Trafford Publishing: Principles of Valuation: Export & Import

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Principles of Valuation: Export & Import

by Clement Key

316 pages; quality trade paperback (softcover); catalogue #03-2709; ISBN 1-4120-2160-X; US$59.99, C$76.00, EUR49.40, £34.23

Avoid exposure to contingent liabilities. Import and export records must be maintained for 5 years. Incorrect value means you may owe in the future through audits. Strive for 99% accuracy!

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about the book      about the author      excerpts      catalogue info

About the Book

This book was written to fill a need for a text which will enable the reader/student to learn the principles of valuation. It will help you to meet the demanding requirements of export and import valuation. Customs and Border Protection expect 99% valuation compliance. Bureau of Industry and Security as well as Bureau of Census expect accuracy in export and import valuation.
The Bureau of Industry and Security states that over 50% of export declarations are incorrect. This book will help to reduce valuation as a value concern.
Valuation is far below the 99% stated to Congress. Under the "reasonable care" requirements of Customs, trained and proficient personnel are expected to provide accuracy of 99%. This book will help attain a higher compliance level and serve as support to your compliance manual.
Please visit the web page for the author's first book, Principles of Classification: Export & Import

About the Author

Clement Key - 33 years service with government; U.S. Customs Services positions held involved in every area of import and export. He completed classification and valuation training through Customs Training Facility at Hofstra University, Long Island (top 25%). In 1980 training was received at Federal Law Enforcement Training Center on Trade Agreements Act of 1979. He completed Operations Analyst Specialist training 1988 at FLETC.
Work positions permitted the broadest experience in trade as well as passenger processing. Positions held exposed him to experience with all commodities. Last position was as Field National Import Specialist. This position required extensive work in writing binding and pre-classification rulings. It furnished the greatest insight on customs compliance in the three main areas, classification, valuation and admissibility. Data analysis training, provides knowledge as to classification methodology and insight into audit assessment. Attended related party transfer price training in Chicago in 1993 and was an instructor to other districts in the Southeast United States. He has "hands on" expertise.
In 1994 he received the Hammer Award signed by Vice President Al Gore for efficiency in government. He received many awards throughout his career.
Since retiring in 1995, he has worked as consultant on compliance projects and as instructor in import and export. His goal is to provide instruction from experience and to encourage global training from high school through continuing education levels. He has written two books on compliance and has a goal of completing eight in a compliance series. From his experience he advises that you "know your merchandise" and acquire all the tools, including training.

