[Code of Federal Regulations]

[Title 19, Volume 2]

[Revised as of April 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 19CFR152.103]



[Page 206-212]

 

                        TITLE 19--CUSTOMS DUTIES

 

   CHAPTER I--BUREAU OF CUSTOMS AND BORDER PROTECTION, DEPARTMENT OF 

        HOMELAND SECURITY; DEPARTMENT OF THE TREASURY (CONTINUED)

 

PART 152_CLASSIFICATION AND APPRAISEMENT OF MERCHANDISE--Table of Contents

 

                   Subpart E_Valuation of Merchandise

 

Sec.  152.103  Transaction value.



    (a) Price actually paid or payable--(1) General. In determining 

transaction value, the price actually paid or payable will be considered 

without regard to its method of derivation. It may be the result of 

discounts, increases, or negotiations, or may be arrived at by the 

application of a formula, such as the price in effect on the date of 

export in the London Commodity Market. The word ``payable'' refers to a 

situation in which the price has been agreed upon, but actual payment 

has not been made at the time of importation. Payment may be made by 

letters of credit or negotiable instruments and may be made directly or 

indirectly.



    Example 1. In a transaction with foreign Company X, a U.S. firm pays 

Company X $10,000 for a shipment of meat products, packed ready for 

shipment to the United States. No selling commission, assist, royalty, 

or license fee is involved. Company X is not related to the U.S. 

purchaser and imposes no condition or limitation on the buyer.

    The customs value of the imported meat products is $10,000--the 

transaction value of the imported merchandise.

    Example 2. A foreign shipper sold merchandise at $100 per unit to a 

U.S. importer. Subsequently, the foreign shipper increased its price to 

$110 per unit. The merchandise was exported after the effective date of 

the price increase. The invoice price of $100 was the price originally 

agreed upon and the price the U.S. importer actually paid for the 

merchandise.

    How should the merchandise be appraised?



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    Actual transaction value of $100 per unit based on the price 

actually paid or payable.

    Example 3. A foreign shipper sells to U.S. wholesalers at one price 

and to U.S. retailers at a higher price. The shipment undergoing 

appraisement is a shipment to a U.S. retailer. There are continuing 

shipments of identical and similar merchandise to U.S. wholesalers.

    How should the merchandise be appraised?

    Actual transaction value based on the price actually paid or payable 

by the retailer.

    Example 4. Company X in the United States pay $2,000 to Y Toy 

Factory abroad for a shipment of toys. The $2,000 consists of $1,850 for 

the toys and $150 for ocean freight and insurance. Y Toy Factory would 

have charged Company X $2,200 for the toys; however, because Y owed 

Company X $350, Y charged only $1,850 for the toys. What is the 

transaction value?

    The transaction value of the imported merchandise is $2,200, that 

is, the sum of the $1,850 plus the $350 indirect payment. Because the 

transaction value excludes C.I.F. charges, the $150 ocean freight and 

insurance charge is excluded.

    Example 5. A seller offers merchandise at $100, less a 2% discount 

for cash. A buyer remits $98 cash, taking advantage of the cash 

discount.

    The transaction value is $98, the price actually paid or payable.



    (2) Indirect payment. An indirect payment would include the 

settlement by the buyer, in whole or in part, of a debt owed by the 

seller, or where the buyer receives a price reduction on a current 

importation as a means of settling a debt owed him by the seller. 

Activities such as advertising, undertaken by the buyer on his own 

account, other than those for which an adjustment is provided in Sec.  

152.103(b), will not be considered an indirect payment to the seller 

though they may benefit the seller. The costs of those activities will 

not be added to the price actually paid or payable in determining the 

customs value of the imported merchandise.

    (3) Assembled merchandise. The price actually paid or payable may 

represent an amount for the assembly of imported merchandise in which 

the seller has no interest other than as the assembler. The price 

actually paid or payable in that case will be calculated by the addition 

of the value of the components and required adjustments to form the 

basis for the transaction value.



