What You Need to Know About Import Values to Mitigate Trump’s Tariffs

Article Highlights:

• CBP agents and customs officials use a two-step process to determine the tariffs for imported goods: classification and valuation. First they classify the import based on the U.S. Harmonized Tariff Schedule (HTS), and then they calculate the value of the good.
• The primary method used for calculating the value of imports is transaction value: the price the importer paid to the seller immediately prior to the item’s export to the U.S. According to Bloomberg Law, this transaction value is the “actual price paid or payable for the merchandise.” 
• While certain costs may be incorporated into the transaction value determination, CBP often excludes a range of other expenses from the valuation, including security and documentation fees, warehousing costs, and inspection tests.

Over the past three months, tariffs on U.S. imports have risen to the highest levels in over a century. According to Yale University’s Budget Lab, the current average effective tariff rate of 28% is the highest figure since 1901. Suffice it to say, this means that American businesses are paying more attention than ever to the total tariff costs they’re responsible for paying across all their imported goods. 

Before companies can arrive at hard duty figures for goods like steel, aluminum, semiconductors, or Chinese imports, however, they need to know how Customs and Border Protection agents are valuing those imports. Because of this, an essential part of any comprehensive tariff mitigation framework is understanding how the federal government arrives at valuations for imported goods. 

How Does Customs and Border Protection Determine Tariff Rates?

CBP agents and customs officials use a two-step process to determine the tariffs for imported goods: classification and valuation. 

Step One: Classifying the Import Based on U.S. HTS Codes

First, they need to classify the import based on the U.S. Harmonized Tariff Schedule (HTS). These are 10-digit codes assigned and maintained by the U.S. International Trade Commission (ITC). According to the Census Bureau, there are currently nearly 20,000 discrete HTS codes. (The first six digits of HTS codes are the same as the universally recognized Harmonized System code, while the final four are unique to the U.S.’s HTS system.) Once an item’s HTS code has been determined, officials can use the HTS database to identify the appropriate tariff rate. 

Step Two: Valuation to Calculate Tariff Responsibility

The second step in this process is valuation. In order to calculate the tariff responsibility of a given import, CBP needs to have a product value to apply the duty rate to. The primary method used for arriving at this figure is transaction value: the price the importer paid to the seller immediately prior to the item’s export to the U.S. According to Bloomberg Law, this transaction value is the “actual price paid or payable for the merchandise.” 

What Additional Costs Are Factored Into the CBP Valuation?

While the valuation is determined primarily by looking at the transaction price of the item at the time of export, there are several other, smaller figures incorporated into valuation. CBP agents will also add the following costs and fees to to their value determinations: 

• Packing
• Commissions
• Royalties and/or licensing fees. 

What Is the Deductive Value of an Import, and When Is It Used in Tariff Valuations?

In instances in which the transaction value of an import can’t be determined, customs officials may use the deductive value of the item. Broadly speaking, the deductive value is the price the good is being resold for in the U.S., with various different deductions being taken into consideration. 

The World Trade Organization uses a more specific definition of deductive value: “the unit price at which the imported goods or identical or similar imported goods are sold in the greatest aggregate quantity.” According to the WTO, the “greatest aggregate quantity” is determined by looking at the sum of all the units of goods sold at a given price and comparing that figure to the sum of all the units of goods sold at any other price. The price at which the greatest number of units were sold represents the greatest aggregate quantity. 

What Is the First Sale Rule in Determining Tariff Costs?

The first sale rule is a regulatory rule used in U.S. customs valuation law stating that importers may use the price the import was sold for during its first sale when assessing valuation. That is, the price when it was sold from the foreign seller to the reseller/distributor—if it went through a third party—who then sold it to the U.S. importer. In cases where the purchase of an import involves multiple parties, U.S. businesses should consider taking advantage of the First Sale Rule. 