Excerpts

Excerpt 1
Table of Contents
Preface
Introduction
Best Practices for Transaction Value
Chapter 1 Customs Valuation Under Trade Agreements Act of 1979
Chapter 2 Transaction Value
Chapter 3 Transaction Value of Identical Merchandise or Similar Merchandise
Chapter 4 Deductive Value
Chapter 5 Computed Value
Chapter 6 Value if Other Values Cannot Be Determined
Chapter 7 Questions and Answers on Value
Chapter 8 Customs Regulations Subpart E - Customs Valuation of Merchandise
Chapter 9 Synopsis of Valuation Decisions
Chapter 10 Valuation Questions and Answers with Solutions
Chapter 11 Compliance Manual Guide on Valuation
Excerpt 2
1. Best Practices for TV in General
* Internal controls over Customs matters:
     Are in writing,
     Include procedures for monitoring and feedback, and
     Were monitored by management.
* One manager is responsible for control of the Import Department, including value. That manager has knowledge of Customs matters and the authority to ensure that internal control procedures for imports are established and followed by all company departments.
* Written internal control procedures assign duties and tasks to a position rather than a person.
* The company has good interdepartmental communication about Customs matters.
* The company conducts and documents periodic reviews of value and uses the results to make corrections to entries and changes to its import operations as appropriate.
* The company has access to and knowledge of the U.S. Customs Valuation Encyclopedia.
* The company has access to and knowledge of value binding rulings.
* The company attends Customs informed compliance outreach and seminars or Customs-related seminars provided by private vendors regarding value issues.
* The accounting system can link specific purchase orders, invoices, and payment records to Customs entry numbers.
2. Best Practices for PAPP (price actually paid or payable)
* The company has good interdepartmental communication about Customs matters.
* The purchase order matches the invoice, or differences are explained with written documentation.....
Excerpt 3
TRANSACTION VALUE OF IMPORTED MERCHANDISE
Several concepts are common to the transaction value of imported merchandise, of identical merchandise, and of similar merchandise. These concepts, concerning the nature of transaction value itself, are discussed in terms of the transaction value of imported merchandise. The next section discusses the unique features applicable to the transaction value of identical merchandise and similar merchandise.
Question - What is meant by Transaction Value?
     Answer - Definition: The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the U.S., PLUS, if not included in the price, amounts equal to:
     A. The packing costs incurred by the buyer
     B. Any selling commission incurred by the buyer
     C. The value of any assist
     D. Any royalty or license fee that the buyer is required to pay as a condition of the sale
     E. The proceeds, accruing to the seller, of any subsequent resale, disposal, or use of the imported merchandise
These amounts (A through E) are added only to the extent that each (1) is not included in the price, and (2) is based on information establishing the accuracy of the amount. If sufficient information is not available, then the transaction value cannot be determined; and the next basis of value, in order of precedence, must be considered for appraisement.
Questions of discount(s) in the price actually paid or payable (PAPP).
Are loyalty discounts allowable?
Yes. The concept of a freely offered price is not pertinent. If a loyalty discount is a part of the price actually paid or payable for the goods undergoing valuation when sold for export, the discount will be allowed.......
Excerpt 4
QUESTIONS and ANSWERS
1. Q. What is meant by Transaction Value?
A. The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the U.S., PLUS, if not included in the price, amounts equal to: the packing costs, any selling commission, the value of any assist, any royalty or license fee required to be paid as a condition of the sale, and the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue to the seller.
2. Q. Can any other adjustments (additions) be made to the price actually paid or payable, other than those listed in the law under transaction value?
A. No. The law provides for only five (5) adjustments to the price paid or payable and these are the only additions that can be made.
3. Q. Since charges for ocean freight and insurance are not dutiable, will merchandise be valued on an FOB (free on board) basis? An ex-factory basis?
A. It will depend on the price actually paid or payable. The terms of sale of the merchandise undergoing valuation will determine the dutiability of foreign charges. If purchased ex-factory, the merchandise will be appraised at ex-factory. Likewise, in those situations where the price actually paid or payable for imported merchandise includes foreign inland freight, such charges will be part of transaction value to the extent that they are included in such price. If the terms are FOB or beyond, FOB valuation is appropriate.
(NOTE*** TD 84-235 telex 13149 11/30/84--If terms of sale are ex-factory, foreign inland freight not dutiable; CIF FOB terms, foreign inland freight is non-dutiable if itemized separately and claimed and the amount is reasonable and appropriate. Foreign inland freight is freight from:
     1. The point or place where the buyer or importer assumes responsibility for the merchandise, to the point or place where the merchandise enters the Customs territory of the U. S.
     2. The point or place of origin or manufacture to the point/place where enters the Customs territory of the U.S., if acceptable evidence is available that substantiates that the merchandise has been placed with a carrier/forwarder for through shipment to the U.S. without a possibility of being diverted. A through bill of lading for these purposes is a contract, waybill, invoice, issued by a carrier, or forwarder which controls the manner or shipment from the point of origin/place of manufacture to the U.S. port of importation or beyond (although the shipment may extend over two or more lines of connecting carriers), shows the origin and destination of the shipment, consignor and consignee, route of movement and applicable rate or rates.
