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HMRC internal manual

Guidance on the Audit of Customs Values

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HM Revenue & Customs
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Exclusions from the customs value: interest charges

The legal provision (Article 33.1(c) of the Code) stems from Decision 3.1 of the WTO.

The Court of Justice of the European Communities (ECJ) addressed this subject in Case No 21/91 (Wunsche Handelsgesellschaft International). The Court ruled to the effect that the words ‘interest payable under a financing arrangement related to the purchase of imported goods’ applies equally to interest due in respect of the period of credit granted by the seller to the buyer, and accepted by the latter, for payment for imported goods.

Practical application

Decision 3.1 indicates that it is to apply regardless of whether the finance is provided by the seller, a bank or another natural or legal person. This underlines the broad general nature of the intention of the parties to the WTO Valuation Agreement to provide for the exclusion of interest charges from the customs value.

When delivering its Judgement in Case No 21/91 the ECJ observed that:

  • the period allowed by the seller of the imported goods to the buyer for payment of the price of those goods in principle constitutes a ‘financing arrangement’ within the meaning of the legal provisions
  • the granting of a time-limit by the seller of the goods to the buyer should be deemed to constitute, on acceptance by the buyer, a ‘financing arrangement’ within the meaning of the legal provisions and
  • it is not necessary for the time-limit for payment to be made the subject of a specific agreement between the buyer and seller, separate from the agreement on the sale of the imported goods. Thus as soon as the amount of any interest due in return for the period of credit granted by the seller, is shown separately on the invoice addressed to the purchaser, it should be considered that, unless disputed by the buyer, the latter has actually agreed to the interest corresponding to this time-limit for payment.

The ECJ rejected the argument that a financing arrangement does not exist unless the buyer has the choice between settling the purchase price within the customary time for payment, or benefiting from longer term settlement in return for a payment of interest. A lesser price for immediate payment need only exist notionally at the time of contractual negotiations. The choice to pay a price which does not include interest need not continue to exist after the contract has been entered into.

Thus, providing the claimed rate of interest is not excessive, and that the interest charges are shown separately at the time of entry to free circulation of the imported goods on the valuation declaration, invoice or other document accompanying the entry, such interest charges may be excluded from the customs value.

The above does not preclude examination of the price actually paid or payable for the goods (that is, net of interest charges) to ensure that it satisfies the provisions of Article 29 of the Code in relation to the transaction value method. Where the buyer and seller are related this may include consideration as to whether the price has been influenced by the relationship. It is also of course necessary to consider whether the price paid or payable requires adjustment in accordance with Articles 32 and 33 of the Code in order to arrive at the customs value.