Customs value is a legal construct, not an invoice price.
Under 19 U.S.C. §1401a, customs value follows a sequential hierarchy of methods. The sequence is mandatory. Methods are considered in order, not selected at will.
The hierarchy
| Step | Method | Authority |
|---|---|---|
| 1 | Transaction value of the imported merchandise | 19 U.S.C. §1401a(b) |
| 2 | Transaction value of identical merchandise | 19 U.S.C. §1401a(c) |
| 3 | Transaction value of similar merchandise | 19 U.S.C. §1401a(c) |
| 4 | Deductive value | 19 U.S.C. §1401a(d) |
| 5 | Computed value | 19 U.S.C. §1401a(e) |
| 6 | Fallback method | 19 U.S.C. §1401a(f) |
Where most entries stop
Most importers file under transaction value, the price actually paid or payable, and go no further.
Transaction value applies only where there is a bona fide sale for export to the United States: a real sale with commercial substance, transfer of title or risk, and a price actually paid or payable. An internal transfer or a paper invoice between related entities is not automatically a bona fide sale.
Most importers file under transaction value without testing whether it is the correct method for their facts. Where the statute and the facts point to a different step, that step is the correct one.
Additions and exclusions
Transaction value is not simply the invoice figure. The statute requires certain additions, including some assists, royalties, and packing costs.
The statute and the facts may also support exclusion of cost elements that are not part of dutiable value, such as post-import services and certain other non-dutiable costs. Whether an exclusion applies is fact specific and depends on documentation.
What lawful tariff engineering means
Structuring imports before they arrive so that the duty result follows from truthful classification and correct valuation.
The Supreme Court has recognized the doctrine since Merritt v. Welsh (1882), on the condition that the merchandise is truthfully presented and classified in its actual condition at importation. Later decisions including Hartranft v. Wiegmann (1887), Falk v. Robertson (1890), and Patton v. United States (1895) develop the same line.
Three conditions apply without exception:
- Done before import. Not corrected afterward.
- Fully documented. Contemporaneous documentation, created at or near the time of the transaction.
- Based on real commercial conditions. Substance over form. The economic reality has to match the paperwork.
This is the statute applied as written.
What CBP actually audits
CBP audits documentation, not explanations.
Entries draw scrutiny from inconsistency, missing documentation, and improper valuation methodology. A file that is consistent, complete, and methodologically sound is the objective. Contemporaneous documentation carries more evidentiary weight than an after the fact explanation.
Records must be retained for five years under 19 C.F.R. Part 163.
Whether any of this applies to you
It is fact specific. Applicability depends on whether a bona fide sale exists, the product category and its regulatory oversight, and whether comparable data is available to support a later step in the hierarchy.
Every implementation is evaluated case by case, structured before importation, and documented against the specific product and transaction.
This work is performed by the Importer of Record provider, named on our Disclosures page. Hamburg Logistics does not provide customs, legal, or valuation advice.
This page summarizes publicly available federal authorities for general information. It is not legal advice. Verify current requirements against the Federal Register and CBP guidance.