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HMRC internal manual

Guidance on the Audit of Customs Values

HM Revenue & Customs
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Objective and quantifiable data


Article 32.2 of the Code states:

‘Additions to the price actually paid or payable shall be made under this Article only on the basis of objective and quantifiable data.’

The interpretative note thereto in Annex 23 to the CCIP indicates that, where objective and quantifiable data do not exist, Method 1 cannot be used. The note illustrates the point by reference to royalty payments.

Practical application

Bearing in mind that it is a fundamental principle of the WTO Valuation Agreement that Method 1 should be used to the greatest extent possible, it is the UK policy to apply the above legal provision pragmatically. This approach is underpinned by the provisions of Article 156a of the CCIP.

Article 156a recognises that there are circumstances when it is not possible at the time of entry to free circulation to quantify the ‘additions’ specified in Article 32 and the ‘exclusions’ specified in Article 33. Thus this Article provides Customs with the opportunity, at the request of the importer, to determine a method whereby an ‘addition’ or ‘exclusion’ could be quantified. Consequently Customs can agree with importers a percentage addition to cover, for example, royalty and licence fees or tooling charges. There is also scope for agreeing average additions or deductions to cover delivery costs.

By invoking Article 156a the necessity to use security arrangements and the incomplete declaration procedure is avoided. In addition Method 1 can be used and therefore it is not necessary to consider the alternative methods of valuation. Thus there are administrative savings for both Customs and the Trade.