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HMRC internal manual

Guidance on the Audit of Customs Values

HM Revenue & Customs
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Additions for freight and insurance costs: air freight

Air transport cost (ATC) apportionment

Where the actual cost of air transport is known, the ATC element can be apportioned to exclude the EC freight. Annex 25 of the CCIP gives the percentages to be used for all EC airports. CHIEF will automatically apportion air freight that is entered in the appropriate box of the E2 (value build up screen).

Where an air waybill accompanies a CIF invoice, only the actual air freight can be apportioned. Air waybills must show the IATA rate. However, some suppliers do not cost the IATA rate into the CIF value. This can be because the airline grants quantity discounts or the exporter does not pass on the full cost of the freight. In such cases the air waybill cannot be used for ATC apportionment. If the actual amount costed in to the invoice price can be distinguished (and attested to if necessary) the ATC apportionment can be used.

If the goods are carried by two or more means of transport (for example sea and air), then the freight bill may be for the total journey (for example goods shipped from Tokyo to Seattle and then flown to the UK). If the cost of the different transport elements cannot be separately distinguished, then the whole sum can be apportioned as if the entire journey had been by air. This only applies where the delivery terms are pre-CIF (for example FOB, ex-works). If the invoice is CIF or post-CIF then only the amounts costed into the value for air freight can be apportioned.

Low value/non-commercial imports

Where low value or non-commercial consignments such as samples are shipped by air instead of by usual means of transport (for example by sea) at the expense of the seller, the additional cost of dispatching the goods by air can be disregarded when determining the customs value.

Where the cost of air freight is charged to the importer, irrespective of whether samples are free of charge or purchased, these costs must be included in the customs value. The air freight costs themselves are subject to percentages listed in Notice 252 Valuation of imported goods for customs purposes, VAT and trade statistics.

Prepaid/collect freight

On some freight bills, amounts will appear in both the prepaid box (that is, paid before shipment) and collect box (that is, paid after shipment). In most cases, only the amount in the collect box is declared. It is very rare for the whole amount to be included in the customs value. There may be a number of reasons for this, although most will fall into one of the following two categories:

  • a preferential rate of transport has been agreed between exporter and carrier. The contracted rate is often shown in the collect column, with the difference (that is, the discount) shown in the prepaid column; and
  • the freight costs have been paid by the seller, but for various commercial reasons (for example to meet a delivery date) the seller has not passed on the full cost to the buyer.

In such cases only the amount in the collect column is dutiable. This is on the understanding that the prepaid amount was not and will not be paid by the importer and therefore the collect amount represents the total freight costs incurred by the importer (or his agent).