CBP does not have to accept the value on your entry. If the price looks wrong, the agency reassesses it, and the new value becomes the basis for duty, for interest, and for the penalty conversation that follows. The dispute is not about whether your price was honest. It is about whether it survives the test in 19 USC 1401a.
Transaction value is the starting point for nearly every entry: the price actually paid or payable for the goods, plus five additions. Packing costs. Selling commissions. Assists, the tools, molds, and engineering the buyer supplied free or at reduced cost. Royalties and license fees paid as a condition of the sale. And any proceeds of a later resale that come back to the seller. Leave one out and the value is understated, which is the most common way a valuation dispute starts.
The United States is unusual in one respect that helps importers: international freight and insurance are excluded from transaction value. Most other countries tax on a CIF basis, so the same shipment carries a higher dutiable value abroad. An importer who copies a supplier's CIF invoice into the entry value overstates the value and overpays duty, which is the mirror-image error and just as expensive.
Related-party sales are the first place the test bites. A price between related companies must pass the circumstances-of-sale test or match a test value, and a transfer price set for tax reasons rarely survives either one. The price has to be defensible as a price, not as an allocation.
Assists are the second. The mold the buyer sent to the factory free of charge is part of the value, and forgetting it is the single most common undervaluation. The assist does not disappear because it never appeared on an invoice. It is valued at its cost and added to the price.
Royalties are the third. A royalty paid as a condition of sale is dutiable even when it is invoiced separately, and splitting the invoice does not split the value. CBP reads the license agreement, not the invoice layout, and the agreement decides whether the royalty is part of the price.
When transaction value fails, CBP does not pick a number it likes. The WTO Agreement on Implementation of Article VII of GATT 1994 sets six methods in a strict hierarchy: transaction value, identical goods, similar goods, deductive value, computed value, and fallback. Methods four and five can swap at the importer's request, but nothing else moves out of order.
If an identical-goods value is available, CBP must use it before deductive value, and the importer who knows the hierarchy can hold CBP to it. The method that replaces your value has to be the next one in line, applied to goods that are actually comparable.
Fallback is not a guess. It has to be derived from one of the other methods with reasonable flexibility, and a value built from a competitor's price with no adjustments will not survive a protest. The fallback method still needs a basis, and the basis still needs evidence.
Reasonable care under 19 USC 1484 is the standard, and it is met on paper: the purchase order, the payment record, the assist valuation, and the royalty agreement, kept on file and produced when asked. An importer who cannot produce the records cannot show reasonable care, whatever the price was.
The penalty for undervaluation under 19 USC 1592 runs to twice the lost duties or 20 percent of the dutiable value for negligence, and higher for gross negligence and fraud. The way back is a protest under 19 USC 1514, filed within 180 days of liquidation on CBP Form 19. A post-summary correction fixes the entry before liquidation; after liquidation the route is a protest, and mixing the two clocks up is how a correctable error becomes final.
Confirm the current valuation rules with a licensed customs broker before a sourcing decision, because the hierarchy is settled law and the application to your goods is not. The broker who has seen your invoices can tell you whether the price survives the test before CBP does.
The price actually paid or payable plus five additions: packing, selling commissions, assists, royalties paid as a condition of sale, and resale proceeds returning to the seller. It is the starting point for nearly every entry under 19 USC 1401a.
No, the United States excludes international freight and insurance from transaction value. Most other countries tax on a CIF basis, so the same shipment carries a higher dutiable value abroad, and copying a CIF invoice into the entry overstates value.
Yes. A related-party price must pass the circumstances-of-sale test or match a test value. A transfer price set for tax reasons rarely survives, and CBP will move to the next method in the hierarchy.
A protest under 19 USC 1514 must be filed within 180 days of liquidation, on CBP Form 19. Before liquidation, the route is a post-summary correction, not a protest.