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How Does CBP Review Value?
Speakers:Cindy Deleon | Deleon Trade LLCJohn Metrich | Deleon Trade LLCKristin Simonson | Deleon Trade LLC
Audience Questions:
How many of you……
• Are importers? Brokers? Service Providers? Government Employees?
• Consider yourself well-versed in Customs valuation?
• Have undergone a CBP Audit?
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Overview
1. Why does CBP care about value?
2. Who at CBP reviews value?
3. How does CBP target for value?
4. How does CBP request value information?
5. How does CBP review and audit value?
6. What does CBP do with the results?
3
Why Does CBP Care About Value?
• Section 201, 232, and 301 duties
– More to come? (List 4 for China, Autos and Auto parts, Mexico, European Union)
• Antidumping and Countervailing Duties
• Regular Ad Valorem duties
• Merchandise Processing and Harbor Maintenance Fees
• Trade Statistics (e.g., negotiating trade agreements)
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Who is Looking at Your Values?
• Import Specialists
• Regulatory Audit
• National Targeting & Analysis Group (NTAG)
• Centers for Excellence and Expertise (CEE)
• Commercial Enforcement Analysis & Response Teams (CEAR)
• Enforcement Analysts
• Homeland Security Investigations
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How Does CBP Target for Value?
• Analysis of ACE Import Data
– Total Value and Volume
– High Value Duty Rates – ADD/CVD, 301, etc.
– Related Party Transactions
– Maquiladora Activity
• Specific Industries or Types of Products
• Census Warnings
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Census Warnings• Occur when something is out of the normal range for a
specific HTS
– Commodity Price Ranges
– Origin Countries
– Quantity-to-Quantity Ratios
– Maximum Value (exceeds $100 million)
• ES-012 – Entry Summary Census Warning and Override
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How does CBP Request Value Support?
• ACE/ABI Request for Documents submitted through Document Imaging System (DIS)
• CBP Form -28 Request for Information
• Audits – Surveys (RASA), Referrals, FA’s, Follow-Ups
– Walkthrough Transactions
– Questionnaire
– Requests for Information
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Document Request Example
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CBP Request for Information – CF 28• Basic Request
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• CF 28 & Audit Combined
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Audit Engagement Letter
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Audit Walkthrough Entry Request
Audit Questionnaire
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Audit Questionnaire
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Informed Compliance Letter
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Tips for Responding to CBP Requests?
• Respond timely or request extensions if necessary
• Review all documents/data before submitting to CBP (look
at all risk areas not just value)
• Be careful NOT to offer up more info and documents than
requested
• Do not say YES to all CBP requests, make sure they are
reasonable and within the scope of the engagement, and in
writing
• Consider obtaining assistance from legal counsel,
consultant, or other expert
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How does CBP Review & Audit Value?
• Verification of Basis of Appraisement
• Review for obvious errors & red flags
– Unconverted Currency
– Undeclared Invoice Value - Free of Charge, Packing, etc.
• Verification of proof of payment
• Review of all deductions
• General ledger review & testing
• Other testing – macro test, first sale, related party value, cost submissions, reconciliations, etc.
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Customs Valuation Hierarchy
1. Transaction Value – price actually paid or payable (PAPP) plus
certain additions;
2. Transaction Value of Identical or Similar Merchandise - based on
the transaction value of previously imported merchandise
3. Deductive Value - selling price in the US less certain post-
importation costs
4. Computed Value - Foreign supplier cost information for
materials, processing, profit, general expenses, and U.S. assists
and packing costs
5. Value if Other Values Cannot Be Determined or Used (Fallback
Method) - methodology derived from one of the first four
methods with the rules being reasonably adjusted
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Basis of Appraisement Questions
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Transaction Value –
Related Party
Computed Value
Fallback Value
Transaction Value – 19 CFR 152.103
• Price actually paid or payable for the merchandise when sold for exportation to the United States, plus certain statutory additions to the price.
