Introduction
An introduction to customs valuation.
The World Trade Organization’s (WTO) Agreement on the Implementation of Article VII General Agreement on Tariffs and Trade (GATT) 1994, also known as the ‘Customs Valuation Agreement (CVA)’ provides the basis for customs valuation rules upon which signatories to the GATT enact domestic legislation, and therefore must be broadly reflected within. This handbook sets out the UK’s policy interpretation of Article VII GATT within our own UK legislation.
The World Customs Organization (WCO) provides guidance and support for its members on customs valuation issues and other customs matters. The WCO’s Technical Committee on Customs Valuation (TCCV) publishes its Valuation Compendium. The TCCV makes technical decisions and publishes them as instruments in the form of:
- advisory opinions
- commentaries
- explanatory notes
- case studies
- studies
These instruments are not binding on Customs administrations, and do not amount to international valuation law. However, it is expected that the decisions of the Technical Committee are to play an important and vital role in achieving uniformity in the interpretation and application of the CVA.
Throughout this handbook HMRC will at times refer to the guidance above, the material is available to the public on the WCO’s website for a subscription fee. The use of WCO material or any mention or listing of such herein is solely for educational purposes and does not imply endorsement by HMRC, nor discrimination against similar products or services not mentioned.
In the UK, customs valuation law is provided by the Taxation (Cross-border Trade) Act 2018 (TCTA) and the Customs (Import Duty) (EU Exit) Regulations 2018 (CIDEER). Additional provisions can be found in Notices made under the Customs (Import Duty) (EU Exit) Regulations 2018.
In Northern Ireland the Union Customs Code (UCC) applies, additionally the UCC DA and the UCC IA provide further provision on customs valuation.
Regulations 952/2013 (UCC), 2015/2447 (UCC DA), and 2015/2446 (UCC IA) can be found on the EU legislation website Eur-lex.
For imports into the UK prior to 1 January 2021 UCC legislation should be applied.
There are 6 methods for establishing the value on which Customs Duty and import VAT is calculated. The same value is also used for trade statistics. This handbook explains what the methods are and when they should be used. The handbook explains HMRC’s view of the law, and nothing in it overrides the law.
HMRC often charges Customs Duty as a percentage of the value of imported goods - this is called ‘ad valorem duty’. The amount of duty an importer must pay depends on the customs value of their goods. The rules for arriving at the customs value are based on the World Trade Organisation (WTO) Valuation Agreement. This was previously known as the ‘General Agreement on Tariffs and Trade’ (GATT).
In the UK Trade Tariff, importers can find out if they have to pay ‘ad valorem Customs Duty’. This lists all the Customs Duty rates, commodity codes and procedures relating to imported goods. Importers can use the HMRC Online Trade Tariff or ask for details from HMRC’s helpline.
The primary basis for customs value is the ‘transaction value’, or Method 1, as defined in TCTA s16. Importers must use this Method wherever possible; it is used for over 90% of importations liable to ad valorem Customs Duty. Importers must try Method 1 before going on to Method 2 and so on. HMRC may ask importers to explain why an earlier Method cannot be used. Importers may try Method 5 before Method 4 if they wish. Under Method 4 importers can use the Accounts Sales Procedure or the Simplified Procedure Values (SPVs) system, for goods imported on consignment, when importing fresh fruit and vegetables.
When trading and moving goods in and out of Northern Ireland; under the Northern Ireland Protocol, Union Customs Code (UCC) valuation rules will continue to apply to goods imported into Northern Ireland. The UCC valuation rules operate in a similar way to the UK’s rules for goods imported into the UK or Great Britain from third countries. Apart from a variation to the list of products covered by the SPV scheme. Read Trading and moving goods in and out of Northern Ireland for more information. HMRC may audit traders declared import values, so it is vital they have a full audit trail with documentary evidence to verify those declarations.