A U.S. importer purchased 1,000 radios from an unrelated foreign manufacturer. The merchandise is invoiced as $24,000 CIF, duty paid and delivered to the importer’s Boston warehouse.
The purchase is from an unrelated foreign manufacturer so the invoice value is at arms length and the transaction value can be accepted for customs valuation purposes. The invoice value is $24,000 CIF duty paid and delivered to the importer’s warehouse. For the purpose of determining assessable value, international freight and insurance is not included. Also any domestic freight to the importer’s factory or warehouse is also not to be included in computing assessable value for charging customs duty. So as a first step, we need to deduct these components from the invoice price.
Entry documents include two bills showing the actual transportation costs associated with the importation. One is an airway bill showing a charge of $2,200 for air freight and insurance, the other is from a Boston delivery service showing a charge of $837.50 for local delivery.
$24,000 – $2,200 – $837.50 = $20,962.50
This value includes the customs duty paid and we need to deduct the customs duty paid to determine the assessable value.
The correct duty rate is 7.5 percent ad valorem. When the customs duty of 7.5% is charged to the assessable value, we get a duty paid amount of $20,962.50 and we need to calculate the duty paid and deduct it.
Assume the assessable value for applying the duty rate of 7.5% is A.
A + A(7.5/100) = $20,962.50
The common factor A can be taken outside the bracket to write this equation as A(1+7.5/100) = A(107.5/100) = $20.962.50
A = $20,962.50 (100/107.5) = 20,96,250/107.5 = $19,500
Answer choice C. $19,500.00 is correct.
