Valuation of imported goods for customs / VAT

Valuation “methods”

You may arrive at the valuation of imported goods by using one of 6 ways or “Methods”. You must try Method 1 before going on to Method 2 and so on. HMRC may ask you to explain why an earlier Method cannot be used. The only exception to the order of trying the Methods is that you may try Method 5 before Method 4 if you wish. You can use the SPV (for goods imported on consignment) or SIV systems if you import the fresh fruit and vegetables.

The normal Method of valuation is Method 1 (the transaction value Method). You must use this Method wherever possible and in fact it is used for over 90{e68217344b855fcd608ed2c4c41f83644da7cd41ea524fbfa2ad06c632d3255d} of importations liable to ad valorem customs duty.

What is meant by “transaction value”?

This is the price paid or payable by the buyer to the seller for the goods when sold for export to the EC adjusted in accordance with certain specific rules.

This may also cover situations where goods are imported from a processor. The “transaction value” may be “built up” or “constructed” by reference to the cost of processing plus any items to be added commonly referred to as “assists”.

How is “customs value” arrived at?

You base it on the price actually paid or payable by the buyer to the seller for the goods. This means the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods. It includes all payments made or to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller. Thus periodic payments (such as monthly, quarterly, annually) or “one off” payments by the buyer to the seller for the imported goods must be taken into account (for example tooling charges, engineering fees, development costs).  The buyer of the imported goods need not necessarily be established in the country of importation.

What items must be added to the price paid or payable?

You must add the following to the price you pay (unless they are already included):

(a) Delivery costs. The costs of transport, insurance, loading or handling connected with delivering the goods to the EC border must be included. 

(b) Commissions. Certain payments of commission and brokerage, including selling commission, must be included. 

But you can exclude buying commission if it is shown separately from the price paid or payable for the goods.

(c) Royalties and licence fees. You must include these payments when they relate to the imported goods and are paid by you as a condition of the sale to you of those goods.

(d) Goods and services provided free of charge or at reduced cost by the buyer. If you provide, directly or indirectly, any of the following, you must include in the customs value any part of the cost or value not included in the price charged to you by the seller:

(i) materials, components, parts and similar items incorporated in the imported goods including price tags, kimball tags, labels

(ii) tools, dies, moulds and similar items used in producing the imported goods, for example, tooling charges. There are various ways of apportioning these charges

(iii) materials consumed in producing the imported goods, for example, abrasives, lubricants, catalysts, reagents etc which are used up in the manufacture of the goods but are not incorporated in them, or

(iv) engineering, development, artwork, design work and plans and sketches carried out outside the EC and necessary for producing the imported goods. The cost of research and preliminary design sketches is not to be included.

(e) Containers and packing. Include:

  • the cost of containers which are treated for customs purposes as being one with the goods being valued (that is not freight containers the hire-cost of which forms part of the transport costs), and
  • the cost of packing whether for labour or materials.

Where containers are for repeated use, for example, reusable bottles, you can spread their cost over the expected number of imports. If a number of the containers may not be re-exported, this must be allowed for.

(f) Proceeds of resale. If you are to share with the seller (whether directly or indirectly) the profit on resale, use or disposal of the imported goods you must add the seller’s share to the price paid as regards dividends). For example, if the seller is to have 30{e68217344b855fcd608ed2c4c41f83644da7cd41ea524fbfa2ad06c632d3255d} of the profit which you receive, this is to be added to the price paid or payable. If at the time of importation the amount of profit is not known, you must request release of the goods against a deposit or guarantee .

(g) Export duty & taxes paid in the country of origin or export. When these taxes are incurred by the buyer they are dutiable. However, if you benefit from tax relief or repayment of these taxes they may be left out of the customs value.

Please contact RKG Consulting if you have queries regarding customs duty or VAT in respect of the valuation of goods imported into the European Community.