CCS Trade Agreements & Valuation 3 — Questions and Answers
Question 1: When must CBP apply the deductive value method before the computed value method?
- Whenever the importer requests it
- Whenever transaction value of identical or similar goods is unavailable
- Always — deductive value is always applied before computed value
- Only when the importer cannot provide cost data from the foreign producer (Correct answer)
Correct answer: Only when the importer cannot provide cost data from the foreign producer
Under 19 USC 1401a(a)(1), the importer may request that computed value be applied before deductive value; otherwise the statutory hierarchy places deductive value fourth and computed value fifth.
Question 2: Under the deductive value method, which of the following deductions is NOT permitted from the unit price of the imported merchandise?
- Commissions or profit and general expenses added in the U.S.
- Customs duties and federal taxes paid on importation
- The value of further processing in the United States
- Costs of ocean freight and marine insurance to the U.S. port of entry (Correct answer)
Correct answer: Costs of ocean freight and marine insurance to the U.S. port of entry
Under deductive value (19 USC 1401a(d)), international freight and insurance incurred after export from the country of exportation are NOT deducted because they were never included in the U.S. sale price used as the starting point.
Question 3: Which element is included in the computed value of imported merchandise?
- U.S. import duties and taxes
- Selling commission paid by the U.S. importer to a U.S. broker
- Profit and general expenses of producers in the country of export (Correct answer)
- Post-importation warranty service costs
Correct answer: Profit and general expenses of producers in the country of export
Computed value under 19 USC 1401a(e) includes cost of materials and fabrication, profit and general expenses of the producer, and assists and packing costs.
Question 4: Under the 'fallback' or 'other' method (Method 6) of customs valuation, which approach is explicitly PROHIBITED?
- Using the transaction value of a related-party sale with price adjustments
- Basing value on the highest of two acceptable alternative values (Correct answer)
- Applying the price of identical goods sold in the U.S. market
- Referencing a previously approved CBP binding ruling for a similar product
Correct answer: Basing value on the highest of two acceptable alternative values
19 USC 1401a(f)(2) prohibits the fallback method from being based on the higher of two alternative values, arbitrary or fictitious values, domestic selling prices, or minimum customs values.
Question 5: Under the GSP (Generalized System of Preferences), what minimum percentage of the appraised value of an imported product must consist of the cost or value of materials produced in the beneficiary country PLUS direct processing costs?
- 25%
- 35% (Correct answer)
- 50%
- 60%
Correct answer: 35%
GSP rules of origin require that at least 35% of the appraised value of the article consist of the cost or value of materials produced in the beneficiary developing country plus direct costs of processing.
Question 6: An importer of record declares a transaction value of $50,000 for electronics. CBP questions whether the price is influenced by a buyer-seller relationship. What must CBP prove to reject the declared transaction value?
- That the buyer and seller share common ownership of more than 5%
- That the relationship actually influenced the price paid or payable (Correct answer)
- That no identical or similar merchandise was imported at an arm's-length price
- That the declared value is more than 10% below the computed value
Correct answer: That the relationship actually influenced the price paid or payable
Under 19 USC 1401a(b)(2)(B), CBP cannot reject transaction value merely because buyer and seller are related; CBP must demonstrate that the relationship actually influenced the price.
Question 7: Royalties and license fees paid by a U.S. importer to the foreign seller are dutiable when they meet what test?
- They are paid as a condition of the sale of the imported goods for export to the U.S. (Correct answer)
- They relate to any intellectual property used in the production process
- They exceed 5% of the customs value
- They are paid to a party located outside the United States
Correct answer: They are paid as a condition of the sale of the imported goods for export to the U.S.
Royalties or license fees are included in transaction value only if they are related to the imported goods AND are a condition of the sale of those goods for exportation to the United States (19 USC 1401a(b)(1)(D)).
CCS Trade Agreements & Valuation 3
When must CBP apply the deductive value method before the computed value method?