Customs Valuation – UK Evidence Requirements

Customs Valuation is the process of selecting the appropriate Valuation Method to declare the value of the goods at import. As with other areas of  Customs compliance, businesses must keep evidence and records of the valuation of the goods. The UK government (HMRC) has provided specific guidelines on the documentation that traders must retain for record-keeping purposes.

International and Domestic Framework

The World Trade Organisation (WTO) Agreement contains the rules governing the valuation of goods. More specifically the Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT). This agreement sets forth methods for determining the value of imported goods, which are subsequently incorporated into domestic customs regulations.

In the UK, the rules are in the Customs (Import Duty)(EU Exit) Regulations 2018.

Why is this important?

Proper documentation of Customs Valuation is crucial for demonstrating compliance during a Customs audit. Document must therefore be part of the customs valuation strategy to ensure compliance.

Customs Valuation Evidence per Valuation Method

Valuation Method 1: Transaction Value

The following type of evidence must be provided to support the transaction value:

•  A copy of the seller’s invoice or other document supporting the payment.
•  Evidence to support anyincluded, excluded or adjusted amounts provided for by virtue of Regulations 111 to 118, of The Customs (Import Duty)(EU Exit) Regulations 2018. This may include evidence of contracts detailing the conditions of sale and evidence of the payments.

Valuation Method 2: Identical Goods

The following type of evidence must be provided to support a Method 2 valuation:

• A copy of, or the necessary data to enable HMRC to trace, an import entry (with supporting documents) for identical goods which a Method 1 transaction value has been accepted by HMRC. This transaction value must relate to goods conforming to the conditions provided by virtue of Regulations 120 and 122 of the Customs (Import Duty)(EU Exit) Regulations 2018

Valuation Method 3: Similar Goods

The following type of evidence must be provided to support a Method 3 valuation:

• A copy of, or the necessary data to enable HMRC to trace, an import entry (with supporting documents) for similar goods for which a Method 1 transaction value has been accepted by HMRC. This transaction value must relate to goods conforming to the conditions provided by virtue of Regulations 121 and 122 of the Customs (Import Duty)(EU Exit) Regulations 2018

Valuation Method 4: Deductive Value

At the time of importation if there is no transaction value or previous method that can be used, a reasonable estimate for deposit purposes of the final sales value should be provided. This estimate should be supported by a pro-forma invoice, statement of value, or other evidence which equally evidences the final sales value.

Once a sufficient quantity of the relevant goods have been sold to allow the unit price to be calculated, copies of the sales invoices and a copy of the calculations must be sent to the National Import Duty Adjustment Centre (NIDAC). Details of the actual deductions claimed must be supplied.

Together with the import entry, one of the following forms of evidence must be provided. The form of evidence must be that which evidences the unit price in the greatest aggregate quantity:

• A sales invoice
• A price list current at the time of importation. Unless an overall percentage deduction has been agreed with HMRC, details of the actual deductions claimed must be provided.

Valuation Method 4 – Special Considerations for Fruit and Vegetables

Alternatively, the Simplified Procedure Value (SPV) scheme can be used for whole fruit and vegetable produce, of a single kind, imported on a consignment basis. SPV cannot be used if there is a transaction value. 

Valuation Method 5: Computed Value

Information about the cost or value of the items must be provided. This information must be based on the producer’s commercial accounts. These accounts must follow the generally accepted accounting principles which apply or have substantial authoritative support in the country where the goods are produced. In addition, information about the producer’s profit and general expenses should be provided. The amount to be added must be in line with the usual figures for profit and general expenses for producers in the country of exportation of the goods:

•  of the same class or kind, and
•  for export to the UK

Valuation Method 6: Fallback Method

A valuation must be arrived at by using reasonable means consistent with the World Trade Organisation valuation principles. Method 6 is the fallback method and can only be used where none of the earlier methods directly apply. Where aspects of the other 5 methods of valuation are applied, the evidence required is the same as laid out in the specific method used.

In conclusion, adhering to the customs valuation methods and maintaining proper documentation is essential for businesses to ensure compliance with HMRC requirements. Each valuation method outlined above has specific evidence requirements, and understanding these is crucial to avoid complications during audits. By following these guidelines, businesses can effectively demonstrate their compliance, ensuring smooth import processes and avoiding potential penalties. Proper customs valuation is not just a regulatory obligation; it is also a critical aspect of international trade that ensures fair taxation and fosters trust in global commerce.