Tax alert

Fresh produce customs appraisement guidance released by CBP

Impact on U.S. fresh produce importers

Apr 04, 2023
Supply chain Retail International tax Grocery
Food & beverage Business tax Restaurant Indirect tax

Executive summary

U.S. fresh produce importers do not typically know final prices or sale details until after importation, which may lead to customs valuation errors and potential fines and penalties. To educate the community, U.S. Customs and Border Protection (CBP) released guidance on March 16, 2023, regarding the determination of customs values of fresh produce imported to the United States. This publication helps importers in this sector exercise reasonable care regarding the imported value of merchandise.   

Fresh produce customs appraisement guidance released by CBP 

U.S. Customs and Border Protection (CBP) released guidance on March 16, 2023, regarding the determination of customs values of fresh produce imported to the United States. The information was released as part of CBP’s Informed Compliance series and is entitled Determining Customs Value of Fresh Produce

Many produce importers declare pro forma values or 'price-after-sale' arrangements at the time of customs entry, so there may not be a final price or sale details available until sometime after import. Therefore, the sales price is not determined until after the merchandise reaches the U.S., undergoes inspection and grading, and thereafter offered for sale. 

Companies that conduct business in this manner should take a closer look at the valuation of their imported goods. The absence of a sale for export to the US may preclude them from being able to defensibly appraise the imports under the transaction value method – the price actually paid or payable for imported goods. In such cases, it could be necessary for importers to use a different and more complicated method of appraisement to assign a customs value to their shipments. 

Furthermore, importers of these products should be aware of certain dutiable additions to their customs values. For example, if they provide items such as seeds, fertilizers, pesticides, associated equipment or packing materials, including refrigerated cartons or containers, for free or at a reduced cost to their supplier(s) to grow and ship them produce, they may need to include those items in the values declared to CBP. 

Due to the complexity of these issues and the variable nature of the market for fresh produce, importers may find it difficult and administratively burdensome to declare accurate values at the time of importation yet still are required to meet CBP’s 'reasonable care' standards of compliance. That is, they must ensure that the values declared at the time of entry are not arbitrary lest they be subject to import holds, fines and penalties. Fortunately, CBP offers a voluntary reconciliation program that allows companies to true-up values for up to 21 months after the date of import, by which time more complete information should be available. 

Recommended next steps

RSM US recommends that importers of fresh produce take immediate steps to review the valuation of their imported goods and ensure they are defensible under the applicable regulations. Among others, this assessment should include the following:

  • Analyze import transactions to understand current customs valuation methodology and identify any potential adjustments and/or risks.
  • Exercise reasonable care to document how the value of imported merchandise was determined.
  • Establish processes to ensure any dutiable additions such as seeds, fertilizers, pesticides, equipment and packaging materials are included in the customs value of merchandise.
  • Connect with customs brokers and/or service providers to explore participation in CBP’s Reconciliation Program and develop the necessary procedures to adhere to the program’s requirements.

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