Non-Dutiable Components of Valuation: Duties & Taxes

For the last few months, we have devoted Monday’s blog to issues related to valuation of imported merchandise. Last week the blog addressed post importation charges. The answer to last week’s question can be found at the end of this article. This week, we will look at the non-dutiable components, customs duties and taxes.

Part 152.103(j)(2) explains that transaction value can be reduced by an amount equal to the customs duties and other federal taxes currently payable on the imported merchandise if these amounts are included in the value. In addition to the customs duties, amounts for merchandise processing and harbor maintenance fees may also be deducted if they are included. State sales taxes cannot be deducted. Only the actual duties, not the estimated duties, are excluded from the value. HQ 546111


Example:

Jetson receives an invoice that includes the value of the merchandise and the U.S. customs duty. The total value of both of these amounts is shown to be $12,500. The duty rate for the merchandise is 7.5%. Since customs duties are not part of the price paid or payable, they may be deducted from the value. In order to deduct the duty, the value containing both the duty and value of merchandise must be divided by the duty rate. The resulting amount will be the entered value for CBP.

$12,500 /1.075 = $11627.91
(Value + Duty) / Duty Rate = Entered Value

$11627.91 x 7.5% = $872.09
Value x Duty Rate = Duty

$11627.91 + $872.09 = $12,500
Value + Duty = Original amount of invoice (which included value and duty)


Question

What is the transaction value of a shipment invoiced at $100,000 if the terms of sale are Delivered Duty Paid (DDP), the Ocean Freight paid is $6,000, the insurance paid is $850, the Duty Rate is 6.5%, and a Harbor Maintenance Fee and Merchandise Processing Fee are paid at .125% and .21% respectively?

A. $93,600
B. $87,191
C. $86,765
D. $100,000
E. $87,465


The answer will be provided next Monday when we continue to discuss the topic of valuation. We will wrap up our discussion of valuation in June. If you have any valuation topics you would like to see discussed here, please submit your request as a comment to this post or to the Wizard’s Corner.


Answer to Post Importation Question – Monday May 18, 2009

Without Deduction
$500,000 x 5% = $25,000

With Deduction
$500,000 – $25,000 = $475,000 x 5% = $23,750

Savings
$12,000 – $23,750 =$1250