When shipping international parcels, an important concept to understand is valuation. The declared value is a key determinant of the import process and duty assessment.   Over declared values result in needless costs and under-declared values can result in significant fines and legal actions.     

In this post explore the basics concepts regarding valuation for shipping parcels.   Please note that this post is for general information only and not intended as legal or tax advice.

The value of imported goods is one of the elements used for assessment of duty.   

The three elements to determining the duty rate:

  1. Value fo the Goods (discussed below)
  2. Origin of the Goods
  3. Customs tariff classification / HS Code

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valuation-graphicWhen sending international shipments, it is important to understand the value that should be applied to your international shipment.     For virtually every major country, the declared value is simply the “transaction value.”     The transaction value can be loosely defined as the amount paid for the items being imported.      But, for many of the international shipments, there is often not an actual transaction value.    

Not having a clear transaction value occurs when unsolicited / free commercial samples or warranty items are sent via international courier.    When there is, in fact, no financial transaction.   At Jet Worldwide, we often handle international shipments - such as samples - where there is not an actual transaction value. 

 Before sending your international shipments, it is helpful to consult with the receiver on which value to declare as valuation is most important to import processes.   

Although the World Customs Organization (WCO) guidelines are adhered to by all major economies, there can be significant interpretational differences.

The key concepts to consider regarding  declared value

Valuation methods for international shipments: 

For all international shipments, the most common method of determining the correct declared value 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.

Virtually all countries accept the transaction Value as the appropriate amount to declare upon import.   

Alternatives to using the Transaction Value for international shipments:

Where the Customs value cannot be determined on the basis of the transaction value, it will be determined using one of the following methods:

  • The transaction value of identical goods
  • The transaction value of similar goods
  • The deductive value method
  • The computed value method
  • The fall-back method.

The above valuation methods must be used in hierarchical order.

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, computed and fall-back methods can get technical.    For high value, specific commodities and cases where determining the value is not immediately clear, it is critically important to get advice from experienced professionals.   

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COST, INSURANCE, FREIGHT:  CIF Value

Virtually all customs authorities consider the "CIF value" as the value to be used when assessing duty and taxes.      In addition to the cost of the item, customs also considers the cost of transport and insurance as the dutiable or accessed value.       

For example, if the transportation and insurance cost to ship goods worth $1,000 are $200, the CIF value is $1,200.    The duty will be assessed is based on $1,200, not $1,000.

Note:  This blog is meant for general information only. Ensure compliance with  your carrier, customs brokers, customs and other regulatory authorities prior to shipping.

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Disclaimer: The information in Jet Worldwide online content, including this post, is for general information only and is not intended to, constitute legal and/or tax advice.  Producers, shippers, exporters, importers should confirm their processes with their customs brokers, carriers and regulating authorities. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed. The content on this posting is provided “as is”; no representations are made that the content is error-free.

 

Written by Timothy Byrnes