Methods of Valuation

Last week we introduced you to the topic of valuation of imported goods. For the next few weeks, we will discuss the methods of valuation. There are six major methods that can be used to determine the value, however, the methods must be used in order, as appropriate, and in accordance with the regulations.

Derived value (lowest on the hierarchy), for example, cannot be used until each of the other methods have proven inappropriate. It is important for international trade professionals to be familiar with not only the different methods of valuation, but also the order in which they may be applied:

• Transaction Value
• Transaction Value of Identical Merchandise
• Transaction Value of Similar Merchandise
• Deductive Value
• Computed Value
• Derived Value

Transaction Value
Transaction value is the first method of valuation to be considered when determining the value of an import shipment and the most common. Transaction value is the price actually paid or payable for the imported goods, with additions made for any dutiable items not included, or deductions made for any non-dutiable items included. Transaction value is simply the price that is paid for the merchandise. Remember, it is important to determine the correct value because duties are usually based on a percentage of value.

Additions to the Price Actually Paid or Payable
The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for export to the U.S., plus amounts equal to:

• Packing Costs
• Selling Commissions
• Assists
• Royalties or License Fees that the buyer is required to pay directly or indirectly as a condition of sale of the imported merchandise
• Proceeds of any subsequent resale or use of the imported merchandise that accrue directly or indirectly to the seller.

Charges Not Added to the Price
• International Freight and Insurance
• Discounts
• Buying Commissions - When determining the transaction value, buying commissions that are added to the price actually paid or payable for the imported goods must be listed separately from the price of the goods in order to remain non-dutiable.
• Costs for transport and construction/maintenance after import
• Customs Duties and Taxes

Transaction value cannot be used when
• there is no sale, such as consignments, leases or free-of-charge shipments,
• sales are not made at “arm's-length” such as related party transactions, and
• restrictions on disposition or use of imported merchandise substantially affect the value of the merchandise.

We will continue our series on valuation next week with a brief discussion about Transaction Value of Identical and Similar Merchandise.