    Example 1. The importer previously has supplied an unrelated foreign 

assembler with fabricated components ready for assembly having a value 

or cost at the assembler's plant of $1.00 per unit. The importer pays 

the assembler 50[cent] per unit for the assembly. The transaction value 

for the assembled unit is $1.50.

    Example 2. Same facts as Example 1 above except the U.S. importer 

furnishes to the foreign assembler a tooling assist consisting of a tool 

acquired by the importer at $1,000. The transportation expenses to the 

foreign assembler's plant for the tooling assist equal $100. The 

transaction value for the assembled unit would be $1.50 per unit plus a 

pro rata share of the tooling assist valued at $1,100.



    (4) Rebate. Any rebate of, or other decrease in, the price actually 

paid or payable made or otherwise effected between the buyer and seller 

after the date of importation of the merchandise will be disregarded in 

determining the transaction value under Sec. 152.103(b).

    (5) Foreign inland freight and other inland charges incident to the 

international shipment of merchandise--(i) Ex-factory sales. If the 

price actually paid or payable by the buyer to the seller for the 

imported merchandise does not include a charge for foreign inland 

freight and other charges for services incident to the international 

shipment of merchandise (an ex-factory price), those charges will not be 

added to the price.

    (ii) Sales other than ex-factory. As a general rule, in those 

situations where the price actually paid or payable for imported 

merchandise includes a charge for foreign inland freight, whether or not 

itemized separately on the invoices or other commercial documents, that 

charge will be part of the transaction value to the extent included in 

the price. However, charges for foreign inland freight and other 

services incident to the shipment of the merchandise to the United 

States may be considered incident to the international shipment of that 

merchandise within the meaning of Sec.  152.102(f) if they are 

identified separately and they occur after the merchandise has been sold 

for export to the United States and placed with a carrier for through 

shipment to the United States.

    (iii) Evidence of sale for export and placement for through 

shipment. A sale for export and placement for through shipment to the 

United States under



[[Page 208]]



paragraph (a)(5)(ii) of this section shall be established by means of a 

through bill of lading to be presented to the port director. Only in 

those situations where it clearly would be impossible to ship 

merchandise on a through bill of lading (e.g., shipments via the 

seller's own conveyance) will other documentation satisfactory to the 

port director showing a sale for export to the United States and 

placement for through shipment to the United States be accepted in lieu 

of a through bill of lading.

    (iv) Erroneous and false information. This regulation shall not be 

construed as prohibiting Customs from making appropriate additions to 

the dutiable value of merchandise in instances where verification 

reveals that foreign inland freight charges or other charges for 

services incident to the international shipment of merchandise have been 

overstated.

    (b) Additions to price actually paid or payable. (1) 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 equal to:

    (i) The packing costs incurred by the buyer with respect to the 

imported merchandise;

    (ii) Any selling commission incurred by the buyer with respect to 

the imported merchandise;

    (iii) The value, apportioned as appropriate, of any assist;

    (iv) Any royalty or license fee related to the imported merchandise 

that the buyer is required to pay, directly or indirectly, as a 

condition of the sale of the imported merchandise for exportation to the 

United States; and

    (v) The proceeds of any subsequent resale, disposal, or use of the 

imported merchandise that accrue, directly or indirectly, to the seller.

    (2) The price actually paid or payable for imported merchandise will 

be increased by the amounts attributable to the items (and no others) 

described in paragraphs (b)(1) (i) through (v) of this section to the 

extent that each amount is not otherwise included within the price 

actually paid or payable, and is based on sufficient information. If 

sufficient information is not available, for any reason, with respect to 

any amount referred to in this section, the transaction value will be 

treated as one that cannot be determined.

    (3) Interpretative note. A royalty is paid on the basis of the price 

in a sale in the United States of a gallon of a particular product 

imported by the pound and transformed into a solution after importation. 

