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The proper valuation of goods sent as warranty replacement items is an important topic for many firms.
It is the responsibility of the firm who has the business relationship with the overseas customer to establish true replacement values for their goods. A best practice is to establish a pricing/valuation schedule based on the sale price of the same item to a customer once the warranty period expires.
There are many reasons why it is important to establish the proper valuation. They include, but are not limited to, the following:
1. Insurance. In the event the replacement item is lost, stolen or damaged en route, the U.S. firm will be reimbursed by the carrier and/or the insurance carrier based on the value of the item stated in the documentation supporting the shipment of the item (e.g. the customs invoice or commercial invoice). If the value is understated, the reimbursement will be less than replacement value.
2. Export licensing. If the good is subject to export licensing, value must be established and documented for the license application.
3. Electronic Export Information in AESDirect (EEI) value reporting. If the USPPI and the filer of the EEI misrepresent the value of the item per Schedule B or HTSUS number to avoid destination duties and taxes, then the filer and the USPPI have violated the U.S. law. Please see the Foreign Trade Regulations and the Export Administration Regulations.
4. Import controls at destination. If the exporter and the forwarder collude in under-declaring the value of the goods on commercial documentation, you will violate the country of import regulations.
5. Pricing and sales negotiation. By misstating the value of the goods to avoid duties and taxes, the buyer may use the reduced value to negotiate the pricing on products they buy in the future.
It seems that most folks want to avoid payment of duties on warranty replacement items. Rather than misstating the value, please look at the other possibilities. Here are a couple of suggestions:
1. Work with a reputable customs broker in the buyer's country to identify the options in the buyer's country. They may discover that the buyer can register the faulty product with their government prior to export and return in order to obtain a refund of duties on the item being exported.
2. Establish an internal procedure at the exporter's facility to ensure that there are appropriate instructions for international transactions embedded into the Materials Return Instruction/Authorization sent by the U.S. firm to the foreign buyer.
3. At time of export of the warranty replacement goods from the U.S., be sure that the documentation includes the following details and other relevant information specific to the product, such as serial numbers:
*The original sale reference numbers;
*That this is a replacement being sent at no charge;
*The true value of the good;
*Any import license numbers;
*Any registration numbers;
*letter of credit number;
*The original bill of lading number for shipment of the original item; and
*If possible, the original import clearance number with corresponding paperwork and language and detail required by the importer's country.
For more information about establishing the correct valuation, check out the resources available at the following websites:
www.census.gov – Foreign Trade Regulations
www.bis.doc.gov – Export Administration Regulations
www.export.gov – Country Profiles
www.aesdirect.gov – AESDirect for filing Electronic Export Information
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| 6817NR NACHI | 85 | 110 | 13 |
| 6316NR NACHI | 80 | 170 | 39 |