INTERNATIONAL TRADE LAW
Customs Valuation: How to Value Imports for CBP
Customs valuation is how U.S. Customs and Border Protection (CBP) decides the dollar value of your imported goods so it can calculate the duty you owe. The rules are not optional or negotiable: they come from a federal statute, 19 U.S.C. § 1401a, which implements the World Trade Organization’s Customs Valuation Agreement. Get the value right and your entry clears cleanly; get it wrong and you face supplemental duty bills, interest, and penalties.
This guide explains the six valuation methods CBP uses, what goes into “transaction value” (the method that covers the vast majority of imports), and the additions importers most often miss.
The Six Valuation Methods, in Order
CBP must apply the valuation methods in a fixed sequence. You start with the first method, and you may only move to the next one if the prior method genuinely cannot be used. You cannot shop for the method that produces the lowest duty.
| Order | Method | Basis |
|---|---|---|
| 1 | Transaction value | Price actually paid or payable for the goods, plus statutory additions |
| 2 | Transaction value of identical merchandise | A prior accepted value for identical goods |
| 3 | Transaction value of similar merchandise | A prior accepted value for similar goods |
| 4 | Deductive value | U.S. resale price, working backward by subtracting post-import costs |
| 5 | Computed value | Cost of materials, fabrication, profit, and general expenses |
| 6 | Fallback (“derived”) value | A reasonable method consistent with the statute when none of the above apply |
At the importer’s request, CBP will reverse the order of the deductive and computed value methods. For ordinary commercial sales between unrelated parties, almost everything settles at Method 1.
What Transaction Value Includes
Transaction value is the price actually paid or payable for the merchandise when sold for export to the United States, plus five categories of statutory additions where they are not already in the price:
- Packing costs incurred by the buyer.
- Selling commissions the buyer pays (buying commissions are not dutiable).
- Assists — see below.
- Royalties or license fees the buyer must pay as a condition of the sale.
- Proceeds of any later resale that accrue back to the seller.
“Price actually paid or payable” means the total payment the buyer makes to (or for the benefit of) the seller — not just the invoice figure. Rebates and discounts agreed after importation generally do not reduce the value.
One point that surprises new importers: the cost of international freight and insurance to bring the goods to the United States is generally not part of the customs value, as long as it is separately identified from the price of the goods. The United States appraises on a “free on board”–type basis, not a landed-cost basis.
Assists: The Most Common Audit Finding
An assist is anything the buyer supplies to the seller for free or at reduced cost to help produce the imported goods. Its value has to be added to the price even though no money changes hands at import. Typical assists include:
- Tooling, dies, molds, and machinery used to make the goods.
- Materials and components incorporated into the goods.
- Engineering, design, or development work performed outside the United States.
Unreported assists are one of the top problems CBP finds in focused assessments. If you sent a foreign factory your molds or your design files, that value belongs in your declared customs value.
Related-Party Sales
When the buyer and seller are related — parent and subsidiary, or commonly owned companies — CBP scrutinizes whether the relationship influenced the price. Transaction value is still acceptable if you can show the price was set at arm’s length, either through the “circumstances of the sale” or by comparison to accepted “test values” for identical or similar goods. If you cannot, CBP moves down the method hierarchy.
Why Accurate Valuation Protects You
Every importer enters goods under a legal duty of reasonable care (19 U.S.C. § 1484). Declaring too low a value — whether by leaving out assists, royalties, or commissions — can trigger penalties under 19 U.S.C. § 1592 for negligence, gross negligence, or fraud, on top of the unpaid duty and interest. Declaring too high a value means you overpay duty you can rarely recover. Both outcomes are avoidable with clean invoices, a documented valuation method, and consistent treatment of additions.
Valuation also connects to the rest of your entry. The value you declare is multiplied by the duty rate that flows from your tariff classification, and it feeds directly into the duties and fees you ultimately pay.
Frequently Asked Questions
What is the primary method of customs valuation in the United States?
Transaction value — the price actually paid or payable for the goods sold for export to the U.S., plus statutory additions. It applies to the large majority of commercial imports and is the first method CBP must try.
Are shipping and insurance included in customs value?
International freight and insurance to bring the goods to the United States are generally excluded from customs value if they are separately identified from the price of the goods. The U.S. appraises imports on an FOB-type basis.
What is an assist?
An assist is something the buyer provides to the producer for free or at reduced cost — tooling, materials, or design work done abroad — to make the imported goods. Its value must be added to the declared customs value.
What happens if I declare the wrong value?
Undervaluation can lead to back duties, interest, and penalties under 19 U.S.C. § 1592. Because reasonable care is the importer’s legal obligation, “the supplier set the value” is not a defense.
Customs value is the foundation of every duty calculation, and small errors compound across hundreds of entries. Reidel Law Firm provides import and export compliance counsel — including valuation, assists, and related-party pricing reviews — for a predictable flat fee: get a flat-fee compliance memo before your next entry.
