Released On 9th Jan 2019
Importing: Fair Market Value, Customs Value & List Price
Substantial discounts can help you compete in a competitive global market, but learn about "fair market value" and how to avoid issues with Customs Value.
The IT marketplace is incredibly competitive – it always has been, but the uncertainty surrounding current economic and political factors is playing the biggest role we’ve seen in the past 25 years.
IT vendors and their technologies compete for an ever-decreasing market, and client budgets are at an all-time low.
According to market research, there are over 2,500 new vendors coming out of Silicon Valley vying for an extremely crowded IT market, and the vendors and the channel are having to go to extreme lengths to ensure they win their share of business – this often means extending their reach to international clients and locations.
Over and above a technology’s features, benefits and value-added services, its price plays a big role when end-users make their decisions about the solution that best fits their challenges, and budget.
Pricing, discounts and “fair value”
As a result, discounts on product both for the SMB (Small Medium Business) and Enterprise marketplace is at an unprecedented high. The difference between winning a deal, even when the solution fits the client’s needs perfectly, can often come down to an extra discount on an offering where the pricing is already set at 40-60% discount.
When those bids are for single or multiple international locations, this sets in motion a number of challenges when preparing for the importing process. Commercial Transactions, where payment of the goods leaves the destination country, can prohibit import ability in a number of destinations, but there is also another complexity to consider: the price the goods were sold at compared to the value the Customs department feels is a ‘fair’ value of the consignment since this is what they calculate the percentage of taxes and duties against.
What is customs value?
Customs Value refers to the value of the imported goods as evaluated by Customs. It’s used as the foundation for assessing the amount of import duty and other taxes that need to be paid. Customs Value is calculated in various ways according to the rules and regulations set out in country; sometimes they will use the List price of the product as the value, or they may provide an “acceptable” discounted value.
It is the Customs officer, and not the importer, exporter or any other party, who has the final say in assigning this value.
The implications of imported goods that are revalued by Customs
If you attempt to import goods at a value the Customs Department doesn’t feel is correct or a fair market value, they will revalue the goods based on their own research – often this is done by multiple Google searches of where they can buy the goods, and for how much, an online reseller for instance.
If they feel the value on the import paperwork does not reflect the values they find in their research, they will then revalue the goods to what they feel is a ‘fair’ value. The implication of this is that import taxes and duties will rise as they are calculated on a percentage of the value of the goods.
This rise in the taxes and duties is passed back to the shipper, who then has to pass it to their customer. Clients like to know what the imported taxes and duties costs will be at time of project planning. In the case of a shipment worth tens or even hundreds of thousands of dollars, this increase can often be quite substantial and often not one that has been budgeted for, leading to a multitude of issues.
How can Mouse & Bear Solutions help?
Through our Importer of Record offering, Mouse & Bear Solutions has extensive knowledge and understanding of how countries view the valuation of goods when high discounts off list price are involved.
Our extremely dedicated and trusted agents around the world will also often review the details of the transaction to ensure that in-country customs are happy with the valuation. We ensure this appraisal happens at point of quoting the IOR solution so that all appropriate costs are declared at proposal.