Customs
Customs valuation: the number the duty rate is applied to
Duty is a rate applied to a value. Exporters give a great deal of attention to the rate and almost none to the value, on the reasonable assumption that the value is just the invoice. It is not. Certain costs must be added whether or not they appear on it, and when buyer and seller are related the invoice price is not accepted until someone shows why it should be.
Transaction value, and what it actually means
Almost every country values imports under the WTO's Customs Valuation Agreement, which makes the transaction value the first and most important method. The WTO defines its base precisely: “the price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods”.
Read the last part slowly. To or for the benefit of the seller. A payment routed elsewhere that benefits the seller is still part of the price. So are payments made later, and payments that settle something agreed as a condition of the sale. The invoice is evidence of the price; it is not the definition of it.
Where transaction value cannot be used, the Agreement sets out five further methods — transaction value of identical goods, of similar goods, the deductive method, the computed method, and a fall-back — and they are “to be applied in the prescribed hierarchical order”. Customs does not choose the method it likes; it works down the list.
What gets added to the price
The Agreement lists adjustments to the price actually paid or payable. The ones exporters trip over are the ones that are real costs but sit outside the commercial invoice:
| Addition | Where it hides |
|---|---|
| Commissions and brokerage, except buying commissions | A selling agent's commission is dutiable; a buying agent's is not. The distinction is what the agent does, not what the contract calls them |
| Packing and container costs and charges | Export packing billed separately, or absorbed and invisible |
| Assists | Tooling, molds, dies, components or design work the buyer supplied free or at reduced cost. Nothing about them appears on the invoice at all |
| Royalties and license fees | Where the buyer must pay them as a condition of sale |
| Transport, insurance and related charges up to the place of importation | Depends on the Incoterm — see Incoterms for who is paying what |
Assists are the one to check first. If your customer sent you a mold, supplied a component, or paid for the design, the value of that contribution belongs in the customs value of what you ship back even though you never invoiced it. It is a common, honest omission, and it is found on audit rather than at entry.
Related parties: the invoice is not enough
A Korean manufacturer selling to its own sales company abroad is the ordinary case here, not an exotic one. Where buyer and seller are related, the WTO position is that transaction value remains acceptable — but the importer has to demonstrate it: that “the relationship did not influence the price”, or that the transaction value “closely approximates a test value” such as the value of identical or similar goods in sales to unrelated buyers.
That is a documentation requirement, and it lands on the importing affiliate at a moment when the only person who can explain the pricing is in Korea.
The pull nobody warns you about
An intercompany price is one number answering to two authorities that want opposite things from it.
- Tax looks at transfer pricing and asks whether profit has been shifted out of a jurisdiction — a pressure toward a price that leaves adequate profit where the value was created.
- Customs looks at the same figure and asks whether duty has been understated — a pressure in the other direction entirely.
Set the price to satisfy one and you have written the other authority's opening question. Worse, a retroactive transfer pricing adjustment at year end changes a price that customs already accepted, which is its own procedural problem in many jurisdictions. The practical answer is not cleverness; it is that whoever sets intercompany prices should know both consequences before the year starts, and that the reasoning is written down while the people who know it are still available.
Where this sits with everything else
Duty is rate times value, applied to goods of a particular origin, and this site covers each piece separately for a reason — they are decided by different people at different times and rarely reconciled.
- Classification sets the rate, and only the first six digits are international.
- Origin decides whether a preferential rate applies at all.
- Valuation sets the number that rate is applied to — this page.
- Drawback decides how much of the duty on inputs comes back.
A mistake in any one of them is a mistake in the duty, and three of the four are usually decided without anyone consulting the fourth.
Practical checks
- List everything of value your customer provides free or below cost. That list is your assists exposure.
- Check whether any agent in the chain is selling or buying — the commission treatment differs.
- Identify royalties tied to the sale, as opposed to royalties on downstream use.
- Confirm which costs the Incoterm places before the place of importation.
- For related-party sales, keep the evidence that the relationship did not influence the price, and keep it current.
- Make sure the value declared matches the export documents and the payment actually made.
Valuation is a legal determination with conditions this page does not reproduce. Confirm the current requirements with Korea Customs Service, the importing country's authority, or a licensed customs broker.
Keeping the evidence together
Most valuation questions are answered years later from records nobody kept for that purpose. Cargovate's platform keeps one record of a shipment across carriers and borders, so what was shipped, when, and under what terms is available when the question is finally asked.
Last reviewed 2026-09-20