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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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Currency conversion

Introduction

Where a contract price is expressed in a foreign currency and settlement is made in that currency, then the official customs exchange rate must be used. This rate is updated monthly, although if a currency fluctuates by 5% or more it will be officially adjusted before the end of that period. Further guidance is provided in CVS Comm 4.

Prepayment

In cases of prepayment, the official exchange rate applicable at the material time of valuation (that is, the time of entry to free circulation) is to be used. There is no provision to use the exchange rate at the time of settlement.

Fixed rates of exchange

Sometimes an invoiced amount is shown in sterling, but settlement is to be made in a foreign currency at a fixed rate of exchange provided for in the sales contract. The fixed rate need not be actually written into the contract, but should be legally provided for. In such cases, the sterling amount should be converted to the foreign currency at the fixed rate of exchange, then converted back to sterling using the official customs rate. It is possible under such arrangements that further payments will be made to the supplier as a result of contractual adjustments.

Note: Case Studies 1 and 2 at GACV39000 give examples. For further guidance see CVS Conclusion 1 and WCO AO 20.1.