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October 2024, question 77

Valuation, Appraisement and Duty Assessment · Valuation

Which of the following costs should not be added to the price actually paid or payable to determine the transaction value for an entry of luxury watches?

  1. The watch face and band pattern designed in Switzerland, which is provided free of charge by the U.S. buyer to the foreign manufacturer.
  2. The royalty fees related to the luxury watches which the U.S. buyer is required to pay as a condition of the sale.
  3. The cost of several milling machines provided free of charge by the U.S. buyer/importer to the foreign manufacturer/exporter to cut and shape parts such as gears.
  4. The shipping costs paid by the U.S. buyer to import the luxury watches.
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CBP's answer: D. D: The shipping costs paid by the U.S. buyer to import the luxury watches.

Free designs and tools supplied by the buyer are assists (A and C) and royalties the buyer must pay as a condition of the sale are added (B). The buyer's international shipping cost is excluded from the price actually paid or payable and is not an addition under 152.103(b), so D is the one not added.

Any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States 19 CFR 152.103(b)(1)(iv)
exclusive of any charges, costs, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise 19 CFR 152.102(f)

Search for: assist royalty international shipping costs transaction value

CBP's key cites: 19 CFR 152.103(b)(1); 19 CFR 152.102(a); 19 CFR 152.103(d)

Question and key from CBP's October 2024 exam and answer key. The walk-through is ours; quotes are from the pinned editions in the reference viewer (HTSUS 2026 Basic, 19 CFR 2025 edition).