What Is Transaction Value in Customs Valuation?

Transaction value in customs valuation is the price an importer actually pays or agrees to pay the seller for goods exported to the United States, adjusted by five statutory additions and certain exclusions. Customs and Border Protection (CBP) uses this figure as the starting point for calculating duties under the Harmonized Tariff Schedule, and it is the preferred method under federal law. Most imports are appraised this way.

The Price Actually Paid or Payable

The base of transaction value is the total payment the buyer makes to the seller for the goods. Federal law counts every payment made directly or indirectly, whether by cash, letter of credit, or negotiable instrument.¹ Timing doesn’t matter. A price not yet paid at the time of importation still counts, as long as the parties have agreed to it.²

Indirect payments cause most of the trouble. If the buyer settles a debt on the seller’s behalf, that payment is part of transaction value even though no money moved for the goods themselves.² The same is true when a discount on one shipment repays an earlier debt the seller owed. CBP looks at the full economic benefit flowing to the seller, not only what shows on the commercial invoice. A buyer who agrees to cover the seller’s marketing costs in exchange for a lower invoice price is still paying for the goods, and the marketing amount counts toward the dutiable value.

What You Must Add to the Invoice Price

Once you have the base price, five categories of separately paid costs must be added before duties are calculated. The statute lists these five and only these five:

Packing costs, meaning labor and materials to pack the goods for international shipment, if the buyer pays for them.
Selling commissions the buyer pays to an agent representing the seller.
Assists, meaning items or services the buyer supplies to the foreign producer free or at reduced cost for use in making the goods.
Royalties and license fees the buyer must pay as a condition of the sale.
Proceeds of any later resale that flow back to the seller.

Each addition applies only when the cost isn’t already inside the invoice price and only when the importer has enough documentation to calculate it accurately.¹ If you can’t determine the amount with sufficient information, CBP treats the whole transaction value as undeterminable and moves to an alternative method.

Buying Commissions vs. Selling Commissions

The difference matters. Selling commissions paid by the buyer get added to transaction value. Buying commissions do not.¹ A selling commission goes to someone acting for the seller to make the sale happen; a buying commission goes to an agent working for the buyer to locate and purchase goods. The burden falls on the importer to prove a genuine buying agency exists. Thin documentation means CBP will reclassify the payment and pull it into the dutiable value.

How Assists Work

An assist is anything the buyer provides to the foreign manufacturer, free or at a discount, for use in producing or selling the imported goods. The statute breaks assists into four categories: components and materials that get incorporated into the finished product; production tools like dies and molds; merchandise consumed during production, such as catalysts or lubricants; and engineering, development, artwork, design, plans, or sketches done outside the United States that are needed to make the goods.

The value of an assist has to be apportioned across the imported merchandise.¹ How you spread the cost depends on the situation. If all production from a particular mold is destined for the United States, you can allocate the mold’s entire value to the first shipment, spread it over units produced up to the first shipment, or spread it over the anticipated total production run. Your method should follow generally accepted accounting principles and needs to be documented well enough to survive review.

What You Exclude

Certain costs are specifically carved out. Getting these right lowers your duty bill legally.

International freight, insurance, and related shipping costs from the country of export to the U.S. port are excluded from the price actually paid or payable.¹ That’s a real difference from many other countries, which value imports on a CIF basis. The United States uses an FOB basis at the port of export.

Post-importation costs are also excluded when itemized separately on the invoice. These include assembly or installation of the goods after arrival, technical assistance provided after importation, and domestic transportation from the port to the buyer’s facility.¹ Federal customs duties, excise taxes, and other import charges are never part of the valuation. The requirement is clear documentation: these costs must appear as separate line items, not folded into the price of the goods.

When Transaction Value Can’t Be Used

Transaction value doesn’t fit every import. There must be a bona fide sale for export to the United States, meaning an actual transfer of ownership in exchange for payment.³ Shipments between branches of the same company where no title changes hands don’t qualify. Consignment arrangements, where the seller keeps ownership until the goods are resold domestically, also fail.

Beyond that, four conditions all have to be met:

The buyer must be free to use or resell the goods without restrictions that meaningfully affect value. Restrictions imposed by law, geographic resale limits, and restrictions that don’t substantially affect value are exceptions.
The sale price cannot depend on a condition whose value can’t be determined.
If any resale proceeds flow back to the seller, an adjustment must be possible under the additions rules.
The buyer and seller must be unrelated, or if related, the price must pass additional scrutiny.

