Lately we have seen many questions around customs assists. Assists are easily overlooked, but if the valuation of your goods are questioned or audited, Customs could penalize you.
What are Customs Assists?
The World Customs Organization (WCO) customs valuation rules are followed by most countries, including the U.S. Loosely, the WCO defines an assist as:
Any of the following if supplied directly or indirectly, and free of charge or at reduced cost, by the buyer of imported merchandise for use in connection with the production or the sale for export to the United States of the merchandise:
- Materials, components, parts, and similar items incorporated in the imported merchandise
- Tools, dies, molds, and similar items used in the production of the imported merchandise
- Merchandise consumed in the production of the imported merchandise
- Engineering, development, artwork, design work, and plans and sketches that are undertaken elsewhere than in the United States and are necessary for the production of the imported merchandise
For an assist to exist, it must be supplied (1) free of charge or at reduced cost, (2) by the buyer of imported merchandise for (3) use in connection with the production or the sale for export to the United States.
If these three conditions are met, you have an assist that needs to be added to the Transaction Value regardless of whether imported merchandise is finished or unfinished, or regardless of whether the exporter and importer are related or unrelated.
The exporter typically does not have information on the actual value of the assist. It is generally up to the importer to add the value of the assist to the value reported on the commercial invoice at the time of entry.
If you are dealing with a triangular or drop shipment transaction and the shipment is going directly to an end customer (not the party purchasing the goods directly from the exporter), you would look to the value that is being used at the time of entry. If that value includes the value of the assist, you do not need to include it again.
According to the World Trade Organization, customs valuation is defined as “a customs procedure applied to determine the customs value of imported goods. If the rate of duty is ad valorem, the customs value is essential to determine the duty to be paid on an imported good.”
Customs duties can be determined either in terms of specific or ad valorem, or as a mix of the two.
Specific duty vs. ad valorem duty
Specific duties are determined based on a quantitative description of the good, per item or per unit. The customs value of the good does not need to be determined since the duty is not based on the value of the good but on other criteria. In this case, no rules on customs valuation are needed and the Valuation Agreement does not apply.
Ad valorem duty depends on the value of a good. To calculate the amount of duty payable on an imported item, the customs valuation is multiplied by an ad valorem rate of duty.
Transaction Value Rules
Customs valuation is based on the actual price of the goods to be valued, which is generally shown on the invoice. This price, plus adjustments for certain elements listed in Article 8, equals the transaction value, which constitutes the first and most important method of valuation referred to in the Agreement.
When there is no transaction value, or when the price has been distorted as a result of certain conditions, the Agreement provides five other methods of valuation. If needed, these methods would be used in the following order:
Method 1 — Transaction value
Method 2 — Transaction value of identical goods
Method 3 — Transaction value of similar goods
Method 4 — Deductive method
Method 5 — Computed method
Method 6 — Fall-back method
Do you add the value of an assist to the AES export value?
This may depend on the country of exportation. The U.S., 15 CFR 30.6 states:
the value to be reported in the EEI shall be the value of the goods at the U.S. port of export in U.S. dollars. The value shall be the selling price (or the cost, if the goods are not sold), plus inland or domestic freight, insurance, and other charges to the U.S. seaport, airport, or land border port of export.
The selling price for goods exported pursuant to sale, and the value to be reported in the EEI, is the USPPI’s price to the FPPI (the foreign buyer).
If the goods are not sold, then the value to report is the “sum of expenses incurred in the USPPI’s acquisition or production of the goods.”
There is no specific requirement in the FTR to include “assists” or materials, etc., provided free of charge or at a reduced cost to the AES export value.
It’s important to appraise your shipment accurately and add in the value of all materials or services used in the production of your goods in order to avoid penalties from Customs.