If the royalty is based partially on the imported merchandise and 

partially on other factors which have nothing to do with the imported 

merchandise (such as if the imported merchandise is mixed with domestic 

ingredients and is no longer separately identifiable, or if the royalty 

cannot be distinguished from special financial arrangements between the 

buyer and the seller), it would be inappropriate to attempt to make an 

addition for the royalty. However, if the amount of this royalty is 

based only on the imported merchandise and can be readily quantified, an 

addition to the price actually paid or payable will be made.

    (c) Sufficiency of information. Additions to the price actually paid 

or payable will be made only if there is sufficient information to 

establish the accuracy of the additions and the extent to which they are 

not included in the price.

    (d) Assist. If the value of an assist is to be added to the price 

actually paid or payable, or to be used as a component of computed 

value, the port director shall determine the value of the assist and 

apportion that value to the price of the imported merchandise in the 

following manner:

    (1) If the assist consist of materials, components, parts, or 

similar items incorporated in the imported merchandise, or items 

consumed in the production of the imported merchandise, acquired by the 

buyer from an unrelated seller, the value of the assist is the cost of 

its acquisition. If the assist were produced by the buyer or a person 

related to the buyer, its value would be the cost of its production. In 

either case, the value of the assist would include transportation costs 

to the place of production.

    (2) If the assist consists of tools, dies, molds, or similar items 

used in the production of the imported merchandise,



[[Page 209]]



acquired by the buyer from an unrelated seller,the value of the assist 

is the cost of its acquisition. If the assist were produced by the buyer 

or a person related to the buyer, its value would be cost of its 

production. If the assist has been used previously by the buyer, 

regardless of whether it had been acquired or produced by him, the 

original cost of acquisition or production would be adjusted downward to 

reflect its use before its value could be determined. If the assist were 

leased by the buyer from an unrelated seller, the value of the assist 

would be the cost of the lease. In either case, the value of the assist 

would include transportation costs to the place of production. Repairs 

or modifications to an assist may increase its value.



    Example 1. A U.S. importer supplied detailed designs to the foreign 

producer. These designs were necessary to manufacture the merchandise. 

The U.S. importer bought the designs from an engineering company in the 

U.S. for submission to his foreign supplier.

    Should the appraised value of the merchandise include the value of 

the assist?

    No, design work undertaken in the U.S. may not be added to the price 

actually paid or payable.

    Example 2. A U.S. importer supplied molds free of charge to the 

foreign shipper. The molds were necessary to manufacture merchandise for 

the U.S. importer. The U.S. importer had some of the molds manufactured 

by a U.S. company and others manufactured in a third country.

    Should the appraised value of the merchandise include the value of 

the molds?

    Yes. It is an addition required to be made to transaction value.



    (e) Apportionment. (1) The apportionment of the value of assists to 

imported merchandise will be made in a reasonable manner appropriate to 

the circumstances and in accordance with generally accepted accounting 

principles. The method of apportionment actually accepted by Customs 

will depend upon the documentation submitted by the importer. If the 

entire anticipated production using the assist is for exportation to the 

United States, the total value may be apportioned over (i) the first 

shipment, if the importer wishes to pay duty on the entire value at 

once, (ii) the number of units produced up to the time of the first 

shipment, or (iii) the entire anticipated production. In addition to 

these three methods, the importer may request some other method of 

apportionment in accordance with generally accepted accounting 

principles. If the anticipated production is only partially for 

exportation to the United States, or if the assist is used in several 

countries, the method of apportionment will depend upon the 

documentation submitted by the importer.

    (2) Interpretative note. An importer provides the producer with a 

mold to be used in the production of the imported merchandise and 

contracts to buy 10,000 units. By the time of arrival of the first 

shipment of 1,000 units, the producer has already produced 4,000 units. 

The importer may request Customs to apportion the value of the mold over 

1,000, 4,000, 10,000 units, or any other figure which is in accordance 

with generally accepted accounting principles.

