Declared Value for Customs: Calculation, Penalties, and De Minimis

The declared value for customs is the price you paid or will pay for imported goods, adjusted upward by certain costs the law treats as part of the goods’ true value and stripped of international freight and insurance. U.S. Customs and Border Protection uses that figure to calculate duties, the Merchandise Processing Fee, and any trade remedy charges, so the number on your entry paperwork drives almost every dollar you owe at the border.

Most U.S. tariffs are ad valorem, meaning the duty is a percentage of declared value. Goods valued at $10,000 at a 5% rate produce $500 in duty. The arithmetic is simple; the value itself is not, because federal regulations dictate exactly which costs belong in it.¹

Building the Number: Transaction Value

Transaction value is the primary method and covers the vast majority of imports. Start with the price actually paid or payable for the goods when sold for export to the United States, then add five categories of cost to the extent they are not already inside the invoice price.²

Packing costs the buyer pays for containers, coverings, and labor to prepare the goods for shipment to the United States.
Selling commissions the buyer pays in connection with the imported goods.
Assists: materials, tools, molds, dies, engineering, or design work the buyer supplies to the foreign producer free or at reduced cost.
Royalties and license fees the buyer must pay as a condition of the sale.
Any portion of later U.S. resale proceeds that flows back to the seller.

Pay $5,000 for the goods, spend $200 on export crating, and supply an $800 mold the factory uses to make them, and the transaction value is $6,000.³

Assists Are the Common Miss

Assists catch out more importers than anything else on the list. Send a foreign manufacturer tooling, design files, molds, or raw materials to use in producing your goods, and the value of those items has to be added. Engineering and design work performed outside the United States and necessary for production also counts. One narrow exception: design work done by a U.S.-based employee of the buyer, incidental to other domestic engineering, is not an assist.⁴

Royalties: It Depends on the Contract

Whether a royalty gets added turns on two questions. Was the payment required as a condition of the sale, and to whom was it paid? Royalties for patents covering the manufacturing process are generally dutiable. Royalties paid to a third party for the right to use a trademark or copyright in the United States are generally treated as the buyer’s selling expense and stay out. CBP evaluates the specific contract terms case by case.³

Related Buyer and Seller

When the parties are related — parent and subsidiary, business partners, family — CBP questions whether the relationship influenced the price. Transaction value still applies if the importer can show either that the price was set the way the seller prices goods for unrelated buyers (or recovers all costs plus a typical profit), or that the declared value closely approximates a “test value” from other accepted methods.⁵

What Stays Out

U.S. Customs values goods on a Free on Board (FOB) basis. International shipping and insurance from the country of export are not part of declared value. That matters because many countries use a Cost, Insurance, and Freight (CIF) basis that includes those charges, and a commercial invoice priced CIF must have the freight and insurance backed out before you declare value to CBP.⁶

The statute expressly defines the price actually paid or payable as exclusive of transportation, insurance, and related services for the international leg.² Post-importation rebates or price cuts between buyer and seller are also disregarded. Value locks in at the time of importation.

When Transaction Value Doesn’t Work

If there is no arm’s-length sale or the price cannot be verified, CBP moves through a fixed hierarchy. First, the transaction value of identical merchandise — goods matching in every respect from the same country and manufacturer.⁴ Then similar merchandise: same country and producer, sharing characteristics, components, and commercial interchangeability.

Next is deductive value. Start with the U.S. sale price of the goods (or identical or similar goods) in the greatest aggregate quantity, then subtract domestic commissions, profit, U.S. transportation, insurance, customs duties, and any value added by processing after import.⁷ Last is computed value, built from materials, fabrication, profit, and general expenses in the country of production. An importer can ask CBP to apply computed value before deductive value, though getting the foreign cost data is difficult in practice.

The $800 De Minimis Rule No Longer Applies

Shipments valued at $800 or less used to enter the United States duty-free under Section 321 of the Tariff Act, and that treatment shaped how many importers thought about declared value for small parcels.⁸ Effective August 29, 2025, Executive Order 14324 suspended duty-free de minimis treatment for shipments from all countries, and the suspension remains in effect in 2026.⁹ Low-value shipments now owe duties, taxes, and fees like any other import.

Narrow exceptions remain: shipments covered by certain national security provisions at 50 U.S.C. § 1702(b), bona fide personal gifts from a donor who owned the item, and mail consisting solely of documents or letters.¹⁰ For postal shipments containing merchandise, carriers must collect either the applicable tariff rate or a flat per-package charge ranging from $80 to $200 depending on the tariff rate for the country of origin.¹¹

Filing the Value on Your Entry

Preparation starts with the commercial invoice from the seller. You need the unit price for each item, the total quantity, the currency, and the correct 10-digit Harmonized Tariff Schedule (HTS) code. The HTS code sets the applicable duty rate; the wrong code produces the wrong amount.¹²

These details go on CBP Form 7501, the Entry Summary. Importers shipping through couriers typically hand the commercial invoice to the carrier, who transmits the data electronically to CBP before the goods reach the border. Professional importers and customs brokers file directly through the Automated Commercial Environment (ACE) portal.

