Every time ocean rates spike, a client asks: “freight got so expensive — does our US duty bill go up too?” Taiwanese import instinct says yes, because Taiwan’s dutiable value includes freight and insurance. The US says no. Getting this wrong is not small talk — it mis-sizes the entire quoting model, which is why it deserves a full article.
Valuation sets the base; the rate is only half the multiplication
US import duty is two things multiplied: the tariff code picks the rate; valuation decides the number the rate multiplies. People obsess over classification and wave valuation through as “the invoice amount” — usually close, but *which* invoice, *containing what*, with *what added back* are all rule-governed questions.
The primary method: transaction value
US valuation’s first-ranked method is transaction value: the price actually paid or payable by the buyer for the goods, plus statutory additions. “Paid or payable” follows the real transaction — the invoice is evidence, not the definition; commission structures, discounts and indirect payments can all shift the determination. Only when transaction value cannot be used does valuation fall to the alternative methods in sequence; normal B2B sales almost always use transaction value.
Statutory additions: what comes back on top of the invoice
This is where Taiwanese exporters slip most. Even with a correct invoice, the following must be added back into dutiable value if the buyer bears them separately:
- Assists: molds, tooling, designs or materials the US buyer supplies free or below cost — billing the mold on a separate invoice does not exempt it from duty
- Royalties and license fees paid as a condition of the sale
- Packing costs that travel with the goods
- Selling commissions (buyer-paid buying commissions are a different analysis)
The practical move: before quoting and filing, list everything the buyer pays beyond the goods price and judge each line for add-back.
The key difference: FOB basis — freight and insurance stay out
The most important section of this article. US dutiable value excludes international freight and insurance — it sits on an FOB concept: ocean freight, air freight and insurance are outside the base. Taiwan is the opposite: CIF basis, freight and insurance added in. Two direct corollaries:
- A freight spike does not directly raise US duties — a US customer multiplying the CIF amount by the rate is inflating the base
- The invoice must let freight and insurance be split out: on CIF or CFR terms, itemize them so entry filing can correctly deduct them; bundled and inseparable, the whole amount risks being treated as the base
For one shipment carried from classification through every duty layer and fee, see our full calculation walkthrough — this article is that one’s valuation chapter.
Two mines: related parties and undervaluation
- Parent-subsidiary sales: Taiwan parent selling to a US subsidiary must survive the arm’s length test — prove the price was not depressed by the relationship, with transfer-pricing documentation maintained as routine
- Undervaluing the invoice: invoicing low to save duty buys penalties plus a compliance record, with the named Importer of Record first in line; if you discover your own filing error later, the US offers Prior Disclosure — correcting and paying before Customs opens a case cuts the penalty exposure dramatically
Where SKYCARGO fits
When SKYCARGO INC serves as Importer of Record, valuation is our own declaration liability — so before shipping we always walk the invoice structure with you: can freight and insurance be split out, are there molds or royalties to add back, what documentation does a related-party sale need. Sorted up front, entry is faster and nothing needs patching later. Transfer-pricing and valuation disputes go to compliance counsel; we keep the logistics and documentation side solid. B2B shipments, talk to us. (Personal parcels: Shiptw.)
Valuation rules follow current CBP law and publications. Reference only; consult compliance counsel for specific cases.