    (f) Royalties or license fees. Royalties or license fees for patents 

covering processes to manufacture the imported merchandise generally 

will be dutiable. Royalties or license fees paid to third parties for 

use, in the United States, of copyrights and trademarks related to the 

imported merchandise generally will be considered selling expenses of 

the buyer and not dutiable. The dutiable status of royalties or license 

fees paid by the buyer will be determined in each case and will depend 

on (1) whether the buyer was required to pay them as a condition of sale 

of the merchandise for exportation to the United States, and (2) to whom 

and under what circumstances they were paid. Payments made by the buyer 

to a third party for the right to distribute or resell the imported 

merchandise will not be added to the price actually paid or payable for 

the imported merchandise if the payments are not a condition of the sale 

of the merchandise for exportation to the United States.



    Example. A foreign producer sold merchandise to an unrelated U.S. 

importer. The U.S. importer pays a royalty to an unrelated third party 

for the right to manufacture and sell a product made in part from the 

imported merchandise. The royalty is based on the selling price of the 

further-manufactured product in the U.S.

    Is the license fee part of the appraised value? No. The license fee 

is not a condition



[[Page 210]]



of the sale of the imported merchandise for export to the U.S.



    (g) Proceeds of subsequent resale. Additions to the price actually 

paid or payable will be made for the value of any part of the proceeds 

of any subsequent resale, disposal, or use of the imported merchandise 

that accrues directly or indirectly to the seller. Dividends or other 

payments from the buyer to the seller which do not relate directly to 

the imported merchandise will not be added to the price actually paid or 

payable. Whether any addition would be made will depend on the facts of 

the particular case.



    Example. A buyer contracts to import a new product. Not knowing 

whether the product ultimately will sell in the United States, the buyer 

agrees to pay the seller initially $1 per unit with an additional $1 per 

unit to be paid upon the sale of each unit in the United States. 

Assuming the resale price in the United States can be determined in a 

reasonable period of time, the transaction value of each unit would be 

$2. Otherwise, the transaction value could not be determined for want of 

sufficient information.



    (h) Right to reproduce. Charges for the right to reproduce the 

imported merchandise in the United States will not be added to the price 

actually paid or payable. The right to reproduce denotes that an idea or 

an original work is incorporated in, or reflected by, the imported 

merchandise, and the right is reserved to reproduce that idea or work in 

other merchandise by using the imported merchandise. The concept of the 

right to reproduce relates only to the following classes of merchandise: 

originals or copies of artistic or scientific works; originals or copies 

of models and industrial drawings; model machines and prototypes; and 

plant and animal species.



    Example. The importer purchases a painting. By purchasing the 

painting, the owner possesses the right to resell, lease, or otherwise 

place it on display. Absent an agreement to the contrary, he does not 

possess the right to reproduce copies of the painting. Fees paid for the 

right to reproduce the painting would not be dutiable.



    (i) Exclusions from transaction value. The transaction value of 

imported merchandise does not include any of the following, if 

identified separately from the price actually paid or payable and from 

any cost or other item referred to in paragraph (b) of this section:

    (1) Any reasonable cost or charge that is incurred for--

    (i) The construction, erection, assembly, or maintenance of, or the 

technical assistance provided with respect to, the merchandise after its 

importation into the United States; or

    (ii) The transportation of the merchandise after its importation.

    (2) The customs duties and other Federal taxes currently payable on 

the imported merchandise by reason of its importation, and any Federal 

excise tax on, or measured by the value of, the merchandise for which 

vendors in the United States ordinarily are liable.



    Example. A foreign shipper sells a piece of equipment to a U.S. 

buyer. The total contract price for the equipment includes technical 

assistance in the U.S. The equipment cannot be purchased without the 

technical assistance, but the contract provides a breakdown of costs.

    Should the appraised value include the technical assistance? No, 

transaction value does not include any reasonable costs for 

construction, erection, assembly, maintenance of, or technical 

assistance, for the imported merchandise after its importation into the 

U.S., the cost of which can be accurately identified as being separate 

from the price actually paid or payable for the merchandise to which 

they relate.



