DutyFlow — Global Customs Duty Intelligence

Customs duties are ad valorem — calculated as a percentage of the value of goods. But "value" is not the same as the invoice price. The WTO Customs Valuation Agreement, implemented in U.S. law at 19 USC §1401a, defines six hierarchical methods for determining dutiable value.

Method 1: Transaction Value (Used ~95% of the time)

Transaction value is the price actually paid or payable for the imported goods, adjusted by adding:

**Packing costs** paid by the buyer

**Selling commissions** paid by the buyer (not buying commissions)

**Assists** — value of materials, tooling, or services provided free/reduced cost by the buyer

**Royalties** related to the imported goods

**Proceeds of resale** that accrue to the seller

And subtracting:

**Freight and insurance** incurred after importation (for CIF values)

**Post-importation duties and taxes** included in the price

Example: You buy goods for $10,000 CIF New York. The freight (sea) is $800. Dutiable value = $10,000 - $800 = $9,200 (FOB value).

Method 2: Transaction Value of Identical Goods

Used when Method 1 cannot apply (e.g., related-party transaction at non-arm's length price). CBP compares the import to transactions for identical goods by the same or different seller, exported at the same time.

Method 3: Transaction Value of Similar Goods

Like Method 2 but for similar (not identical) goods. "Similar" means same HS classification, same quality and commercial reputation.

Method 4: Deductive Value

Works backward from the U.S. resale price. CBP deducts: import duties, commissions, profit, selling expenses, freight and insurance. What remains is the dutiable value.

Method 5: Computed Value

CBP computes value from the cost of production: materials + fabrication + general expenses + profit. Requires access to manufacturer's cost data.

Method 6: Fallback Method

Any reasonable method, applying the above in flexible sequence. CBP must explain why it used this method.

Related-Party Transactions

When buyer and seller are related (parent/subsidiary, joint venture partners), CBP scrutinizes whether the transaction value was influenced by the relationship. You may be required to submit Transfer Pricing documentation or use Methods 2–5.

Assists and their Impact

An "assist" is any item provided free or at reduced cost that becomes part of the imported goods. Common assists:

Molds and dies provided to a foreign manufacturer

Engineering drawings developed in the U.S.

Raw materials supplied by the importer

The assist's value must be added to the invoice price. This is frequently overlooked and is a top area for CBP audit findings.

Customs Valuation Methods Explained