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HMRC internal manual

Guidance on the Audit of Customs Values

Goods not in accordance with contract


As with damaged goods if the goods are re-exported, abandoned or destroyed, there is no liability to duty.

If the goods are retained, they will fall into one of two categories:

  1. wrong goods (for example woollen gloves instead of sweaters) or
  2. correct goods which fail to conform to the original specifications to the extent that the supplier makes some form of restitution.

Wrong goods

Where wrong goods are retained, they should be valued in accordance with the normal rules. If there is no sale for export, Method 1 cannot be used. If Method 6 is reached a price agreed after importation may be acceptable. However, it must be borne in mind that the price may reflect either an element of compensation by the sellers, or the fact that sellers wish to avoid the expense of having the goods returned to them, or both.

Goods not conforming to specification

A number of situations may arise depending on the level of agreement, or disagreement, between the buyer and the seller. For example, the seller may:

  • take steps to bring the goods into conformity, either directly or through other parties
  • render some form of compensation to the buyer which is extraneous to the goods themselves
  • not agree that there is, in fact, a non-conformity to specifications or
  • the buyer may be seeking an amount of redress from the seller which is predicted on damages resulting from the non-specification rather than a measure of the non-specification itself.

For customs valuation purposes the price actually paid or payable still exists. Since the WTO Valuation Agreement does not make specific provisions for this consideration, Method 1 applies, if all other conditions are met.

Note: The above does not preclude ‘goods not conforming to specification’ being considered as ‘wrong goods’.