Every field must match the underlying sales contract or purchase order. If the invoice shows a CIF price, separate the freight and insurance out before entering value. If you supplied assists, reflect them. Errors at this stage are the single most common source of penalty exposure.

Penalties for Declaring the Wrong Value

Civil penalties for a bad declaration are graded by fault under a three-tier system.¹³

Negligence, meaning failure to exercise reasonable care: the maximum civil penalty is the lesser of the domestic value of the merchandise or two times the lost duties. If the error did not affect duties, the cap is 20% of the dutiable value.
Gross negligence, meaning reckless disregard for the accuracy of the declaration: the lesser of the domestic value or four times the lost duties, and 40% of dutiable value if duties were unaffected.
Fraud, meaning intentional misrepresentation: up to the full domestic value of the merchandise, and CBP can seize the goods.

CBP can assess these civil penalties without a criminal prosecution. Intentional customs fraud also opens the door to criminal charges under separate federal statutes; false entry documents can carry prison sentences of up to two years, and smuggling-related offenses carry substantially longer terms.

Fixing an Error Before CBP Finds It

If you discover a valuation mistake after filing, reporting it voluntarily before CBP starts investigating substantially cuts your exposure. The process is called a prior disclosure.¹⁴

For negligence or gross negligence, a valid prior disclosure reduces the penalty to interest on the unpaid duties. For fraud, the penalty drops to 100% of the lost duties rather than the full domestic value of the goods.¹³ On a $200,000 shipment where duties were underpaid by $10,000, a negligence penalty without disclosure could reach $20,000, while prior disclosure might cost only a few hundred dollars in interest.

To qualify, the disclosure must identify the merchandise, the entry numbers or port and approximate dates, the specific errors, and the correct information. You also have to tender the unpaid duties either at the time of disclosure or within 30 days after CBP calculates the shortfall. An oral disclosure has to be followed in writing within 10 days. Mark the envelope “prior disclosure” and send it by certified mail to lock in the date.¹⁴

Once CBP has commenced a formal investigation, prior disclosure is off the table. CBP records the investigation start date internally, and the importer bears the burden of showing they had no knowledge of it. Disclose early; waiting is a gamble with steep downside.

How Long CBP Can Come After You

CBP has five years from the date of the alleged violation to bring a penalty action for negligence or gross negligence. For fraud, the five-year clock does not start until CBP discovers the fraud, which can extend the window considerably.¹⁵

You have to keep the paperwork to defend yourself during that window. Every record related to a customs entry — invoices, purchase orders, packing lists, payment records, correspondence with the seller — must be retained for five years from the date of entry.¹⁶ Willful failure to produce a demanded record can cost up to $100,000 or 75% of the appraised value of the merchandise, whichever is less; negligent failure caps at $10,000 or 40% of appraised value.¹⁷ Organized digital copies of every entry-related document are the simplest insurance against a records demand.

1
eCFR. 19 CFR Part 152 – Classification and Appraisement of Merchandise
2
Office of the Law Revision Counsel. 19 USC 1401a – Value
3
eCFR. 19 CFR 152.103 – Transaction Value
4
eCFR. 19 CFR 152.102 – Definitions
5
U.S. Customs and Border Protection. Ruling H289520 – Internal Advice on Acceptability of Transaction Value in Related-Party Transactions
6
U.S. Customs and Border Protection. Duty – Cost Insurance and Freight (CIF)
7
eCFR. 19 CFR 152.105 – Deductive Value
8
U.S. Customs and Border Protection. Section 321 Programs
9
The White House. Continuing the Suspension of Duty-Free De Minimis Treatment for All Countries
10
U.S. Customs and Border Protection. E-Commerce Frequently Asked Questions
11
The White House. Suspending Duty-Free De Minimis Treatment for All Countries
12
International Trade Administration. Harmonized System (HS) Codes
13
Office of the Law Revision Counsel. 19 USC 1592 – Penalties for Fraud, Gross Negligence, and Negligence
14
eCFR. 19 CFR 162.74 – Prior Disclosure
15
Office of the Law Revision Counsel. 19 USC 1621 – Limitation of Actions
16
eCFR. 19 CFR Part 163 – Recordkeeping
17
U.S. Customs and Border Protection. Informed Compliance Publication – Recordkeeping