A U.S. buyer purchased merchandise from an unrelated manufacturer in India. The terms of the sale were ex-factory packed. The U.S. buyer paid the foreign manufacturer $18,344 which included a $1,500 packing fee. The U.S. buyer also paid $4,500 to a freight forwarder to cover expenses for inland freight of $500 and air freight of $4,000. In addition, the U.S. buyer paid a commission of $1,500 to a buying agent who facilitated the purchase of the merchandise. What is the entered value for the imported merchandise?
How to get there
Start with the price paid to the seller, then go through each extra cost:
- Price paid to the manufacturer: $18,344. It already includes the $1,500 packing fee. Packing is an addition only when the buyer incurs it on top of the price, so nothing more is added.
- Foreign inland freight ($500), paid to a forwarder: the sale is ex-factory, so:
19 CFR 152.103(a)(5)(i): Ex-factory salesIf the price actually paid or payable … does not include a charge for foreign inland freight and other charges for services incident to the international shipment of merchandise (an ex-factory price), those charges will not be added to the price.
- Air freight ($4,000): international transportation is never part of transaction value.
- Buying agent's commission ($1,500): only selling commissions are added (§ 152.103(b)(1)(ii)). A bona fide buying commission isn't.
Entered value = $18,344.00: A.
Why the other choices are wrong
B) $12,344: subtracts the packing and the freight-forwarder charges from the price, but those freight costs were never in the price, and packing that's included stays in.
C) $6,500: a combination of the freight and commission amounts. It isn't a valuation result at all.
D) $25,844: adds the $4,500 freight and the $1,500 buying commission (and more) to the price. Neither belongs in transaction value.
Trap!
Selling commission → add. Buying commission → don't. Packing is added only if the buyer pays it outside the price. On an ex-factory price, foreign inland freight paid separately is never added.
Source: 19 CFR 152.103(a)(5)(i), (b)(1) (eCFR).
CBP answer key: Answer A · 19 CFR 152.103(a)(5)(i)Source: CBP past exams ↗