Transaction Value of Identical

Merchandise must have a previously accepted CBP value.

The next Appraisement method after Trans-

Action Value of Identical Merchandise is the Transaction Value of Similar Merchandise, of which the value must be previously CBP-ac-

cepted.

Deductive Value

The next Appraisement method is Deductive Value, which is the resale price in the USA after importation of the merchandise, specifically with deductions and additions for certain items from the original unit price.

Reminder: If an Assist is involved in a sale, the

same sale can’t be used in deter-

mining the Deductive Value.

Deductive Value - Continued

The following identified items aren’t part of the Deductive Value and must be deducted from the unit price:

1) Related with sales in the USA of imported

merchandise of the same class or kind as the

merchandise in question, any commissions

usually paid or the addition usually made for

profit and general expenses.

Deductive Value - Continued

2) Transportation and Insurance Costs

3) Customs (CBP) Duties and Federal Taxes

4) Further Processing Value, which is applied

only when the merchandise isn’t sold in its

original imported condition.

Deductive Value – Continued

Reminder: A deduction can’t be made for both commissions and profits.

Example: A paid commission can be deducted from the unit price but any profit and general expenses can be added to the unit price.

Computed Value

The next Appraisement method is Computed Value, of which the Importer of Record can choose as the Appraisement method to precede the Deductive Value.

The Computed Value is collectively made up of the following items:

1)