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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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Package deals: valuation treatment

Different goods are sold and invoiced at a single overall price

The fact of a single overall price for different goods does not preclude the use of Method 1, providing the requirements of that method can be met. However, it is accepted that there may be practical problems where the goods are classifiable under separate tariff headings at different rates of duty. Possible solutions to such problems include:

  • the use of prices or values of identical or similar goods in previous importations; where it can be shown that such prices or values provide a valid indication of the price of the various goods covered by the package deal
  • suitable price breakdowns supplied by the importer, based on generally accepted accounting principles (Annex 24 to the CCIP refers).

Goods of different quality sold and invoiced at a single overall price are only partially declared for free circulation in the UK

The following example illustrates the nature of the problem:

 

A consignment comprising… The buyer declares… Since the overall price actually paid or payable has been…
     
goods of three different qualities (top quality A, average quality B and low quality C) is purchased at an overall unit price of 100 currency units per kilo. quality A for free circulation at 100 currency units per kilo but assigns the other qualities to some other procedure (for example exportation, customs warehousing). agreed for a set of goods of various qualities, there is no selling price for the goods declared for free circulation. Thus Method 1 cannot be used. However, if it is possible to apportion the total price for the consignment by a means which takes into account the different qualities, Method 1 may be used.

Also, in the above example, Method 1 may be applied if, instead of only one of the different qualities of goods being declared for free circulation, a specified and equal proportion (one third or a half, for example) of each of the products contained in the total package making up the consignment were declared for free circulation. In such circumstances it would be possible to retain as a basis for the transaction value, the price represented by the proportion of the total price which the quality of the goods declared for free circulation bears to the total quantity purchased.

Different goods, included in the same transaction, are invoiced at individual prices established solely for tariff or other reasons

This is illustrated by the following example:

Products A&B which have been… are invoiced at… without altering…
     
been purchased in a package deal at a price of 100 currency units 35 and 65 in order to reduce the total liability of the importer for the customs duty (the rate being 15% for product A and 6% for product B) the overall price of the transaction payable to the seller.

In the above example the prices have been set or modified (some upwards or some downwards) to inappropriately reduce liability for customs duties. This type of practice may also be used to circumvent anti-dumping measures or quotas. Price manipulation cases of this type are a matter for fraud investigators. Nevertheless, the imported goods need to be valued for customs purposes. In this context it should be noted that off-setting arrangements of the type illustrated above represent a condition or consideration for which a value cannot be determined in respect of the goods being valued. Thus the provisions of Article 29.1(b) of the Code apply and an alternative method of valuation has to be used (WCO Comm 8.1 also refers).