# Customs Valuation: When CBP Rejects Your Transaction Value

Source: https://landedgehq.com/blog/2026-11-08-customs-valuation-cbp-rejects-transaction-value/

Cross-border operations guide · November 8, 2026


**Short answer:** CBP rejects transaction value when the buyer and seller are related and the relationship affected the price, or when the additions, packing, selling commissions, assists, royalties, and resale proceeds, were left out. The law is 19 USC 1401a, and the six methods apply in strict order. When transaction value fails, CBP moves to the next method, not to a number it likes better.

## Transaction value, and what it actually is

Transaction value is the price actually paid or payable for the goods, and it is the first of the six valuation methods in 19 USC 1401a. It is the method most importers use, and the reason is simple: it is the number on the invoice. But the invoice price is the starting point, not the answer, because the law requires additions that the invoice does not show.

The additions are the part people skip. Packing costs, selling commissions, assists such as tooling and molds supplied free or at a reduced price, royalties and license fees that are a condition of the sale, and any proceeds of a later resale that go back to the seller all get added to the price actually paid. A valuation that leaves them out understates the customs value, and the understatement is the violation.

## The related party problem

The most common rejection is the related party price. When the buyer and seller are related, CBP accepts the transaction value only if the relationship did not affect the price. That is a test, not a presumption, and the importer has to show it, usually by demonstrating that the price matches the price charged to unrelated buyers, or that it covers the costs plus a normal profit.

A related party price that cannot pass the test does not get adjusted. It gets rejected, and CBP moves to the next method in order. The importer who files a related party price without the support has not filed a low value. They have filed a value that will be replaced, and the replacement will be CBP's number, not theirs.

## The US strips freight, and that matters

One feature of US valuation surprises importers from other countries: the US strips international freight and insurance out of the customs value. The value is the price of the goods, not the cost of getting them here. An importer who includes the freight in the value overpays the duty, and an importer who excludes a domestic charge that belongs in the value underpays it.

The distinction is the border. Costs incurred up to the point of export belong in the value. Costs after the goods leave the country of export do not. The invoice usually mixes them, and the entry filer has to separate them, which is the part of the job that takes a careful reading of the commercial invoice rather than a quick copy of its total.

## Form 29, and the penalty for getting it wrong

When CBP disagrees with a value, it says so on a CBP Form 29, a notice of action that proposes an increase. A Form 29 that increases the duty by more than 15 dollars is a formal challenge, and the importer has to respond with the support for their value or accept the increase. Ignoring it is not an option. The increase becomes the assessment.

The penalty for negligence is up to twice the duty lost, or 20 percent of the dutiable value. That is the cost of a valuation that was wrong because nobody checked it. The fix is a valuation file for each product: the method used, the additions, the related party analysis if any, and the documents that support each line. The file is the defence, and it has to exist before the Form 29 arrives.

Keep reading: [Royalties and License Fees: When CBP Adds Them to Value](https://landedgehq.com/blog/2026-11-06-royalties-license-fees-value/), [First Sale Rule: How It Cuts Duty on Multi-Tier Transactions](https://landedgehq.com/blog/2026-11-06-first-sale-rule-duty/), [How do related party prices affect customs valuation for importers?](https://landedgehq.com/blog/2026-10-16-related-party-pricing-customs-valuation-importers/).

## Frequently asked questions

## What is transaction value?

Transaction value is the price actually paid or payable for the goods, and it is the first of the six valuation methods under 19 USC 1401a. The invoice price is the starting point, and the law requires additions for packing, selling commissions, assists, royalties, and resale proceeds that go back to the seller.

## When does CBP reject a related party price?

When the relationship affected the price. CBP accepts a related party transaction value only if the importer shows the price was not affected, usually by matching it to prices charged to unrelated buyers or showing it covers costs plus a normal profit. A price that cannot pass the test is rejected and CBP moves to the next method.

## Is international freight included in US customs value?

No. The US strips international freight and insurance out of the customs value. Costs up to the point of export belong in the value, costs after the goods leave the country of export do not. An importer who includes freight overpays the duty.

## What is a CBP Form 29?

It is a notice of action proposing an increase in value or duty. A Form 29 that increases duty by more than 15 dollars is a formal challenge, and the importer must respond with support for their value or accept the increase. Negligence penalties run up to twice the duty lost or 20 percent of the dutiable value.