Transaction value is the starting point for nearly every customs valuation. It equals the price actually paid or payable for the merchandise when sold for export to the United States, plus certain mandatory additions. The statute is 19 USC 1401a, which implements the World Trade Organization's Customs Valuation Agreement, and the method covers the vast majority of imports because most commercial sales are straightforward: a buyer, a seller, a price, and a shipment.
The method works only when four conditions are satisfied. There must be a genuine sale for export to the United States. There must be no restrictions on how the buyer uses or disposes of the goods that would meaningfully affect the price. If the buyer and seller are related, the relationship must not have influenced the price. And no part of the proceeds of a subsequent resale may accrue to the seller unless it is added to the price. If any condition fails, the importer moves to the alternative methods, in order, and cannot skip ahead.
When transaction value cannot be used, the law prescribes a strict hierarchy of five alternatives. First, the transaction value of identical merchandise: goods the same in all respects, including physical characteristics, quality, and reputation, exported to the United States at or about the same time. Second, the transaction value of similar merchandise, which is close but not identical. Third, deductive value: the US resale price of the goods, or identical or similar goods, working backward by subtracting post-import costs, commissions, profit, and general expenses.
Fourth, computed value: the cost of materials and fabrication, plus profit and general expenses, plus the value of any assists. Fifth, the fallback method, a reasonable method consistent with the statute. At the importer's request, CBP will reverse the order of the deductive and computed value methods. For ordinary commercial sales between unrelated parties, almost everything settles at method one, and the ladder exists for the cases where it does not.
Computed value needs the producer's cost records: materials, fabrication, profit, and general expenses, broken out and documented. A foreign manufacturer rarely hands that over, and has no legal obligation to. The importer who needs computed value is asking a supplier to open their books for a US customs filing, which is a commercial negotiation, not a paperwork exercise.
That is why most importers fight to stay on transaction value, and why the related-party rules matter so much. If CBP rejects your transaction value because the relationship influenced the price, and there is no identical or similar merchandise value to fall back on, the next stop is deductive value, which needs a US resale price, or computed value, which needs the producer's costs. Either way, the importer is building a valuation from data they do not control. The cheapest valuation defense is a clean transaction value with the evidence ready before the entry is filed.
Keep reading: Royalties and License Fees: When CBP Adds Them to Value, First Sale Rule: How It Cuts Duty on Multi-Tier Transactions.
Transaction value is the price actually paid or payable for the merchandise when sold for export to the United States, plus certain mandatory additions. It equals the total payment made by the buyer to the seller or for the seller's benefit, whether the payment is direct or indirect, and it does not include international freight, insurance, or related shipping costs.
Five categories, where they are not already in the price: packing costs incurred by the buyer, selling commissions incurred by the buyer, the apportioned value of any assist such as tools, molds, or design work supplied free or at reduced cost, royalties and license fees the buyer must pay as a condition of sale, and the proceeds of any subsequent resale that accrue to the seller.
Yes, on request at the time the entry summary is filed. The hierarchy runs transaction value, identical merchandise, similar merchandise, deductive value, then computed value, with fallback last. At the importer's request, CBP will reverse the order of the deductive and computed value methods, which matters when you have the producer's cost data but no US resale price to work from.
The fallback method: a reasonable method consistent with the statute, under 19 USC 1401a(f). It cannot be based on the selling price in the US of the merchandise itself, on arbitrary or fictitious values, or on the price of goods for export to a third country. In practice the fallback is rare, because one of the first five methods almost always works.