    (j) Limitations on use of transaction value--(1) In general. The 

transaction value of imported merchandise will be the appraised value 

only if:

    (i) There are no restrictions on the disposition or use of the 

imported merchandise by the buyer, other than restrictions which are 

imposed or required by law, limit the geographical area in which the 

merchandise may be resold, or do not affect substantially the value of 

the merchandise;

    (ii) The sale of, or the price actually paid or payable for, the 

imported merchandise is not subject to any condition or consideration 

for which a value cannot be determined;

    (iii) No part of the proceeds of any subsequent resale, disposal, or 

use of the imported merchandise by the buyer will accrue directly or 

indirectly to the seller, unless an appropriate adjustment can be made 

under paragraph (b)(1)(v) of this section; and



[[Page 211]]



    (iv) The buyer and seller are not related, or the buyer and seller 

are related but the transaction value is acceptable.

    (2) Related person transactions. (i) The transaction value between a 

related buyer and seller is acceptable if an examination of the 

circumstances of sale indicates that their relationship did not 

influence the price actually paid or payable, or if the transaction 

value of the imported merchandise closely approximates:

    (A) The transaction value of identical merchandise; or of similar 

merchandise, in sales to unrelated buyers in the United States; or

    (B) The deductive value or computed value of identical merchandise, 

or of similar merchandise; and

    (C) Each value referred to in paragraph (j)(2)(i) (A) and (B) of 

this section that is used for comparison relates to merchandise that was 

exported to the United States at or about the same time as the imported 

merchandise.

    (ii) In applying the values used for comparison, differences with 

respect to the sales involved will be taken into account if based on 

sufficient information supplied by the buyer or otherwise available to 

Customs and if the differences relate to:

    (A) Commercial levels;

    (B) Quantity levels;

    (C) The costs, commissions, values, fees, and proceeds described in 

paragraph (b) of this section; and

    (D) The costs incurred by the seller in sales in which the seller 

and the buyer are not related that are not incurred by the seller in 

sales in which the seller and the buyer are related.

    (k) Restrictions and conditions on sale. (1) A restriction placed on 

the buyer of imported merchandise that does not affect substantially its 

value will not prevent transaction value from being accepted as the 

appraised value.

    (i) Interpretative note. A seller requires a buyer of automobiles 

not to sell or exhibit them before a fixed date that represents the 

beginning of a model year.

    (2) The transaction value will not be accepted as the appraised 

value if the sale of, or the price actually paid or payable for, the 

merchandise is subject to a condition or consideration for which a value 

cannot be determined.

    (i) Interpretative note 1. The seller establishes the price of the 

imported merchandise on condition that the buyer also will buy other 

merchandise in specified quantities.

    (ii) Interpretative note 2. The price of the imported merchandise is 

dependent upon the price or prices at which the buyer of the merchandise 

sells other merchandise to the seller of the merchandise.

    (iii) Interpretative note 3. The price of the imported merchandise 

is established on the basis of a form of payment extraneous to the 

merchandise, such as where the merchandise is to be further processed by 

the buyer, and has been provided by the seller on condition that he will 

receive a specified quantity of the finished merchandise.

    (l) Related buyer and seller--(1) Validation of transaction. The 

port director shall not disregard a transaction value solely because the 

buyer and seller are related. There will be related person transactions 

in which validation of the transaction value, using the procedures 

contained in Sec.  152.103(j)(2), may not be necessary.

    (i) Interpretative note 1. Customs may have previously examined the 

relationship or may already have sufficient detailed information 

concerning the buyer and seller to be satisfied that the relationship 

did not influence the price actually paid or payable. In such case, if 

Customs has no doubts about the acceptability of the price, the price 

will be accepted without requesting further information from the 

importer. If Customs does have doubts about the acceptability of the 

price and is unable to accept the transaction value without further 

inquiry, the importer will be given an opportunity to supply such 

further detailed information as may be necessary to enable Customs to 

examine the circumstances of the sale. In this context, Customs will 

examine relevant aspects of the transaction, including the way in which 

the buyer and seller organize their commercial relations and the way in 

which the price in question was arrived at in order to determine whether 

the relationship influenced the price.



