Here is an example of application of the computed value method in customs valuation as tested on a previous Customs Broker License Exam.
April 2001 Test
41) Laminate Industries in Seattle, Washington, sells laminated plywood sheets to the building and home improvement industries. It purchases its large plywood sheets from its parent company, Canadian Laminates, located in Alberta, Canada. Canadian Laminates imports the sheets from its British manufacturer and then sends
them to the U.S. firm. The Canadian firm stopped manufacturing in Canada because the general expense cost skyrocketed to15%, while the profits were only 1% for these plywood laminate sheets. This was not the result of problems at Canadian Laminates, but reflective of the entire Canadian industry that produces these laminated products for export sales to the United States. In Britain plywood laminate producers are able to hold general expenses to 3%, while recouping a 7% profit. The correct basis of appraisement is Computed Value. The information available is as follows:
Fabrication $ 1,000.00
General Expenses and Profit $ 1,050.00
What is the correct computed value?
Answer and explanation:
19 CFR § 152.106 Computed value.
(a) Elements. The computed value of imported merchandise is the sum of:
(1) The cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise;
(2) An amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States;
Here cost of materials, labor and fabrication is $10,000 + $10,000 + $1,000 = $21,000
To derive the computed value, we need to add to this, an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States. The country of exportation is Canada because it imports the sheets from Britain and then sends it to the U.S. firm. We are told that in Canada, the general expense is 15%, while the profits were only 1% for a total of 15+1 = 16%.
Therefore, we need to add 16% to the cost of materials, labor and fabrication to derive the computed value.
16% of $21,000 = 21,000 x 16/100 = $3,360
Computed value = $21,000 + $3,360 = $24,360 which is answer choice E.