Monday, March 23, 2009

Transaction Value of Identical & Merchandise

Welcome back to our series on "Methods of Valuation." Last week we covered the definition of Transaction Value and provided some information about components that are included and excluded from value. If Transaction Value cannot be used, then the next two methods available are Transaction Value of Identical & Similar Merchandise.

Transaction Value of Identical Merchandise

Transaction value of identical merchandise is the second method of valuation. If transaction value cannot be used, then this method must be used. As its name suggests, this is the price that is paid for merchandise that is identical in every way to the merchandise being imported.

Identical means that the merchandise is:
· The same in all respects to the merchandise being appraised,
· Produced in the same country, and
· Produced by the same entity as the merchandise being appraised. and,
· Exported to the United States at or about the time that the merchandise being appraised is exported to the United States.
· If transaction value of identical merchandise cannot be used, then the transaction value of similar merchandise will be used.

Example 1: Worldwide Ball Mfg produces golf balls in Germany and is related to Golf Discounters Ltd in the U.S. The relationship influences the prices between the parties. Worldwide does not sell its golf balls to any other U.S. companies. Sport Crafters in France manufactures golf balls that appear to be of identical construction and forwarded several shipments at about the same time as the shipment from Worldwide to Golf Discounters. The price of the golf balls from France cannot be used for appraisement of the current transaction because the balls were not manufactured in the same country or by the same manufacturer. If the balls had been produced in the same country by another manufacturer, the value may have been valid as identical goods if goods from the same producer as the goods being appraised cannot be found.

Transaction Value of Similar Merchandise

The term "similar" merchandise means merchandise that is:
·Produced in the same country, and,
·Produced by the same entity as the merchandise being appraised, and,
·Like the merchandise being appraised in its characteristics and component
·Exported to the United States at or about the time that the merchandise being appraised is exported to the United States.

Example 2: Worldwide Club Mfg produces golf clubs from titanium in Germany. Most of the clubs are made from 75% titanium and 25% steel; however, the less expensive models may contain slightly less percentages of titanium. Worldwide consigns 500 sets of its newest 75% titanium clubs to Golf Discounters in the United States. Since the clubs are consigned, no sale has taken place; therefore, transaction value is not appropriate. Worldwide also sells the same club made with 65% titanium and 35% steel to Giant Golf Warehouse in the United States for $50 per set. Since the clubs are manufactured by the same producer in the same country and are similar in characteristics with only a 10% difference in metal content, the value in the sale between Worldwide and Giant Golf would most likely be an acceptable basis for valuing the transaction between Worldwide and Golf Discounters.

If transaction value of Similar Merchandise cannot be used, then deductive value is the next option. Deductive Value will be the topic for next week's discussion in our Methods of Valuation series.

No comments: