Transaction Value and Its Components in Customs Valuation

What exactly is Transaction Value? It is the “price paid or payable” for the item. Transaction value is simply one technique of determining the worth of commodities used by Customs, but it is the most popular form of valuation employed in worldwide trade. The World Trade Organisation established it as a standard procedure for calculating ad valorem levies on imported goods. The valuation method was established in 1947, when the World Trade Organisation was based on the General Agreement on Tariffs and Trade, to “promote justice, impartiality, and uniformity in customs duty assessment, and is utilised by more than 150 WTO Member nations worldwide.”

Some components may be part of the invoice price to the client that may or may not be dutiable, as determined by Customs. It is usually a good idea to detail each of them when producing invoices so that a customs broker or other agent may decide what value will be submitted to Customs for payment of duties. Therefore, it is important to know about Customs valuation.

Transaction Value includes the following components:

These are the values that will be included in your total price when tallying up your invoice from the invoice price to determine what your transaction value will be:

Packaging Fees — Fees for packing your products for retail or delivery.

Indirect Payments — These are past obligations owed by the seller to the buyer that are included on the invoice but are unrelated to the transaction. This debt would be included in the transaction value even if it was unrelated to the shipment.

Assists — These are the contributions made by the customer to the seller for the products to be manufactured, such as moulds, tools, dies, or any other supply used in the manufacture of that merchandise.

Commissions- Any selling commissions received by individuals or businesses when selling the merchandise. If the commission is already included in the importer’s pricing, the selling commission does not need to be added.

Royalties — The licencing fees or royalties linked with the sale of goods, including patents, trademarks, or any other incentive agreed upon between buyer and seller.

Foreign freight inland abroad — This term refers to inland freight charges passed on from a seller to a buyer from an overseas location.

Proceeds from the resale, disposal, or use of the products that accrue to the seller — This would include profits, disposal charges, and other known facts at the time of the buyer-seller transaction.