• Price actually paid or payable
– The total payment (whether direct or indirect) for the imported merchandise from the buyer to the seller.
– General presumption that all payments from the buyer to the seller are dutiable – Generra Sportswear Case
– Often the invoice price, but certain upward and downward adjustments may be made.
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Obvious Errors - Currency
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USD
CAD
Obvious Errors – Undeclared Invoice Value
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Entered Value $213,703
Obvious Errors – Undeclared Invoice Value
Invoice Value $213,865.36
Packaging Charge - 162.54
Entered Value $213,702.82
Invoice Value $213,865.36
Free Charge + 541.00
Correct Value $214,406.36
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Proof of Payment – Double Invoices
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Invoice w/ Shipment$20,486.40
Invoice for Payment$25,382.40
Proof of Payment Example
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Proof of Payment Example – Invoice
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Proof of Payment Example – Wire Detail
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Proof of Payment Example – Bank Stmt
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Deductions from Transaction Value
• You can only exclude/deduct a few costs under the rules for transaction value and they all carry certain requirements:
– International Freight
– Post-Importation Charges
– Transportation of Merchandise after Importation
– Duties and Taxes Payable after Importation
• CBP will review documentation to verify all deductions taken!
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Freight Deductions
• Requirements to take a freight deduction:– Estimated freight deductions are not allowed; only the actual freight
charges can be deducted
– A costed bill of lading or other documents from the 3rd party freight company corroborating the charges MUST be obtained to support the deduction. Commercial documents to and from the service provider such as an invoice or written contract separately listing freight/insurance costs, a freight/insurance bill, a through bill of lading or proof of payment of the freight/insurance charges (i.e., letters of credit, checks, bank statements) are examples of some documents which may serve as proof of such actual costs.
– Actual freight charges need to be separately identified on the invoice used to clear Customs
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Freight Example
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$2,016 Deducted
Invoice Freight = $5,869.82
Freight Example – Freight Invoice
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Actual Freight $2,016
G/L Review & TestingFocus is on:
• Value Additions–Commissions (Selling)
–Royalties
–Assists
–Packing Costs
–Proceeds
• Additional Payments
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Additional Vendor Payments
• Types of supplemental vendor payments that are considered part of the price actually paid or payable:
– Tooling, Die, Mold, or Equipment Charges
– Deposits and milestone payments
– Material acquisition charges
• Spot buy charges
• Metal surcharges (e.g., Steel, Copper, and precious metals)
– Rework charges
– Testing charges
– Packing charges
– Royalties/Proceeds
– Design or development charges
– Transfer pricing true-ups
– Management Fees
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G/L Review & Testing
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• Request & Review G/L Trial Balance
• Identify Accounts of Interest
• Select Sample Transactions for Testing
Step 1
G/L Review & Testing
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Step 2
G/L Review & Testing
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Step 3
What does CBP Do With The Results?
• Acceptable Audit Report
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What does CBP Do With The Results?
• Unacceptable Audit Report
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What should you do Now?
• Get Educated – Read Focused Assessment Technical Guide - Value
• Conduct a Risk Assessment
• Conduct Targeted Sampling of Identified Risks
• Evaluate Your Internal Control Program
• Consider Prior Disclosure if Errors are Identified
• Develop and Implement Corrective Actions
• DON’T WAIT UNTIL YOU HEAR FROM CBP!
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Cindy Deleon
Founder
Deleon Trade LLC
Former U.S. Customs Auditor
& Assistant Field Director
Office (281) 466-2026
Mobile (708) 533-5224
QUESTIONS?
John Metrich
Senior Trade Auditor
Deleon Trade LLC
Former U.S. Customs Auditor
& Assistant Field Director
Office (281) 466-2026
Mobile (219) 781-8973
Kristin Simonson
Senior Trade Auditor
Deleon Trade LLC
Former U.S. Customs Auditor
& Assistant Field Director
Office (281) 466-2026
Mobile (612) 987-6163
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