Customs Valuation: How Goods Value Affects Shipping and Customs Clearance

International trade is complex. Understanding domestic and international value of goods can help streamline the export and import process, ensuring a smooth flow of goods. Customs value is an important aspect of international trade. If you’re sending or receiving shipments internationally, it’s important to know how to determine the value of goods and why this piece of data is essential.  By understanding how goods value is calculated or used, we can ensure goods clear customs and avoid unnecessary delays or penalties. 

Why The Value of Goods Matters 

Customs declaration is the heart and soul of any international transaction. If you are looking to import or export goods, it is important that you understand the value of the goods you are handling. In shipping, the value of goods is one of the most significant components to the process, as it affects several other key parts of the process, including taxation and other fee calculations. When it comes to commercial goods shipped around the world, the value is essential, because it allows importers or exporters to budget for the shipment and understand all the added costs of doing business internationally.

The value of goods is used to determine how much duty, fees or tax is paid on the shipment, as these fees are usually calculated on a percentage of the goods value. Failure to correctly value goods on shipping paperwork or documentation can result in hefty fines and penalties, as it can be considered fraud. It is also essential to get the correct goods value, as insurance will use that number in reimbursing a business for any damage or loss.

Goods value can be described as transactional value or customs value,  which are usually quite similar if not the same amount. The transactional value is how much the buyer is paying for the goods or how much they are retailing for, whereas the value on the customs forms is the goods customs value. Valuing goods is not as simple of a process to those who are new or not as experienced in the shipping industry, so it is important to understand what goes into valuing goods and getting your shipment through customs with ease.

Customs Valuation Process

There are multiple methods used to calculate customs value, and often this process is referred to as a customs valuation. The valuation is a procedure to determine goods cost and help assess the duties, fees or taxes owed. In order to value goods correctly, several methods are used:

• Transaction Value: The most common and basis of the valuation process, it is based on the actual price of the goods listed on the paperwork or commercial/customs invoice.
• Transaction Value of Identical Goods: The value is calculated in the same manner as identical goods which are being imported to the same country, and are exported around the same time as the goods which are being valued. However, there are conditional factors such as goods need to originate from same country or by the same producer.  
• Transaction Value of Similar Goods: Assessing the value based on similar goods which hold the same purpose or use, as well as produced in the same country.
• Deductive Method: Considers the resale price of the goods, with deductions for certain items such as transport charges, customs duties, and taxes.
• Computed Method: A calculation which takes into account the manufacturing expenses, profits or general expenses, packing costs and other components.
• Fall-Back Method: A calculation within reasonable means (data provided and customs), and is usually the least common method of valuing goods.

While customs has its methods for determining goods value in order to assess fees and taxes, the goods value also matters in transport. Many carriers or companies will charge more for goods of high value, due to both the type of good but also the risks associated with transporting such a high value shipment. However, other factors such as insurance, weight or dimensions and destination also affect the shipping price for goods. Carriers will take into account the value and sizing of the shipment in their pricing, so it is important to budget ahead and know what your shipment requires, in order to get the best quote.

Customs Value vs. Declared Value

The customs value of goods is their total value, including shipping cost and any other costs agreed on in the terms of the transaction or incoterms used.  This value is used to help determine the level of fees, taxes and duties for customs. Usually the declared value should match the customs value of a shipment. However, at times the declared value would be the selling price and cost of replacement for the shipments contents, for insurance purposes, whereas the customs value is the actual value of the shipment.

When declaring value at customs, it is important to declare the type of goods (with correct HS codes), and a detailed description of the goods with the price paid for them. If the shipment is retail, then you would also need to declare the price you intend to sell the goods at.

Can Goods Be Valued At Zero? 

The only time a customs value would be zero is for samples or documents, for instance. Value must be declared even for goods exempt from duty, as this still contributes to trade stats.

It is important to understand that importers can also choose to disagree with the customs value determined by officials and they can appeal for review, on the basis that they believe the wrong method were used to calculate the value.  You can make the most of your international trade, if you know how much your goods are worth. Having the accurate value helps to streamline the import/export process, and ensure a smooth flow of goods.