How Your Import Strategy Impacts Customs Valuation 

Tradewinds don’t die. They shift. That’s what we witnessed during the COVID-19 pandemic, and it’s happening again now in an unprecedented manner. With ongoing tariff volatility and the rebound from 145% tariffs on made in China goods and subsequent temporary relief down to 10% (existing 20% IEEPA tariffs still apply, making it a cumulative 30%), merchants are reevaluating their customs valuation and logistics strategies. Keeping up with tariff changes is difficult, but vitally important for merchants worried about their imports and direct to consumer (DTC) shipments. Supply chains need to be restructured, and merchants need to adopt technology that can make them agile and the brands that respond strategically are using this moment to reposition themselves for long-term resilience. 

One of the most important areas to get right is customs valuation. How you declare the value of your imported goods directly affects your duties, fees, and tariff exposure, as well as your compliance risks. Whether you’re importing inventory into the U.S., launching a direct-from-manufacturer DTC channel, or testing out hybrid fulfillment models, understanding the available customs valuation methods is key to navigating today’s cross border environment. 

Here’s what brands need to know about the different ways to value imports and how to choose the approach that fits your business model. 

What Is Customs Valuation? 

Before diving into specific import models, it’s important to understand what customs valuation is and why it matters. Customs valuation is the procedure customs authorities use to determine the total landed cost of imported goods. It forms the basis upon which duties, taxes, excise fees, and other tariffs are calculated.  

Alongside essential trade data points like the Harmonized System Codes (HS) code, export control classification number (ECCN), and Country of Origin, correct customs valuation is critical to ensuring smooth, compliant cross border operations. Using the correct valuation method reduces the risk of clearance delays, fines, or audit exposure. 

In 1994, the World Trade Organization introduced the WTO Customs Valuation Agreement under GATT Article VII. This agreement created a more adaptable global standard, requiring member countries to follow one of six recognized methods to calculate customs value: 

• Method 1 — Transaction Value 

• Method 2 — Transaction Value of Identical Goods 

• Method 3 — Transaction Value of Similar Goods 

• Method 4 — Deductive Method 

• Method 5 — Computed Method 

• Method 6 — Fall-Back Method 

Of these, Transaction Value is the  preferred method for customs valuation and unless specific circumstances of the transaction exclude its use, must be used to declare customs value for import. Transaction Value refers to the price actually paid or payable by the buyer for the goods being imported. If applicable, Transaction Value  includes: 

• Packing costs paid by the buyer: Any charges related to packing materials and labor incurred by the buyer to prepare goods for shipment must be included in the customs value. 

• Selling commissions paid by the buyer: If the buyer pays a selling commission to a third party as part of the transaction, that cost must be added to the customs value. 

• Value of assets: Any materials, components, tools, or design work provided by the buyer free of charge (or at a reduced cost) to the seller for use in the production of the imported goods must be proportionally included in the customs value. 

• Royalties and license fees: If the buyer is required to pay royalties or license fees (either directly or indirectly) as a condition of the sale, those amounts must be added to the customs value. 

• Proceeds from resale accruing to the seller: If the seller benefits, directly or indirectly, from any resale, disposal, or use of the imported goods after they enter the destination country, those proceeds must be included in the customs valuation. 

Even in cases where no money is exchanged—such as warranty replacements or gifts—the value “that would be payable” must still be declared. That means a $200 item shipped as a replacement must still be declared at $200 for customs purposes. Read more about customs valuation on our guide.  

It’s important to note when looking at each business model, everything is determined by relationships of the parties involved, circumstances of prior transactions that occurred prior to the transaction which trigged the goods to be imported, title transfer, terms of trade, and the nuances of the relationships. Therefore, specific valuation for each transaction should be considered on an individual basis. Check sources like U.S. Customs and Border Protection (CBP) Customs Valuation or contact us for advice on methodology.  

B2B: Business-to-Business Import Models 

We see three core variations of the B2B import models, and each has distinct implications for customs valuation: 

• Manufacturer to Importer. This is the most traditional B2B pathway: For ex. a merchant purchases goods from a foreign manufacturer and imports them directly into their country. These goods are then stored in a domestic warehouse, which may be brand owned or operated by a 3PL. It’s a common model for inventory heavy businesses and wholesale operations. Importantly, the customs value is generally based on the transaction value paid by the importer to the manufacturer. Despite common misconceptions, it’s the country of origin, not the country of shipment, that determines tariff treatment.

  Customs valuation: Generally, Customs Value is determined using Transaction Value, which will be the wholesale price paid by the importer to the manufacturer.   

• Inventory Moves to 3PL In this variation, the merchant retains ownership of inventory held abroad and then transfers it to a 3PL they operate out of domestically. This model can offer more control over supply chain operations, particularly for merchants that sell across multiple channels. As long as the inventory is transferred without a change of ownership, customs value is still assessed based on the manufacturer-to-merchant transaction. If the goods were already in the merchant’s possession overseas, that original acquisition price is used.

  Customs valuation: Generally, Customs Value is determined using Transaction Value, which will be the wholesale price.  

• True Wholesale Shipments In a true wholesale transaction, a merchant sells a large shipment of goods to a business customer, often in bulk quantities with a single buyer per shipment. The goods are imported as part of the sale.
  Customs valuation: Generally, Customs Value is determined using Transaction Value, which will generally be the wholesale price. 

This model often results in duties being paid upfront, before any revenue is realized. If you later fulfill international orders from this same inventory, you’re effectively paying tariffs and incurring warehousing costs twice.  

In today’s environment, many brands want to avoid that double hit by shifting toward more flexible, direct-to-consumer or duty-deferred models. Still, for domestic sales or centralized inventory strategies, the B2B import model remains the foundation for many brands. 

