Trade Compliance is complicated and JD Group is here to help. Welcome to our series of trade compliance support articles specially designed to help you in managing trade compliance, avoiding surprises, reducing costs and achieving the best possible outcomes. We look forward to your questions and comments.

Valuation – Maquila / IMMEX Operations

When goods are imported into United States they are subject to certain requirements involving U.S. Customs. As part of the import entry process, all goods require correct and accurate valuation. It is the responsibility of the importer of record to use “reasonable care” to “enter,” “classify,” and “value” the merchandise and provide any other information necessary to enable US Customs to properly assess duties, collect accurate statistics, and determine whether all other applicable legal requirements are met.

What should the Invoice include: For US Customs purposes the commercial invoice from the IMMEX Operation in Mexico must include all elements of value:

• Material cost
• Labor / Overhead Costs
• Assists

For “Material” cost US Customs is looking for the actual cost for all materials used in the manufacturing / assembly / packaging / repair, etc. process of the imported merchandise. For most IMMEX operations the materials are consigned by the US parent company and are captured in the IMMEX inventory control systems that generate the commercial invoice for US Customs purposes. Most material costs are captured at standard cost.

For “Labor and Overhead” cost U.S. Customs is looking for all costs and expenses generated in Mexico that are related to the production of the imported merchandise. These costs must include all expenses reported in the IMMEX Financial Reporting system and are generally allocated on a per unit basis by labor minutes or hours. The following costs and expenses are generally excluded:

• Extraordinary and one-time Expenses
• Sales / Marketing Expenses

Some examples of the above include expenses related to a fire that occurred at the facility, damages to the structure per the result of natural disaster e.g. earthquake, severe storm, etc. or expenses related to sales or marketing activities undertaken in Mexico.

For “Assists” U.S. Customs is looking for all costs and expenses associated with any molds, tools, dies, machinery and equipment, reported on the financial records of the U.S. parent company and used for production purposes in Mexico. Most assist costs are captured on a scheduled basis of deprecation and allocated equally among all production activities.

Cost Update, Changes and Modifications

U.S. Customs recognizes that costs may change and that actual costs are not often available at the time of entry. We strongly recommend that all importers regularly review and update their costs. At the very least all costs must be updated on an annual basis. However, for some IMMEX operations with highly volatile commodities, such as metals, textiles or petroleum based products, quarterly updates may be a more effective option. Moreover, the addition or reduction of production lines may also require more frequent cost updates.

Final Tips and Recommendations

Establish a sound process to capture all relevant costs that make up the customs value, including accurate reporting of material, labor, overhead and assist costs on the commercial invoice
Establish a sound process with the US parent company to:
- A. Periodically review and update current costs
- B. Ensure that cost updates are properly reflected in the IMMEX system
Participate in the U.S. Customs Reconciliation Program. In our next Trade Compliance Support Article we will talk more about Reconciliation and how IMMEX companies can legally update and reconcile their reported values to actual cost.
Consider a thorough review by an independent third party to validate and confirm your valuation methodology and accurate reporting of all required values.
Finally, work with us! As your U.S. Customs Broker we are here to help. We have the experience and can provide the necessary guidance so that you accurately value your merchandise while complying with U.S. Customs rules and regulations, no question is too big or too small.