4. Q. What allowances, if any, will be made for U.S. inland freight, duties, and taxes included in the price actually paid or payable?
A. Any reasonable amount for such charges will be deducted.............
Excerpt 5
CUSTOMS REGULATIONS
SUBPART E - VALUATION of MERCHANDISE
152.100 Interpretative notes.
The interpretative notes set forth in this subpart have been derived from information contained in the Statement of Administrative Action relating to customs valuation, submitted to and approved by Congress along with the Trade Agreements Act of 1979 (Pub. L. 96-39, and will have the force and effect of regulations issued under this subpart.
152.101 Basis of appraisement.
(a) Effective date. The value for appraisement of merchandise exported to the United States on or after July 1, 1980, or, for articles classified under subheading 6401.10.00(EN) Harmonized Tariff Schedule of the United States (19 U.S.C. 1202)), on or after July 1, 1981, will be determined in accordance with section 402, Tariff Act of 1930 (19 U.S.C. 1401a), as amended by section 201, Trade Agreements Act of 1979.
(b) Methods. Imported merchandise will be appraised on the basis, and in the order, of the following:
(1) The transaction value provided for in § 152.103;
(2) The transaction value of identical merchandise provided for in § 152.104, if the transaction value cannot be determined, or can be determined but cannot be used because of the limitations provided for in § 152.103(j);
(3) The transaction value of similar merchandise provided for in § 152.104, if the transaction value of identical merchandise cannot be determined;
(4) The deductive value provided for in § 152.105, if the transaction value of similar merchandise cannot be determined;
(5) The computed value provided for in § 152.106, if the deductive value cannot be determined; or
(6) The value provided for in § 152.107, if the computed value cannot be determined.
(c) Importer's option. The importer may request the application of the computed value method before the deductive value method. The request must be made at the time the entry summary for the merchandise is filed with the port director (see § 141.0a(b) of this chapter). If the importer makes the request, but the value of the imported merchandise cannot be determined using the computed value method, the merchandise will be appraised using the deductive value method if it is possible to do so. If the deductive value cannot be determined, the appraised value will be determined as provided for in § 152.107.)
(d) Explanation to importer. Upon receipt of a written request from the importer within 90 days after liquidation, the port director shall provide a reasonable and concise written explanation of how the value ofthe imported merchandise was determined. The explanation will apply only to the imported merchandise being appraised and will not serve as authority with respect to the valuation of importations of any other merchandise at the same or a different port of entry. This procedure is for informational purposes only, and will not affect or replace the protest or administrative ruling procedures contained in parts 174 and 177, respectively, of this chapter, or any other Customs procedures. Under this procedure, Customs will not be required to release any information not otherwise subject to disclosure under the Freedom of Information Act, as amended (5 U.S.C. 552, the Privacy Act of 1974 (5 U.S.C. 552a), or any other statute (see part 103 of this chapter).
T.D. 81-7, 46 FR 2600, Jan. 12, 1981, as amended by T.D. 89-1), 53 FR 51270, Dec. 21, 1988
152.102 Definitions.
As used in this subpart, the following terms will have the meanings indicated:
(a) Assist.
(1) "Assist" means any of the following if supplied directly or indirectly, and free of charge or at reduced cost, by the buyer of imported merchandise for use in connection with the production or the sale for export to the United States of the merchandise:
(i) Materials, components, parts, and similar items incorporated in the imported merchandise.
(ii) Tools, dies, molds, and similar items used in the production of the imported merchandise.
(iii) Merchandise consumed in the production of the imported merchandise.
(iv) Engineering, development, artwork, design work, and plans and sketches that are undertaken elsewhere than in the United States and are necessary for the production of the imported merchandise.
(2) No service or work to which paragraph (a)(1)(iv) of this section applies will be treated as an assist if the service or work:
Excerpt 6
SYNOPSIS OF VALUATION DECISIONS
PRICE ACTUALLY PAID OR PAYABLE
In 19 U.S.C. 1401a(b), transaction value is defined as the following:
The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to theUnited States, plus amounts equal to -
(A) the packing costs incurred by the buyer with respect to the imported merchandise;
(B) any selling commission incurred by the buyer with respect to the imported merchandise;
(C) the value, apportioned as appropriate, of any assist;
(D) any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and
(E) the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.
The price actually paid or payable for imported merchandise shall be increased by the amounts attributable to the items (and no others) describedin subparagraphs (A) through (E) only to the extent that each such amount
(i) is not otherwise included within the price actually paid or payable;and
(ii) is based on sufficient information.
If sufficient information is not available, for any reason, with respect to any amount referred to in the preceding sentence, the transaction value of the imported merchandise concerned shall be treated, for purposes of this section, as one that cannot be determined.
In addition, 19 U.S.C. 1401a(b)(4)(A) defines the price actually paid or payable as: The term "price actually paid or payable" means the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise bythe buyer to, or for the benefit of, the seller.
