CAFC Upholds Use of Domestic Sales for Transaction Value

Jan. 10, 2026
By: Austin J. Eighan

On January 8, the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed the Court of International Trade’s (CIT) decision that transaction value does not require an international sale for merchandise to qualify as sold “for exportation to the United States.”

Import duties are primarily calculated on an ad valorem basis, meaning that duty is determined as a percentage of the declared value of the product. The customs valuation statue (19 U.S.C. § 1401a) provides a hierarchy of calculation methods. The first is the “transaction value”, which covers “the price actually paid or payable for the merchandise when sold for exportation to the United States.” If the transaction value cannot be calculated and the remaining alternatives higher in precedence are unavailable, importers may use the “deductive value”. This method bases value by “deducting” certain costs from the domestic sales value of the imported goods to arrive at a landed cost.

In Midwest-CBK v. United States, the dispute arose from the importer’s use of the deductive value method when appraising its imports of Christmas ornaments. Midwest imported the ornaments from China into Canada, where they were stored. After receiving purchase orders issued from U.S. customers to its U.S.-based sales staff, Midwest imported the merchandise under “FOB Buffalo, NY” sales terms and appraised them using their deductive value. Midwest considered the underlying purchase orders “domestic sales” and thus not “for exportation to the United States” as required under transaction value. After extending liquidation (i.e., final tally of duties owed) of the subject entries to conduct several rounds of accounting audits, U.S. Customs and Border Protection disagreed and instead elected to appraise the ornaments under the transaction value method. This resulted in a 75.75% increase in declared value.

Midwest argued that the FOB Buffalo term and the CIT’s 1989 decision in Orbisphere Corp. v. United States foreclosed transaction value because the sales allegedly occurred domestically. The CAFC declined to follow Orbisphere, explaining that it rested on outdated statutory language and references to foreign market sales that are no longer applicable to the current valuation statute. The Court concluded that transaction value does not expressly require an international sale for merchandise to qualify as sold for exportation to the United States. As domestic sales may thus support transaction value, the Court declined to address the legal significance of the FOB Buffalo term.

If your company would like to discuss which valuation methods best suit your international transactions, please reach out to one of our attorneys at Barnes, Richardson & Colburn.