Customs raises a query on a declaration: the declared value sits below the range the risk system expects for that commodity and origin, and the goods are held pending an explanation. The invoice is genuine and the price was genuinely paid. That does not close the matter, because an invoice is evidence of a value rather than the value itself, and the burden of showing the price qualifies as a transaction value rests with the declarant.
Transaction value is the primary method under the WTO Valuation Agreement: the price actually paid or payable for goods sold for export to the country of importation. It applies only where there is no restriction on the buyer's disposal of the goods, no condition attached to the sale whose value cannot be determined, no proceeds flowing back to the seller that have not been adjusted for, and no relationship between the parties that influenced the price.
The price is then adjusted. Selling commissions and brokerage, packing, the cost of moulds, dies, tooling and design work supplied by the buyer free or below cost, and royalties or licence fees required as a condition of sale are all added where they are not already in the invoice. Whether international freight and insurance are added depends on the country: the EU values on a CIF basis to the frontier, the United States on an FOB basis.
Related-party pricing is the most frequent reason a genuine invoice is challenged. The relationship alone does not disqualify the price; the question is whether it influenced the price. Two routes are open. Demonstrate that the circumstances of the sale are consistent with normal pricing practice in the industry, or show that the price closely approximates a test value for identical or similar goods. A transfer-pricing study is useful evidence, but it answers a tax question.
When transaction value fails, the alternatives run in a fixed sequence. Identical goods first, then similar goods, both drawn from previously accepted transaction values for the same country of export at about the same time. Then deductive value, worked back from the first resale price in the importing country by stripping out commissions, inland freight, duty, profit and general expenses. Then computed value, built up from cost of production plus normal profit and general expenses.
The residual method permits reasonable means consistent with the Agreement's principles and the data available in the country of importation, and it is explicitly fenced. Arbitrary or fictitious values, minimum import prices, the selling price of goods in the domestic market of the exporting country and the export price to a third country are all excluded. A declarant may ask for deductive and computed value to be reversed; the rest of the order is not optional.
In practice the query arrives for a short list of reasons: a price outside the risk range, related parties, free-of-charge or sample consignments declared at nothing, warranty replacements, a three-way mismatch between invoice, packing list and payment record, a multi-tier sale where the declared price is not the sale for export, or a declarant who cannot produce proof of payment. Goods can usually be released against a guarantee while the value is settled.
What resolves it is a document set assembled before anyone asks for it: the purchase order, the signed contract or order confirmation, the supplier's price list, bank proof of payment reconciled to the invoice, a clear statement of the Incoterm, and freight and insurance shown separately. For samples, declare a stated basis rather than zero. Consistency between shipments matters more than any single document, because the risk system reads patterns rather than individual entries.
Value is not only a duty question. It sets the import VAT base, it is the base for ad valorem trade-remedy duties, and preferential origin rules that test value added or an ex-works price break down when the price is wrong. Customs clearance and brokerage is one of our service lines, so send us the invoice, the Incoterm and the relationship between the parties before shipment and we will say where the declaration is likely to be tested.