While not all foreign goods go through resellers, identifying the chain of transactions, and the first sale—which is typically the lowest price—is an effective strategy for securing the lowest possible valuation, and therefore the lowest possible tariff fee. It’s important to remember, however, that the burden is on the importer to show CBP that the valuation should be made based on the first sale. This responsibility may include providing documentation demonstrating the sale of the good from the original foreign manufacturer to the reseller, as well as a reasonable price difference (within the realm of what is often referred to in business parlance as an “arm’s length price”) between the first and subsequent sales. 

While not all foreign goods go through resellers, identifying the chain of transactions, and the first sale—which is typically the lowest price—is an effective strategy for securing the lowest possible valuation, and therefore the lowest possible tariff fee.

Are Any Fees Exempted From the Transaction Value?

While certain costs may be incorporated into the transaction value determination, others may be excluded by CBP. Importers should be aware of all the charges they are incurring during the transport and importation process, and explore which of those expenses can be taken off the transaction value that ultimately determines tariff responsibility. Fees that could potentially be excluded from CBP valuation include:

• Security Expenses: Some ports and logistics companies charge security fees for freight. These costs can generally be deducted from the transaction value provided to CBP.

• Documentation Fees: There are a myriad of documents that American businesses need to transport goods internationally and import them through U.S. ports of entry. Depending on the item, industry, and supply chain, these may include bills of lading; freight receipts; certificates of origin; and exporter invoices. Importers incurring fees for some or all of this documentation may be able to deduct them from the import’s transaction value. 

• Warehousing Charges: Depending on the circumstances, costs associated with warehousing goods may be deductible from the transaction value. If the imports were warehoused by a third party—and not the seller—then they are considered outside the scope of the transaction cost, and are therefore deductible from the transaction value. Fees charged by the seller for warehousing the merchandise themselves before exporting it, on the other hand, are considered part of the transaction value. 

• Inspection/Testing Costs: In some instances, manufacturers may have their goods tested for quality before exporting them. If the manufacturer pays a third party to carry out this quality inspection—and then passes those costs onto the importer—then those fees are deductible from the transaction value. As with the warehousing expenses, inspection fees cannot be deducted if the seller themselves is responsible for the testing. 

How Can Understanding Valuation Methods Benefit Importers?

In a trade environment this restrictive, costly, and unpredictable, securing any possible edge can be highly advantageous. Organizations that understand how CBP conducts its import valuations are in a favorable position to mitigate and manage costs in a variety of different ways. Firms that know the rules and regulations around customs valuation law can effectively utilize the First Sale Rule, and will be better positioned to identify potential deductions from the transaction value. 

Organizations that understand how CBP conducts its import valuations are in a favorable position to mitigate and manage costs in a variety of different ways.

In addition, just having the ability to consistently and accurately calculate tariff costs ahead of time gives importers more data to act on. Knowing tariff responsibilities associated with imports can prompt businesses to explore supply chain diversification options, negotiate with suppliers, and utilize foreign trade zones (FTZs) and other tariff mitigation strategies. 

How Supply Chain Mapping Can Help Mitigate Tariff Costs

Data and the knowledge that comes with it can be powerful assets in 2025’s trade landscape. U.S. manufacturers and importers are currently scrambling to identify ways to mitigate the steep tariff costs associated with many foreign goods. Whether its product engineering, foreign trade zones, supplier negotiations, or manufacturing modifications, supply chain mapping can be critical to facilitating effective cost management tactics. 

Whether its product engineering, foreign trade zones, supplier negotiations, or manufacturing modifications, supply chain mapping can be critical to facilitating effective cost management tactics. 

SCRM platform Z2Data provides businesses with comprehensive mapping capabilities, including:

• Part-to-site mapping for millions of electronic components
• Relationships between direct suppliers and sub-tier manufacturers
• Site and geographical locations and single-source dependencies
• Country of Origin (COO) and Country of Diffusion (COD)

When it comes to supply chain risk management, there’s no substitute for data and expertise. With Z2Data, businesses get a powerful version of that combination through visibility, insights, and seasoned research teams working tirelessly to understand all the latest supply chain developments. To learn more about Z2Data and how the platform can help businesses understand tariff costs and cultivate effective mitigation strategies, schedule a free demo with one of our product experts.