How is the transaction value calculated?

The transaction value is calculated as the invoice price plus additions minus subtractions. This method reflects the actual price paid or payable for the goods, ensuring that all relevant costs associated with the importation are considered.

Additions may include costs such as packing, transportation, and insurance that are included in the price of the goods but can be separate line items on the invoice. Subtractions generally refer to any allowable deductions based on discounts or adjustments that may apply, which means these amounts are deducted from the total price paid.

This method provides a comprehensive view of the transaction's value and aligns with international customs valuation principles, ensuring that it captures what the buyer effectively pays for the goods, including any extra costs associated with bringing those goods to the buyer.

Other methods do not encompass all these elements as comprehensively. For instance, simply taking the invoice price and applying a multiplication factor does not account for these additional costs or deductions, while the concept of invoice price minus total deductions oversimplifies the valuation process by excluding significant added costs. Thus, the correct understanding of transaction value encompasses both the additive and subtractive elements reflected in this formula.