Deductive Value Quiz Answer

In order to complete the deductive value formula, the value of components that are not dutiable must be deducted from the sales price using the list of deductions in Part152.105. The following amounts should be deducted from the merchandise being appraised under the deductive method:

- Any commission usually paid or the addition usually made for profit and general expenses in connection with sales in the U.S. of imported merchandise that is of the same class or kind regardless of the country of exportation.

- The actual costs and associated costs of transportation and insurance incurred with respect to international shipments of the merchandise concerned from the country of exportation to the U.S.

- The usual costs and associated costs for transportation and insurance incurred with respect to shipments of the merchandise concerned from the place of importation to the place of delivery in the U.S.

- The customs duties and other federal taxes currently payable on the merchandise concerned because of its importation.

Note:
Notice the "or" in 152.105? If you have a deductive value situation that has both commissions AND profit and general expenses, which one applies?

The Customs Valuation Encyclopedia summarizes a ruling in the Deductive Value section under Deduction for Usual Profits and General Expenses. It's Ruling 543065 and states that "an importer who elects deductive value as a means of appraisement is only entitled to an adjustment of EITHER the commission OR the addition usually made for profit and general expenses. "

Therefore, the answer to Wednesday's question is D - $10.51

$15.00

- $1.50 - Commission OR $1.50 Profit & General Expenses
- $1.00 Intl Transportation
- $0.85 Domestic Transportation
- $1.14 Duties

$10.51

Deductive Value Quiz

It has been a slow news week in international trade, so we're going to have a little fun with Part 152 of the CFR. Read and answer the question below. You are welcome to submit answers; however, we won't publish them until Thursday night so that everyone has a chance to work the problem without being tempted to look at the answers that have been submitted. Then on Friday, we will post the answer along with an explanation. Choose wisely; it could be a trick question.

Wilson’s Watermelons, a large fresh foods distributor in Laredo, Texas, imports 400 cartons of watermelons on consignment from a farming operation in Mexico. The watermelons are shipped to Dallas for sale at the Cowboy's Fresh Fruit & Vegetables Market. Once placed for sale at the local market, all of the cartons are sold to unrelated parties within two days. Based on an examination of the merchandise, including identical or similar watermelons, the unit price sold in the greatest aggregate quantity is $15 per carton (300 cartons). The cartons of watermelons are appraised under deductive value. Wilson submits the following cost data per carton.

Commissions $1.50
Profit and General Expenses $1.50
Transportation from Mexico to Laredo $1.00
Transportation from Laredo to Dallas $0.85
Customs Duties $1.14

What is the appraised value?

A.) $9.01
B.) $13.51
C.) $15.00
D.) $10.51
E.) $11.51

Deductive Value

Welcome back to our series on "Methods of Valuation." Last week we covered the definition of Transaction Value of Identical & Similar Merchandise. Those two methods are similar to Transaction Value and are easy to understand. As you will see in our coverage of Deductive and Computed Value, the requirements become a little more complex.

Deductive Value is the fourth method of valuation. If the previous three methods are found to be inappropriate to use, then deductive value must be used. Generally, deductive value takes the merchandise sold after importation, and assigns value based on the price of the greatest aggregate quantity sold, with deductions made for profit, transportation and other expenses. Although it might not be noticeable now, determining the value gets more complex with each new method introduced. The following amounts should be deducted from the merchandise being appraised under the deductive method:

•Any commission usually paid or the addition usually made for profit and general expenses in connection with sales in the U.S. of imported merchandise that is of the same class or kind regardless of the country of exportation.
•The actual costs and associated costs of transportation and insurance incurred with respect to international shipments of the concerned merchandise from the country of exportation to the U.S.
•The usual costs and associated costs for transportation and insurance incurred with respect to shipments of the concerned merchandise from the place of importation to the place of delivery in the U.S.
•The customs duties and other federal taxes currently payable on the concerned merchandise because of its importation.

Note: Even though deductive value is the 4th method, computed value may be used before deductive if the importer requests it before entry and CBP approves it.

Example: Eagle Exporter manufactured and shipped widgets to its subsidiary in the United States; however, it was determined that the relationship influenced the price, and transaction value was not acceptable. Eagle Exporter only manufactured one kind of widget and only sold them to the U.S. subsidiary; therefore, transaction value of identical and similar merchandise was not an acceptable method of appraisement. The U.S. subsidiary would need to keep track of the sales for 90 days after importation, determine the greatest aggregate quantity sold at a certain value and make the proper deductions in order to determine the value for customs purposes. Since this information will not be available at the time of entry, the importer will need to consider participation in the reconciliation program or provide the information using another acceptable post entry process.

Join us next week when we explore computed value.