If any condition fails, CBP rejects transaction value and moves to alternative methods.¹

Related-party transactions get extra attention because the relationship can distort the price. Parent-subsidiary deals, sales between companies under common ownership, and transactions between business partners all fall in this category. CBP won’t reject a related-party price just because the parties are related, but the importer carries the burden of showing the relationship didn’t influence the price, either by demonstrating that the pricing matches how the seller prices to unrelated buyers (or covers all costs plus a normal profit) or by comparing the price to accepted values for identical or similar goods sold to unrelated buyers in the U.S.⁴

Using the First Sale Rule to Lower Duties

When goods pass through a middleman before reaching the U.S. importer, there may be more than one sale in the chain. The importer typically pays the middleman’s marked-up price. Under the first sale rule, the importer can instead use the manufacturer-to-middleman price as transaction value, potentially cutting the dutiable value significantly.⁵

This isn’t automatic. The importer has to prove the earlier sale was genuinely for export to the United States and that the manufacturer and middleman dealt at arm’s length.⁶ CBP expects a complete paper trail: purchase orders, invoices between the manufacturer and middleman, proof of payment, and documentation that the goods were destined for the United States at the time of that first sale. The paperwork burden is real, but for importers buying through trading companies or overseas agents, the duty savings can justify it.

What CBP Uses When Transaction Value Fails

Federal law sets a strict hierarchy of fallback methods. You can’t skip ahead or pick whichever gives the lowest value.

Transaction value of identical merchandise produced in the same country and exported at roughly the same time.
Transaction value of similar merchandise from the same country and time period.
Deductive value, starting from the U.S. resale price and subtracting commissions, profit, post-importation costs, and duties.
Computed value, built up from materials, production costs, profit, and general expenses.

An importer can ask CBP to apply computed value before deductive value, reversing those two steps.¹ If none of these work, CBP falls back on a residual method that adapts the earlier ones, with certain bases (like minimum or arbitrary values) prohibited by statute.

Penalties for Getting It Wrong

Misreporting transaction value triggers penalties under 19 U.S.C. § 1592, scaled to how blameworthy the importer was:

Negligence: the lesser of the domestic value of the merchandise or two times the lost duties and fees.
Gross negligence: the lesser of the domestic value or four times the lost duties and fees.
Fraud: up to the full domestic value of the merchandise.

Even when the violation didn’t affect duty owed, penalties are still available: up to 20% of the dutiable value for negligence and 40% for gross negligence.⁷ The most common valuation mistakes involve failing to add assists or royalties, mischaracterizing selling commissions as buying commissions, and leaving indirect payments out. A voluntary prior disclosure filed before CBP discovers the problem typically reduces penalty exposure substantially.

Records You Have to Keep

Importers must retain all records that support the declared transaction value for up to five years from the date of entry.⁸ That covers commercial invoices, purchase orders, payment records, contracts, royalty agreements, assist documentation, commission agreements, and any transfer pricing studies used to support a related-party price. For drawback claims, records must be kept until three years after the claim is liquidated.

CBP can audit entries years after importation, and missing records effectively shift the burden against the importer. Organized documentation from the start is far cheaper than reconstructing it during an audit or paying penalties because a valuation claim can’t be substantiated.

1
Office of the Law Revision Counsel. 19 USC 1401a – Value
2
eCFR. 19 CFR 152.103 – Transaction Value
3
U.S. Customs and Border Protection. Bona Fide Sales and Sales for Exportation to the United States
4
U.S. Customs and Border Protection. Ruling H292850 – Internal Advice on Acceptability of Transaction Value in Related-Party Transactions
5
U.S. International Trade Commission. Use of the First Sale Rule for Customs Valuation of U.S. Imports
6
U.S. Customs and Border Protection. Ruling H005222 – Transaction Value, Nissho Iwai, Sale for Export
7
Office of the Law Revision Counsel. 19 USC 1592 – Penalties for Fraud, Gross Negligence, and Negligence
8
Office of the Law Revision Counsel. 19 USC 1508 – Recordkeeping