Transaction Value
Meaning ~ Valuation logic determining duty based on the actual price paid between buyer and seller, incorporating specific additions like royalties, packing, and assists.
Selling Commissions Inclusion
Meaning
Fees paid by a seller to an agent to find a buyer or facilitate a transaction are treated as part of the price paid or payable and must be included in the total declared value. These payments are different from buying commissions because they are made for the benefit of the seller rather than the buyer. Under international trade rules, any commission paid by the seller to an agent who is acting on their behalf is a dutiable part of the transaction value.
Selling commissions inclusion ensures that the customs value reflects the full cost of the goods including the marketing and the sales expenses. This rule is a fundamental part of the transaction value method and is applied in almost every country that follows the WTO standards.
Agent Role
The behavior of this rule depends on the specific activities performed by the agent and who they represent. A selling agent typically works for the manufacturer or the exporter and their goal is to secure orders and manage the relationship with the buyer. Their commission is usually a percentage of the sales price and is paid by the seller from the proceeds of the sale.
Even if the buyer pays the commission directly to the agent on behalf of the seller, it is still considered a selling commission and must be added to the price. The agent does not take title to the goods but plays a necessary part in the commercial transaction. If the agent is actually a middleman who buys and resells the goods, the entire price in that second sale is the dutiable value.
Inclusion Mechanism
Requirements for these declarations are found in the commercial invoices and the sales contracts and the agency agreements. If the selling commission is already included in the invoice price, no further adjustment is necessary. However, if the commission is paid separately or listed as a deduction from the price, it must be added back to the dutiable value.
The importer of record is responsible for identifying these payments and ensuring that they are correctly reported at the time of entry. This requires a clear understanding of the financial arrangements between the seller and their agents. Customs auditors will often look for separate commission invoices or entries in the seller’s accounts to find hidden selling commissions.
Disclosure Fault
Financial risks of failing to include these commissions are found in the back duties and the penalties for making a false declaration. If a customs officer discovers an unreported selling commission, they will treat it as an undervaluation of the goods. The importer will be liable for the missing duty plus interest and a fine that is based on the value of the commission or the total shipment.
This can also lead to a more detailed audit of the company’s other trade relationships and a loss of trust with the authorities. Because the distinction between a buying and a selling commission is often subtle, it is a common area of error in customs compliance. Maintaining a clear and documented trail of all agency fees is the best way to avoid these costs.