INTERNATIONAL TRADE LAW
Customs Value and Import Duties Explained
Customs value is the dollar figure CBP uses to calculate ad valorem import duties, and U.S. law sets six valuation methods that must be applied in a fixed order — starting with transaction value, the price actually paid or payable for the goods when sold for export to the United States. You cannot pick the method that produces the lowest duty; you work down the list and use the first one that fits. This is governed by the Trade Agreements Act of 1979 (19 U.S.C. § 1401a) and the regulations at 19 C.F.R. Part 152. Here is how value is set and how it turns into the duty you owe.
The Six Valuation Methods, In Order
CBP appraises imported merchandise using six methods applied sequentially. You move to the next method only when the prior one cannot be used.
| Order | Method | In short |
|---|---|---|
| 1 | Transaction value | Price paid or payable for the goods, plus statutory additions |
| 2 | Transaction value of identical merchandise | Value of identical goods sold for export to the U.S. |
| 3 | Transaction value of similar merchandise | Value of similar goods sold for export to the U.S. |
| 4 | Deductive value | U.S. resale price, working backward by deducting post-import costs |
| 5 | Computed value | Cost of materials, fabrication, profit, and general expenses |
| 6 | Fallback value | A reasonable method derived from the prior five, flexibly applied |
Most entries are appraised under transaction value. The later methods exist for related-party sales, consignments, and situations where there is no usable sale price.
What Transaction Value Includes
Transaction value is more than the invoice number. To the price actually paid or payable, importers must add certain statutory amounts when they are not already in the price:
- Packing costs incurred by the buyer.
- Selling commissions paid by the buyer.
- Assists — tooling, dies, molds, materials, or engineering and design work the buyer provides to the seller for free or at reduced cost.
- Royalties and license fees the buyer must pay as a condition of the sale.
- Proceeds of any resale that accrue back to the seller.
Leaving assists or royalties out of declared value is one of the most common — and most penalized — valuation errors CBP finds in a customs audit. If the buyer furnished anything of value to make the goods, it probably belongs in the customs value.
How Duties Are Calculated
Once value is set, the duty depends on the type of rate tied to the goods’ HTS classification.
| Duty type | How it works | Example basis |
|---|---|---|
| Ad valorem | A percentage of the customs value | 5% of value |
| Specific | A fixed charge per unit of quantity | $0.10 per kilogram |
| Compound | Both an ad valorem and a specific component | 3% plus $0.05 per unit |
For ad valorem duties, the math is simply customs value multiplied by the rate, which is exactly why an accurate value matters as much as the right code. Note that trade-remedy measures — antidumping and countervailing duties and other special tariffs — can stack on top of the base rate, and those programs change frequently; confirm what currently applies to your goods rather than relying on a figure from an older article.
Frequently Asked Questions
What is customs value?
It is the appraised dollar value of imported goods that CBP uses to compute ad valorem duties. U.S. law sets six valuation methods under 19 U.S.C. § 1401a, applied in order, with transaction value — the price paid or payable plus statutory additions — used first.
What is included in transaction value?
The price actually paid or payable for the goods, plus statutory additions: packing costs, selling commissions paid by the buyer, assists, royalties and license fees that are a condition of sale, and any resale proceeds that go back to the seller.
How are import duties calculated?
For ad valorem duties, you multiply the customs value by the rate tied to the product’s HTS code. Specific duties are charged per unit of quantity, and compound duties combine both. Trade-remedy duties can apply on top of the base rate.
Can I choose the valuation method that gives the lowest duty?
No. The six methods are applied in mandatory order, and you must use the first one that applies to your transaction. Skipping to a method that yields a lower value is a valuation violation.
Getting value right protects both your duty budget and your compliance record. Reidel Law Firm advises importers on valuation, assists and royalty treatment, and duty exposure on flat-fee terms. Get an import compliance memo.