[[Page 212]]



    (ii) Interpretative note 2. If it is shown that the buyer and 

seller, although related, buy from and sell to each other as if they 

were not related, this will demonstrate that the price has not been 

influenced by the relationship, and the transaction value will be 

accepted. If the price has been settled in a manner consistent with the 

normal pricing practices of the industry in question, or with the way 

the seller settles prices for sales to buyers who are not related to 

him, this will demonstrate that the price has not been influenced by the 

relationship.

    (iii) Interpretative note 3. If it is shown that the price is 

adequate to ensure recovery of all costs plus a profit which is 

equivalent to the firm's overall profit realized over a representative 

period of time (e.g., on an annual basis), in sales of merchandise of 

the same class or kind, this would demonstrate that the price has not 

been influenced.



    Example. A foreign seller sells merchandise to a related U.S. 

importer. The foreign seller does not sell identical merchandise or 

similar merchandise to any unrelated parties. The transaction between 

the foreign seller and the U.S. importer is determined by Customs to be 

unaffected by the relationship.

    How should the merchandise be appraised?

    Transaction value based on the price actually paid or payable. A 

transaction value between a related buyer and seller is acceptable if 

the relationship did not affect the price actually paid or payable. This 

is so even if similar merchandise is being sold at a higher price, which 

includes a higher percentage for profit and general expenses.



    (2) Test values. (i) The importer or the buyer may demonstrate that 

the transaction value in a related person transaction is acceptable by 

showing that the value ``closely approximates'' any one of the test 

values provided in Sec.  152.103(j)(2)(i). The factors that will be 

examined to determine if the transaction value closely approximates a 

test value include:

    (A) The nature of the imported merchandise and the industry,

    (B) The season in which the merchandise is imported,

    (C) Whether the difference in value is commercially significant, and

    (D) Whether the difference in value is attributable to internal 

transport costs in the country of exportation.

    (ii) Because these factors may vary, Customs will not be able to 

apply a uniform standard, such as a fixed percentage, in each case. A 

small difference in value in a case involving one type of imported 

merchandise may be unacceptable, although a large difference in a case 

involving another type may be acceptable, in determining if the 

transaction value closely approximates any of the test values. Customs 

will be consistent in determining if one value ``closely approximates'' 

another value. The same approach will be taken if Customs considers a 

transaction value that is higher than any of the enumerated test values 

as will be taken if the transaction value is lower than any of the test 

values.



    Example. In applying any of the test values, if the transaction 

value in the sale under consideration is rejected because 95 does not 

closely approximate 100, then a transaction value for the sale of the 

same merchandise at 105 occurring at or about the same time likewise 

would have to be rejected. Similarly, if 103 were considered to closely 

approximate 100, a transaction value of 97 likewise would closely 

approximate 100.



    (iii) If one of the test values provided in Sec.  152.103(j)(2)(i) 

has been found to be appropriate, the port director shall not seek to 

determine if the relationship between the buyer and seller influenced 

the price. If the port director already has sufficient information to be 

satisfied, without further detailed inquiries, that one of the test 

values is appropriate, he shall not require the importer to demonstrate 

that the test value is appropriate.

    (m) Rejection of transaction value. When Customs has grounds for 

rejecting the transaction value declared by an importer and that 

rejection increases the duty liability, the port director shall inform 

the importer of the grounds for the rejection. The importer will be 

afforded 20 days to respond in writing to the port director if in 

disagreement. This procedure will not affect or replace the 

administrative ruling procedures contained in part 177 of this chapter, 

or any other Customs procedures.



[T.D. 81-7, 46 FR 2600, Jan. 12, 1981, as amended by T.D. 84-235, 49 FR 

46888, Nov. 29, 1984]



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