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HMRC internal manual

Guidance on the Audit of Customs Values

Method 2

Meaning of the term identical goods

Further guidance, including examples, is provided in WCO Comm 1.1. In particular it is to be noted that goods incorporating or reflecting engineering, development, artwork, design work and plans and sketches undertaken in the EU are not covered by the term ‘identical goods’ (Article 141.4 of the UCC IA refers).

Adjustments for different commercial levels and/or quantities

Further guidance is provided in WCO Comm 10.1. This commentary sets out examples of differences in commercial level and/or quantities and indicates whether or not an adjustment is required to be made.

When examining and comparing transactions involving quantity differences, care must be taken in situations where the price may be the subject of a contingency or retrospective discount. At the time of entry it is unlikely that the transaction value of either the identical goods or the goods to be valued will have taken into account such discounts. Thus it may be necessary to make a price adjustment before deciding whether or not an adjustment for quantity is required and, if so, to what extent. Invariably any such action will have to be taken at the post-clearance stage.

Time element

The transaction value of identical goods must relate to goods exported at or about the same time as the goods being valued. The allowable period is flexible but commercial practices and market conditions must be taken into account. For administrative purposes UK Customs considers a period of three months to be reasonable for comparison purposes. However, this can be altered if circumstances dictate. For example, it would not be practical to accept a three month old transaction for comparison purposes for a commodity, which is subject to violent price fluctuations.

Regardless of the age of the transaction of identical goods used for comparison, the material time for the valuation of the goods to be valued remains as the time of entry to free circulation.

Further guidance on the ‘time element’ is provided in WCO EN 1.1.

Acceptable evidence

Method 2 is most commonly used when the identical goods to be valued under both Method 1 and 2 are entered on the same entry for free circulation. In such circumstances the evidence provided with that entry can be used to establish both the customs values.

Otherwise Method 2 is rarely used because of the practical difficulties in obtaining appropriate evidence. Normally importers can only obtain details of importations of identical goods from their own records or those of a related importer in the EU. Customs does not have the resources to routinely search for transactions of identical goods accepted under Method 1.

Normally, the Method 1 transaction to be used for comparison purposes will be evidenced by a copy of the entry for free circulation. However, where the entry is not available, the following alternative evidence may be considered:

  • the relevant invoice
  • the name of the import vessel
  • the date that vessel reported in the EU
  • the place of discharge in the EU and
  • the Bill of Lading number.