It is the responsibility of the importer to ensure that valuation laws and regulations are well-grasped. Of course, CBP requires that all importers moving goods into the US exercise reasonable care during all parts of the process. Under this legal framework is the payment surrounding the transactions outside of the actual invoice (also known as statutory additions – as referred to be CBP). However, this part of the transaction is often overlooked, because the organization’s lawyers or accountants may not be versed in CBP valuation laws. (ex: royalty payments, commissions, assists, etc.)
This presents an issue because getting the valuation and the statutory additions right for your import is critical for you to move goods into the US with ease. In turn, this will also have an impact on the organization’s bottom line as well.
An organizational valuation program that is equipped for the full scope of additions required by CBP is, in essence, a fully integrated valuation program. In a piece by Torres Law, PLLC, an international trade firm, on the topic, they explain this integration:
“A fully integrated valuation program must cover the price actually paid or payable, basis of appraisement, related party transactions, and statutory additions. Reviewing your company’s financial data is one key area to identify the statutory additions. Like other trade areas in a Customs compliance program, risk assessment and monitoring are a balance of the appropriate internal resources and external expertise.”
Below, we’ll outline a few CBP regulations to look out for, as stipulated in the Tariff Act. These regulations include, but are not limited to:
19 CFR Part 163: general records to be maintained, who is responsible for maintaining/recordkeeping, and for how long. (Appendix (a)(1)(A)). (Recommended Reading: What Every Member of the Trade Community Should Know about Recordkeeping)
19 CFR 152.103: determining transaction value for imported products, along with elements to add to the price paid:
- Packing costs
19 USC 1509: informs the importer that CBP maintains the right to examine any record that may be relevant to an import investigation (ex: statements, documents, etc.)
Beyond this, CBP may ask for other kinds of documents within a ruling – this may include financial statements, ledgers, accounting reports, balances, chart of accounts, etc. In addition, Torres Law warns that:
“At times restrictions imposed by a parent entity limit the amount of information that can be shared between related entities creating challenges to accurately support additions.
There is no one size fits all approach and method. If your company has not recently completed a review of the company’s financial data, a more thorough approach and review is warranted. When identified, the risk of additions is low, and a stop-and-go approach can be taken with fewer transactions reviewed.”
(Recommended Reading: CUSTOMS AUDIT CHECKLIST: GET PREPARED FOR US CUSTOMS AUDITS)
So many organizations are feeling the pinch of navigating the pandemic, maintaining profits, streamlining supply chains, and more. The last thing importers need right now is a CBP investigation as a result of customs valuation missteps.
To ensure that your organization stays in a healthy place, you can contact a customs consultant or customs broker. Click here to get the conversation started!