The corresponding regulations are 19 C.F.R. 152.103(b) and (c) and 19 C.F.R. 152.102(f), respectively.
Regarding sufficiency of information, 19 C.F.R. 152.103(c) states:
Sufficiency of information. Additions to the price actually paid or payable will be made only if there is sufficient information to establish the accuracy of the additions and the extent to which they are not included in the price.
In addition, 19 C.F.R. 152. 103 (a) (3) provides:
Assembled merchandise
The price actually paid or payable may represent an amount for the assembly of imported merchandise in which the seller has no interest other than as the assembler.The price actually paid or payable in that case will be calculated by the addition of the value of the components and required adjustments to form the basis for the transaction value.
The regulations cite the following examples:
Example 1. The importer previously has supplied an unrelated foreign assembler with fabricated components ready for assembly having a value or cost at the assembler's plant of $1.00 per unit. The importer pays the assembler 50 [cents] per unit for the assembly. The transaction value for the assembled unit is $1.50.
Example 2. Same facts as Example 1 above except the U.S. importer furnishes to the foreign assembler a tooling assist consisting of a tool acquired by the importer at $1,000. The transportation expenses to the foreign assembler's plant for the tooling assist equal $100. Thetransaction value for the assembled unit would be $1.50 per unit plus a pro rata share of the tooling assist valued at $1,100.
GATT Valuation Agreement:
Article 8, paragraph l(a) through (d), of the Agreement provides for the additions to the price actually paid or payable. Paragraphs 2 through 4 state the following:
Excerpt 7
1) Which ONE of the following is NOT a statutory addition to the price actually paid or payable?
A) The packing costs incurred by the buyer with respect to the imported merchandise
B) Any selling commission incurred by the buyer with respect to the imported merchandise
C) The value, apportioned as appropriate, of any assist
D) Any royalty that the seller is required to pay with respect to the imported merchandise, whether directly or indirectly as a condition of the sale
E) The proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller
2) A U.S. importer purchases 2,000 porcelain dolls from a manufacturer in China for $25,000. Terms of sale are CIF San Francisco. International air freight and insurance costs total $7,400. Following the dolls importation, the importer pays the U.S. license holder a royalty fee of $2 per doll for the right to resell the dolls in the United States. None of the parties are related. Which ONE of the following represents the correct appraised value of the imported dolls?
A) $25,000
B) $32,400
C) $17,600
D) $21,600
E) $29,000
Answer 1) D 19 CFR 152.103(b)(1)
Value issue: TOC REGS for PART 152_CLASSIFICATION AND APPRAISEMENT OF MERCHANDISE then Subpart E_Valuation of Merchandise then
152.103 Transaction value.
......
(b) Additions to price actually paid or payable.
(1) The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States, plus amounts equal to:
(i) The packing costs incurred by the buyer with respect to the imported merchandise;
(ii) Any selling commission incurred by the buyer with respect to the imported merchandise;
(iii) The value, apportioned as appropriate, of any assist;
(iv) Any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and [(D) states seller]
(v) The proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.
(2) The price actually paid or payable for imported merchandise will be increased by the amounts attributable to the items (and no others) described in paragraphs (b)(1) (i) through (v) of this section to the extent that each amount is not otherwise included within the price actually paid or payable, and is based on sufficient information. If sufficient information is not available, for any reason, with respect to any amount referred to in this section, the transaction value will be treated as one that cannot be determined.
(3) Interpretative note. A royalty is paid on the basis of the price in a sale in the United States of a gallon of a particular product imported by the pound and transformed into a solution after importation. If the royalty is based partially on the imported merchandise and partially on other factors which have nothing to do with the imported merchandise (such as if the imported merchandise is mixed with domestic ingredients and is no longer separately identifiable, or if the royalty cannot be distinguished from special financial arrangements between the buyer and the seller), it would be inappropriate to attempt to make an addition for the royalty. However, if the amount of this royalty is based only on the imported merchandise and can be readily quantified, an addition to the price actually paid or payable will be made.
(c) Sufficiency of information. Additions to the price actually paid or payable will be made only if there is sufficient information to establish the accuracy of the additions and the extent to which they are not included in the price.
(d) Assist. If the value of an assist is to be added to the price actually paid or payable, or to be used as a component of computed value, the port director shall determine the value of the assist and apportion that value to the price of the imported merchandise in the following manner:
(1) If the assist consist of materials, components, parts, or similar items incorporated in the imported merchandise, or items consumed in the production of the imported merchandise, acquired by the buyer from an unrelated seller, the value of the assist is the cost of its acquisition. If the assist were produced by the buyer or a person related to the buyer, its value would be the cost of its production. In either case, the value of the assist would include transportation costs to the place of production.
Copyright 2002 Customs Compliance Consulting, Inc. 4/02

Catalogue Information