Customs officers are required by law to determine the value of imported merchandise. Valuation is necessary for statistical purposes as well as to determine the amount of import duty which must be paid if the duty rate is stated as a percentage of value (ad valorem duty).
Article VII of the General Agreement on Tariffs and Trade (“GATT”) in the 1994 WTO agreement outlines methodology for Customs Valuation: https://www.cbsa-asfc.gc.ca/publications/dm-md/d13/d13-2-4-eng.html
(general) The price actually paid or payable for merchandise.
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 for the following items if not included in the price:
(1) The packing costs incurred by the buyer.
(2) Any selling commission incurred by the buyer,
(3) The value of any assist,
(4) Any royalty or license fee that the buyer is required to pay as a condition of the sale, and
(5) The proceeds, accruing to the seller, of any subsequent resale, disposal, or use of the imported merchandise.
The amounts for the above items are added only to the extent that each is not included in the price actually paid or payable and information is available to establish 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.
If the transaction value cannot be used, then certain secondary bases are considered. The secondary bases of value, listed in order of precedence for use, are:
· Method 1 Transaction Value
· Method 2 Transaction Value of Identical Goods
· Method 3 Transaction Value of Similar Goods
· Method 4 Deductive Value
· Method 5 Computed Method
· Method 6 Fallback Method
The order of precedence of the Methods 4 & 5 can be reversed if the importer so requests and Customs officer approves.
See valuation; identical merchandise; similar merchandise; computed value; deductive value; assist.