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What is customs valuation?

Customs valuation is how a customs authority decides the value on which import duty is charged. Most duty rates are a percentage of that value, so the value you declare sets the tax you pay. This guide explains the WTO rules most countries follow, how CIF and FOB fit in, and how to work out the duty base for your own shipment.

The starting point: transaction value

The WTO Customs Valuation Agreement (implementing Article VII of GATT 1994) makes transaction value the first and main method. Transaction value is the price actually paid or payable for the goods when sold for export to the country of importation, adjusted as Article 8 of the Agreement requires.

Customs can reject the invoice price as the transaction value in specific cases: where the buyer's use of the goods is restricted, where the sale depends on a condition whose value cannot be determined, where part of the resale proceeds goes back to the seller without an adjustment, or where the buyer and seller are related and the relationship influenced the price.

What gets added to the invoice price

Article 8.1 requires these costs to be added to the price paid or payable, to the extent they are not already included:

Commissions and brokerage, except buying commissions.
The cost of containers treated as one with the goods, and the cost of packing (labour and materials).
Assists: goods or services the buyer supplies free or at reduced cost for making the imported goods, such as tooling, moulds, materials, engineering and design work done outside the importing country.
Royalties and licence fees related to the goods that the buyer must pay as a condition of the sale.
The value of any part of the proceeds of a later resale, disposal or use of the goods that goes to the seller.

Transport and insurance: why CIF and FOB differ

Article 8.2 lets each WTO member decide whether the customs value includes the cost of transport to the port or place of importation, loading, unloading and handling charges linked to that transport, and the cost of insurance. This is why one country may value goods on a CIF basis (cost, insurance and freight to the port of import) while another uses a FOB-type basis (goods loaded at the port of export, without international freight).

Check which basis your destination applies before you quote landed cost. Customs Declare calculates duty, excise and VAT on the CIF value, not on the raw invoice price, so a FOB invoice is first adjusted for freight and insurance.

The six valuation methods, in order

If transaction value cannot be used, customs moves down the list. Each method is used only when the one before it cannot be applied:

Transaction value (Article 1). The price paid or payable, adjusted under Article 8.
Transaction value of identical goods (Article 2). The value of identical goods sold for export to the same country at about the same time.
Transaction value of similar goods (Article 3). The same test, using goods that are alike and can do the same job.
Deductive value (Article 5). Worked back from the price at which the goods, or identical or similar goods, are sold in the importing country, less deductions such as commissions, profit, and transport costs.
Computed value (Article 6). Built up from the cost of materials and production, plus profit and general expenses typical of sales of such goods.
Fall-back method (Article 7). Reasonable means consistent with the Agreement, based on data available in the importing country. Minimum customs values and arbitrary or fictitious values are not allowed.

The importer can ask to swap the order of methods 4 and 5

Under Article 4, if the value cannot be found under Articles 1 to 3, the importer may ask that computed value (Article 6) be tried before deductive value (Article 5). Whether it is available in practice depends on the destination's own rules.

Worked example (illustrative numbers)

A buyer imports goods invoiced at USD 10,000 on FOB terms. International freight is USD 800 and marine insurance is USD 100. The CIF value is 10,000 + 800 + 100 = USD 10,900.

At a 10% ad valorem duty rate, duty is 10% of 10,900 = USD 1,090. If the destination charged duty on a FOB basis instead, the same rate would give USD 1,000. The 10% rate is an example, not a real tariff line; use the duty calculator for actual rates.

Common valuation mistakes to avoid

Declaring a lower value than the invoice, or using a second invoice for customs. This is undervaluation.
Leaving out assists, royalties or commissions that Article 8 requires you to add.
Using the wrong Incoterm basis, so freight and insurance are missing or counted twice.
Converting currency at the wrong rate. Use the rate your destination's customs authority requires for the date of declaration.

Frequently asked questions

Is customs value the same as the invoice value?

Not always. Customs value starts from the price paid or payable but must be adjusted under Article 8 of the WTO Valuation Agreement, for example for packing, commissions, assists, royalties and, where the destination applies a CIF basis, international freight and insurance.

What is the difference between CIF and FOB value?

FOB covers the goods loaded at the port of export. CIF adds international freight and insurance up to the port of import. Article 8.2 of the WTO Valuation Agreement lets each member choose whether to include those costs in customs value.

What happens if customs does not accept my declared value?

Customs moves to the next method in the order set by the Agreement: identical goods, similar goods, deductive value, computed value, then the fall-back method. The exact appeal procedure depends on the destination country.

Sources

Last verified: 2026-09-29

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