Why customs valuation matters
Customs duties are calculated as a percentage of the declared customs value. If your declared value is incorrect, you risk overpaying duties by declaring too high a value, underpaying duties which triggers penalties and interest if CBP audits your entries, or fraud charges if CBP determines intentional undervaluation.
Getting valuation right is both a compliance requirement and a cost optimization opportunity.
The transaction value method
The primary method for customs valuation in the US and most countries is the transaction value method. Transaction value is defined as the price actually paid or payable for the goods when sold for export to the United States, plus certain additions.
The price paid or payable is typically the amount shown on the commercial invoice. This includes all payments made directly or indirectly by the buyer to the seller as a condition of the sale.
Additions to transaction value
Certain costs must be added to the invoice price to arrive at the correct customs value. Packing costs including the cost of containers and packing labor must be added. Selling commissions paid by the buyer to the seller's agent are added. Assists are items supplied by the buyer to the seller free of charge or at reduced cost for use in producing the imported goods, such as tools, dies, molds, or design work. Royalties and license fees paid as a condition of the sale must be added. Proceeds from resale that accrue to the seller must be included.
Deductions from customs value
Certain costs can be excluded from customs value if they are separately identified on the invoice. International freight and insurance costs are excluded when using the FOB valuation basis that the US applies. Post-importation costs such as domestic freight, installation, assembly, and maintenance are excluded. US import duties and taxes are not part of the customs value.
First Sale valuation
For goods that pass through intermediaries such as trading companies before reaching the US, First Sale valuation can reduce the dutiable value. Instead of declaring the price paid to the trading company, the importer declares the price paid by the trading company to the manufacturer, which is typically lower.
First Sale valuation is legal but requires extensive documentation including proof that the first sale was a bona fide arm's-length transaction, evidence that the goods were clearly destined for the US at the time of the first sale, and detailed transaction records showing the entire chain of sales.
Penalties for incorrect valuation
CBP can assess penalties ranging from 20% to 40% of the lost revenue for negligent valuation errors, up to the domestic value of the goods for grossly negligent errors, and criminal penalties for intentional fraud.
Get your valuation reviewed by ASR
Our customs team reviews valuation practices to ensure compliance and identify optimization opportunities such as First Sale eligibility. Contact us at shipping@asrwe.com or +1 786 373 3003.
