Chapter 4. The Valuation of Imported Merchandise

AuthorJ. Steven Jarreau
Pages63-84
CHAPTER 4
The Valuation of Imported
Merchandise
J. Steven Jarreau1
INTRODUCTION TO THE VALUATION H
OF IMPORTED MERCHANDISE
Since you know how to classify your imported merchandise pursuant to the Har-
monized Tariff Schedule of the United States (HTSUS) and you know the rate of
duty that corresponds to the merchandise’s eight-digit HTSUS subheading, you
now need to know the customs value. The customs value enables you to deter-
mine the amount of duties that you will owe U.S. Customs and Border Protec-
tion. Once again, the focus is the “bottom line” of your importing transaction.
The valuation of imported merchandise, similar to classification pursuant to
the HTSUS, is undertaken pursuant to an international agreement that has been
enacted into U.S. law. “Appraisement” or valuation is made according to the
World Trade Organization (WTO) Valuation Agreement that was enacted into
U.S. law in the Trade Agreements Act of 979.2 The goal of the WTO Valuation
Agreement and one of the reasons it was enacted into U.S. law was to estab-
lish a degree of international uniformity in the valuation of imported merchan-
dise. Prior to the agreement, countries had many differing methods for valuing
imports and nothing prevented them from changing their respective domestic
value laws. With the agreement and its implementation into the domestic laws
of each of the more than 40 WTO member countries, importers and exporters
around the world value imports pursuant to an essentially, but not perfectly,
uniform method.
The WTO Valuation Agreement and, therefore, U.S. value law provides six
methods of appraisement. Those methods are: () transaction value; (2) transac-
tion value of identical merchandise; (3) transaction value of similar merchandise;
(4) deductive value; (5) computed value; and (6) the “fallback” method. These
methods must be applied sequentially. This means that if your merchandise can
be valued using the transaction value method, you may not use any of the other
methods. If you are not able to apply one method, you proceed to the next
63
Mr. Jarreau would like to extend thanks to Howard D. Hurwitz, Counsel, Commercial Law, GE Consumer &
Industrial, General Electric Company, and Fernando Peña, Attorney-Advisor, Regulations and Rulings, O ce of
International Trade, U.S. Customs and Border Protection, who reviewed this chapter and o ered critical insight.
jar24508_04_c04_p063-084.indd 63jar24508_04_c04_p063-084.indd 63 7/17/09 12:00:33 PM7/17/09 12:00:33 PM
method, but again must apply the value methods in the order set forth by law.
The only exception to this requirement provides you with the choice of using
either the deductive or computed methods, provided that you are unable to uti-
lize any of the value methods that precede the deductive and computed value
methods.
Suppose your merchandise has a “Free” rate of duty or its duty is determined
on a per-unit basis. Does it matter how you value your imported goods? It mat-
ters because, although you may not owe any import duties or the duties are not
based on the value of the merchandise, the U.S. government collects import sta-
tistics and the failure to comply with U.S. value law and regulations may result
in the assessment of financial penalties. Certain fees and taxes that you may incur
may be based on the customs value of your goods. As an importer, you are obli-
gated under the Customs Modernization Act to use “reasonable care” to enter,
classify, and value your merchandise.3 Even when no duties are due, CBP takes
the correct valuation of your merchandise seriously.
TRANSACTION VALUE H
The transaction value method is the first method of appraising your imported
merchandise. It is the method by which the vast majority of all goods imported
into the United States are appraised. It is also generally the easiest method to
apply. If you are not able to use the transaction value method and need to pro-
ceed to one of the other methods, the valuation of your merchandise generally
becomes more complex for both you and CBP.
Transaction value is the “price actually paid or payable for imported mer-
chandise when sold for exportation to the United States,” plus amounts equal
to the “statutory additions.”4 The statutory additions to the price actually paid
or payable, or the PAPP, are () packing costs incurred by the buyer; (2) sell-
ing commissions incurred by the buyer; (3) the apportioned value of any assist;
(4) royalties and license fees related to the imported merchandise that the buyer
is required to pay, directly or indirectly, as a condition of the sale; and (5) the
proceeds of any subsequent resale, disposal, or use that accrue, directly or indi-
rectly, to the seller.5
PRACTITIONER’S TIP: Transaction value is often thought of as just the invoice price, but
this oversimplifies the method. It begins with reference to a sale or invoice price, but you should
not simply use the invoice price. The invoice price may not completely reflect the “transaction
value,” as the invoice price may not include, for example, amounts for assists or royalties.
Price Actually Paid or Payable
Since transaction value is the “price actually paid or payable for imported mer-
chandise when sold for exportation to the United States,” plus the statutory
additions, the initial step in ascertaining the transaction value is determining the
“price actually paid or payable.” The PAPP is
64 CHAPTER 4
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