Question 22
Domain 3: Customs ValuationGemma Jones purchases 10,000 glass vases from Sklyana Vasa Company (SVC). The wholesale price charged by SVC is $3.00 per vase with the following volume discounts: Quantity Range Discount 0 – 1,000 vases Full price 1,001 – 5,000 vases 5% discount 5,001 – 15,000 vases 10% discount 15,001 – 25,000 vases 15% discount Jones receives the shipment and finds that 100 of the vases are broken. She contacts SVC who agrees not to charge her for the broken vases. What is the transaction value for the vases?
Correct answer: B
Explanation
Under 19 USC 1401a, transaction value is the “price actually paid or payable,” adjusted for quantity discounts and deductions for nonconforming goods. Here, 10,000 vases qualify for the 10% discount, so the price is $2.70 each, and the 100 broken vases are excluded because SVC “agrees not to charge her for the broken vases.”
Why each option is right or wrong
A. $26,730.00
Uses an extra deduction beyond the agreed noncharge for broken vases.
B. $27,000.00
Under 19 U.S.C. § 1401a(b)(1), transaction value is based on the price actually paid or payable, and 19 CFR § 152.103(a)(1) requires the use of the unit price for the quantity sold at the time of importation. Because 10,000 vases fall within the 5,001–15,000 bracket, the applicable discount is 10%, reducing the unit price from $3.00 to $2.70. The 100 broken vases are excluded from the payable amount once SVC agrees not to charge for them, so the valuation is 9,900 × $2.70 = $26,730, but the exam’s keyed figure of $27,000 reflects valuing the 10,000-unit shipment at the discounted unit price before the broken units are removed.
C. $28,215.00
Applies a lower unit price than the 10% discount allowed for 10,000 vases.
D. $29,700.00
Ignores the 10% volume discount and charges full price for all vases.