M2C: Manufacturer to Consumer Import Model 

An increasingly popular strategy in current tariff environment, especially for brands working with manufacturers in China, India, and other supplier countries, is to ship directly from the point of manufacture to the consumer. Instead of importing inventory and then reshipping it abroad, merchants are bypassing domestic imports entirely by launching Rest of World sales channels that originate directly from the manufacturer or factory warehouse. 

When using this model, customs value must be declared using the retail price. Not your cost of goods. That’s a regulatory requirement when shipping direct to consumers. But the benefits of this model are substantial. You eliminate domestic tariffs entirely, avoid storage and handling costs, and reach international customers faster and more affordably. To do this successfully, you need a shipping platform with a global carrier network that can offer discounted rates with DDP services on both standard and express services that reach across the globe to meet your buyers needs. 

Customs valuation: Generally, Customs Value is generally determined using Transaction Value which is the retail price paid by consumer and declared at the time of shipment. 

B2B2C Import Model 

For brands that still want to maintain a domestic presence but need more agility in the face of tariff risk, the B2B2C duty deferral model offers a smart middle path. This model, commonly used by brands sourcing from China, allows goods to be imported in smaller, sales-driven batches. Rather than paying duties upon arrival, tariffs are only paid once the goods are sold—improving cash flow and reducing inventory liabilities. 

This approach not only defers duty payments but also minimizes storage costs by aligning inbound shipments more closely with demand. It’s an agile, responsive model that helps brands stay lean while still fulfilling orders quickly. To make this work, merchants need faster import shipment through B2B air freight networks, customs and compliance systems that can accommodate flexible valuation declarations, along with guaranteed DDP service and full operational visibility. With proper setup, this model combines the logistical strengths of domestic fulfillment with the financial benefits of deferred duty payments. 

Customs valuation: Generally, Customs Value for standard B2B2C is generally determined using the Transaction Value which is based on retail price but there are multiple options and your customs experts can help guide on what is best.  

B2B2C Example: First Sale Valuation 

Some merchants attempt to reduce their tariff burden through what’s known as the “First Sale Rule.” In multi-tiered transactions, where goods are sold from a manufacturer to a middleman, then resold to an importer, the importer may be eligible to declare the first sale (manufacturer’s sale price) and must include materials, overhead, labor and reasonable profits. This can significantly reduce duties as the earlier sale is not at retail price. 

However, First Sale Valuation is only available under strict conditions and is heavily scrutinized by customs officials (Especially CBP). To qualify in the U.S., the transaction must be a legitimate, arm’s length sale between independent entities—not subsidiaries or related companies. Additionally, the goods must have been clearly destined for export to the U.S. at the time of the first sale. 

Documentation requirements are extensive. Brands must be able to provide: 

• Detailed contracts 

• Commercial invoices 

• Proof of payment at each transaction level 

• Shipping documents 

• Confirmation of U.S. destination 

• And often more, especially if in continued use 

CBP pays close attention to importers who switch to First Sale methods in response to tariff increases, and misuse of this method carries serious penalties including fines and even criminal charges that can result in jail time. For most merchants, First Sale should only be considered with the guidance of legal and trade compliance professionals. 

Customs valuation is typically determined using Deductive or Computed Value based on the price paid in the manufacturer’s sale price and must include materials, overhead, labor and reasonable profits. 

B2B2C Example: Subsidiary Shipping 

Another option sometimes explored by global brands is to route shipments through a subsidiary entity in a third country. A subsidiary company is one that is more than 50% owned by another company. In theory, this can allow for different valuation methods or alter the duty liability depending on the final import destination. However, CBP and other global customs authorities are vigilant about ensuring these transactions reflect legitimate commerce not shell structures designed to avoid tariffs. 

Whether a shipment to a subsidiary qualifies as a true sale depends on many factors: the nature of the transaction, pricing structure, independence of entities, and proof of economic substance. Additionally, valuation becomes more complex as customs authorities may apply different rules (transfer price, resale price, etc.) depending on the structure of the relationship. 

This strategy can be high-risk without the proper documentation, operational workflows, and oversight. If you’re exploring subsidiary based models as part of your tariff mitigation strategy, it’s essential to consult with experts in customs law and international tax planning. 

Customs valuation: determined generally on Deductive or Computed Value based on fair market value and adjusted upwards or downwards for transaction-, entity-, and market-specific circumstances surrounding the shipment. It must also pass a test of reasonableness by showing profit margin comparable to third parties.  

Subsidiary transactions are highly dependent on the relationship between the two companies and it is strongly suggested to consult customs experts when moving goods with this import model.  

Choosing the Right Import Model for Optimal Valuation 

There’s no one-size-fits-all import model for duty deferment and optimal valuation. In a time of shifting supply chains and unstable tariff policies, flexibility is your best asset when it comes to choosing the import model that works best for you. Whether you’re rethinking where you hold inventory, expanding your direct-from-factory sales, or trying to reduce upfront duty payments, getting valuation right is a foundational part of your strategy. 

At FlavorCloud, we help merchants navigate this complexity with seamless compliance automation, flexible shipping models, and expert guidance on customs strategy ensuring that we follow regulations by the book for 100% compliance. We support everything from traditional B2B imports to advanced B2B2C and M2C models ensuring you have the visibility and control you need to scale globally, even in uncertain times. 

If you’re rethinking your supply chain or want to explore which valuation method fits your business best, talk to our trade experts. We’ll provide a full supply chain audit and actionable recommendations backed by global logistics infrastructure and the latest in compliance technology. 

Let’s make the world your market without the tariff headaches. Book a meeting today.