When shipping internationally, a common question we get is "what value should we declare." The value declaration is, along the the H.S. classification, the key element of the import process and duty assessment. Over declarations result in needless costs and under-declaration of values can result in significant fines and legal actions.
In this post, we review the key concepts to understand for declaring a value for your international shipment.
The value of imports is one of the elements for assessment of duty.
The three elements to determining the duty rate:
Read about new rules regarding declared value for non-resident importers to Canada.
Disclaimer: The information in this post and all Jet Worldwide content is for general information only
The transaction value is the amount paid for the items. But, for many of the international shipments, there is often not an actual transaction value.
Not having a clear transaction value occurs when free commercial samples or warranty items are ship. When there is, in fact, no financial transaction. At Jet Worldwide, our customers often send commercial samples or warranty replacement parts where there is not an actual transaction value.
Before sending your international shipments, we advise our customers to consult with the receiver on which value to declare as valuation is most important to import processes.
Although the broad World Customs Organization (WCO) guidelines apply in most countries, there can be significant differences.
The transaction value can include items not necessarily on the commercial invoice. To the USA, for example, US customs also considers the following items as part of the transaction value:
Note that US customs does not consider transport costs as part of the transaction value.
The value to determine the admissibility under duty free duty free thresholds for online orders is the value of the total consignment, not individual orders.
Common Duty Free Thresholds for Online Orders
It is important to note that value add tax is most often applicable even if the goods otherwise qualify for duty free import. Useful information regarding duty free low value thresholds.
The definition of “intrinsic value” refers to the price of the goods themselves when sold for export. It excludes transport and insurance costs, unless they are inclusive in the price. If price includes shipping and insurance it must be separately indicated on the invoice. For goods of a non-commercial nature, the price which for payment for the goods themselves.
The the term “consignment” refers that ship together from a single consignor to a single consignee. A consignment is covered by the same transport waybill and tracking number.
Read about value for duty for non-resident importers to Canada.
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The most common method of determining the correct value declaration is to use the "transaction value:"
The transaction value is the price actually paid or payable for the goods when sold for export to the country of importation, with certain adjustments.
The adjustments can include such things as the cost of transportation and insurance. If, for example, you sold an item for $1,000 and cost of transportation and insurance was $90, the transaction value would be $1,090.
Most countries accept the transaction value as the appropriate amount to declare upon import.
Other customs value assessment are possible when the transaction value is not possible. Alternative valuation methods include:
International Resources: Rules for declaring a value
Application of the above alternative valuation methods are in hierarchical order.
Basically, deductive value is the resale price after import with deductions for certain items. The deductive generally starts with a unit price. From this point certain additions to and deductions will apply from that price.
Computed value consists of the sum of the materials and processing costs, plus packing, profit and general expenses
If none of the previous methods apply directly, the value with derive from one of the five previous methods with adjustments.
When declaring a value for your international shipment, the transaction value is mostly just common sense. The following two methods (value of identical or similar goods) are self explanatory.
Deductive, computation and fall-back methods of valuation can get technical. Their implementation is mostly in the case of high value disputes. Useful concepts in determining the value include inherent value, intrinsic value and historic value.
For high values and specific commodities get advice from logistics professionals. Consult with customs authorities. Get a ruling on value prior to importing the goods.
The CIF value is the value of the goods plus shipping and insurance. This can also mean the landed costs or value for duty
Most customs authorities consider the "CIF value" as the value for duty. Customs considers the cost of transport and insurance as also dutiable. The term CIF value is often the value for duty .
For example: if the transportation and insurance cost to ship goods worth $1,000 are $200, the CIF value is $1,200. The duty is then based on $1,200, not $1,000.
For courier and postal shipments, the exact transport cost is often unknown. When assessing the transport value for parcel imports, most customs applies a standard cost per kg.
US Customs considers only the cost of the goods as the value for duty. Additional items to include in the cost of goods include:
Duty costs of the goods can calculate differently against a specific Incoterm value. Some customs calculate duty on the CIF value. Other countries calculate duty as a percentage of the FOB value of the goods. Shipping terms define the points at which costs and risks pass between the seller and buyer. Useful information regarding shipping terms.
In general, the correct value for duty is the transaction value to the purchaser in Canada. It is not the value between foreign entities.
Read more about value declaration for non-resident importers to Canada.
Inter-company transactions can complicate the idea of a transaction value. Such pricing and invoicing affect both import and tax processes.
Online orders are usually at a disadvantage when it comes to duty assessment. Be careful and make sure you are assigning the correct value. The duty free thresholds can provide some benefit for online orders.
For example: An import of thousands of shirts with a wholesale value of $5 per shirt will be assessed on that transaction value. The same shirt sold retail online for $30 will be assessed the same duty rate but on higher transaction price.
Traditional retail logistics (TRL) flow versus Direct Online Shipping (DOS)
International online merchants parcel logistics considerations include a variety of factors:
Other Helpful Resources: