The fallback method under 19 U.S.C. §1401a(f): what CBP accepts as a reasonable adjustment, and what the Importer of Record documents

The fallback method is the last of the six customs valuation methods in 19 U.S.C. §1401a. It applies only when the value of imported merchandise cannot be determined under the five methods before it, and it does not allow a free choice of number: under 19 U.S.C. §1401a(f)(1) the value is derived from those earlier methods and adjusted as reasonably necessary. Under 19 C.F.R. §152.107(a), only information available in the United States is used. Seven bases are barred outright by 19 U.S.C. §1401a(f)(2) and 19 C.F.R. §152.108.

The Importer of Record (IOR) is the party that declares value on the entry. Under 19 U.S.C. §1484(a)(1), the IOR makes entry using reasonable care, and the entry is completed by filing the declared value, classification, and rate of duty along with the other documents or data needed to assess duties properly. When a value rests on the fallback method, the records behind the adjustment are the IOR’s own. This applies to companies importing high-duty goods such as pharmaceuticals, steel and aluminum, oil and gas equipment, chemicals, copper, and machinery, where the customs value is the base on which duty is calculated. It applies the same way to goods from Brazil, other Latin American countries, or anywhere else, because the hierarchy does not vary by origin.

The statute: where the fallback sits

19 U.S.C. §1401a(a)(1) sets the order. Merchandise is appraised on the first of these that can be determined:

1. Transaction value under subsection (b).
2. Transaction value of identical merchandise under subsection (c).
3. Transaction value of similar merchandise under subsection (c).
4. Deductive value under subsection (d), unless the importer has requested computed value first under subsection (a)(2).
5. Computed value under subsection (e).
6. Fallback value under subsection (f).

19 C.F.R. §152.101(b) repeats the same six steps in the same order, ending with “the value under §152.107”. Under 19 C.F.R. §152.101(c), an importer who wants computed value considered before deductive value makes that request when the entry summary is filed. If computed value cannot be determined after such a request, deductive value is used if possible, and if deductive value also fails, the value is determined under §152.107.

The customs valuation page walks each earlier method. The point for this post is the entry condition: the fallback is not an alternative to transaction value that an importer elects. It is reached only because the methods before it could not be applied.

What 19 U.S.C. §1401a(f)(1) allows

The text is short. When the value cannot be determined under subsections (b) through (e), the merchandise is valued on a basis derived from those methods, adjusted as reasonably necessary. Two ideas are in that sentence. The starting point is one of the earlier methods, not a new method. And each adjustment is limited to what is reasonably necessary to arrive at a value.

19 C.F.R. §152.107 fills in the mechanics:

• Paragraph (a): the merchandise is appraised on a value derived from the methods in §§152.103 through 152.106, reasonably adjusted to the extent necessary to arrive at a value, using only information available in the United States.
• Paragraph (b): the requirement that identical or similar merchandise be exported at or about the same time as the merchandise being appraised may be interpreted flexibly. Identical or similar merchandise produced in a country other than the country of exportation may be the basis for valuation, and customs values already determined on the basis of deductive value or computed value may be used.
• Paragraph (c): the 90 day requirement for the sale of merchandise in 19 C.F.R. §152.105(c) may be administered flexibly.

Those are the adjustments the regulation names. Each one loosens a timing or sourcing requirement of an earlier method. None of them lets the appraisement rest on a figure that has no connection to the earlier methods.

What the fallback may not rest on

19 U.S.C. §1401a(f)(2) lists the bases that cannot be used, and 19 C.F.R. §152.108, titled “Unacceptable bases of appraisement,” lists the same seven:

• The United States selling price of goods produced in the United States.
• A system that values goods at the higher of two alternative values.
• The price of the goods in the home market of the exporting country.
• A production cost, other than a computed value under the computed value method for identical or similar goods.
• The price of goods exported to a country other than the United States.
• Minimum appraisal values.
• Arbitrary or fictitious values.

For a reader at a pharmaceutical, steel, or machinery importer, the third and fifth items matter most in practice. A price list in the exporter’s home market, or the price on a shipment to a third country, can be useful commercial data. As the basis for a customs value under the fallback, the statute rules both out.

What the IOR’s file needs to show

The statute does not prescribe a form for the fallback. What the text does require shows what a complete file addresses:

• Why each method before the fallback could not be determined, in order, with the facts behind each step.
• Which earlier method the value is derived from.
• Each adjustment made, and the flexibility in 19 C.F.R. §152.107(b) or (c) that it relies on.
• That the information used was available in the United States.
• That none of the seven barred bases in 19 U.S.C. §1401a(f)(2) was used.

Under 19 C.F.R. §163.4, records required by CBP are generally kept for five years, counted from the date of entry for entry-related records. A fallback valuation depends on documents created at or near the time of the transaction, which is why those records matter more than an explanation written later.

Duty on steel, aluminum, and copper articles under Proclamation 11021 of April 2, 2026 (91 FR 18201) applies to the full customs value from April 6, 2026, so whichever step of the hierarchy fixes the value sets the base for the Section 232 duty. The sector pages for steel and aluminum, pharmaceuticals, and oil and gas equipment list the duties by Chapter 99 heading.

In effect and in rulemaking, as of October 27, 2026

The valuation hierarchy is statute and regulation, and it is in effect. Nothing in the documents listed below changes it.

The 2026 enforcement directives sit on a different track. Executive Order 14411, Strengthening Customs Enforcement (91 FR 35125, June 10, 2026), directs asset and bonding minimums, formal entry rules for foreign entities, good standing and vetting, disclosure and certification requirements, and a 50 percent penalty floor. Those provisions are in rulemaking with no effective date. CBP’s advance notice of proposed rulemaking on supply chain disclosures (September 2, 2026) takes comments through December 1, 2026. The Low-Value Shipments proposed rule (91 FR 64532, October 8, 2026) takes comments through December 7, 2026 and is not in effect.

One step is in effect: enforcement of the CBP notice Accuracy of Importer of Record Data Submitted to CBP (August 19, 2026) began September 18, 2026, and CBP voids an IOR number where the Form 5106 information does not meet the notice. The tracker records the dated position of each directive. For the roles and the nonresident condition around the IOR, see the Importer of Record USA guide.

Facts that decide

• Whether a value could be determined under each of the first five methods, step by step, and the records showing why not.
• Which earlier method the derived value starts from.
• Each adjustment made and the part of 19 C.F.R. §152.107 it rests on.
• Whether the information used was available in the United States.
• Whether any basis barred by 19 U.S.C. §1401a(f)(2) or 19 C.F.R. §152.108 appears anywhere in the calculation.
• Whether any request under 19 U.S.C. §1401a(a)(2) was made when the entry summary was filed.

Each of those items is answered from the IOR’s own records. Tell us what you import and how your entries are filed today, and we’ll show you where you stand: see if you qualify or write to ship@iorusa.com.

Sources

• 19 U.S.C. §1401a, value
• 19 C.F.R. §152.101, appraisement in general
• 19 C.F.R. §152.107, fallback value
• 19 C.F.R. §152.108, unacceptable bases of appraisement
• 19 U.S.C. §1484, entry of merchandise
• 19 C.F.R. §163.4, record retention period