Valuation Additions
There is a series of six valuation methods. The must be considered sequentially. The first and most important method of valuation is the transaction value method. If it can be used, it must be used. This is used in almost all cases and will be the purchase price in an arm’s length sale. If it can be demonstrated between related parties that the price is at arm’s length the transaction value may also be used.
The customs value is the value of the goods plus insurance and freight to the EU border. Certain additional costs must be included in the customs value, for example:
- Commissions and brokerage (with the exception of buying commissions)
- The cost of containers classified with the imported goods
- Packing costs
- Dutiable “assists”
- Dutiable royalties/licence fees
- Value of the “proceeds of resale “accruing to the seller
- Transport and insurance costs up to the point of entry in the EU. (Depending on the INCOTERMS used, these costs may or may not already be included in the invoice price.
- Bunker charges
- Currency conversion charges
There are a limitative number of costs which may be excluded, for example:
- Exclusive distribution rights (for as far as not related to the goods).
- Financial interest;
- Installation and technical assistance (in the EU);
- Customs duties;
- Transport and insurance costs within the EU;
- Costs of marketing activities (whether direct or indirect).
The value of materials and services provided for free must be included in the transaction value. This may include for example additional material received. Royalty payments and licence fees incurred by the importer must be added to the price of the relevant goods if the buyer must pay them directly or indirectly and they are a condition of sale. Some limited costs can be excluded.
Where pre-border costs are paid by the importer then they are identified separately and charged in the import declaration
Transaction Value
Customs valuation is generally based on the sale price where there is a sale between an unconnected importer and exporter. HMRC or Revenue may apply a different value if it believes that the valuation is incorrect. Where there are group purchases and sales, issues of valuation may be looked at more closely by HMRC and Revenue, than in the case of an arms’ length sale.
The primary method of valuation is with reference to the invoice price. Some deductions may be permissible if they are clearly distinguished, such as cash, trade and quantity discounts. Transport, insurance and other importation charges to the point at which the goods reach the border, are included in the customs valuation for customs duty purposes. Value added tax applies to the customs value plus the customs duty, so that there is double taxation to this extent.
The transaction value may be accepted where the importer demonstrates the value approximates to a transaction occurring at the time of importation between unrelated buyers in respect of identical or similar goods which has been determined under an appropriate method.
The transaction value of the goods sold for export to the customs territory of the Union shall be determined at the time of acceptance of the customs declaration on the basis of the sale occurring immediately before the goods were brought into that customs territory.
Where the goods are sold for export to the customs territory of the Union not before they were brought into that customs territory but while in temporary storage or while placed under a special procedure other than internal
The customs valuation rules apply to samples. They cannot be deemed of no value simply because they are not sold. Equally returned goods cannot be deemed of no value. They must be the subject of returned goods relief.
Other Rules to Apply Succesively
The other valuation rules are as follows and must be applied in order
- transaction value of identical goods
- transaction value of similar goods
- deductive method
- computed method reasonable means (the full-back at the)
Related Parties
The issue of valuation may arise when goods are imported by a related party, such as movements between group companies or branches. Where there is an immediate sale after import, such as where the import is for the purpose of completing that sale, an inter group or company to branch value that is in accordance with the invoice price to the external customer (say with an appropriate margin built is) is unlikely to be successfully challenged.
Traders must be able to show that the transaction value between related parties is robust. It must cover all the additions and the at arm’s-length equivalent. It must be shown that the price was not influenced by the relationship and is arm’s length.
Customs valuation rules are not applicable on the same basis as transfer pricing rules now common in most jurisdictions. Transfer pricing seeks to reallocate profits to the jurisdiction where in substance they are should be earned.
Valuation Declaration Forms
A valuation declaration must be completed for every import consignment with a value in excess of €20,000 except where the:
- import is not commercial
- duty payable is not based on the value of the goods
- goods are liable to Value-Added Tax (VAT) only and the importer is registered for VAT
- goods are fruit and vegetables valued by the ‘unit price’ system.
Alternatively, a long-term declaration can be registered instead of a separate declaration for each import consignment for three years.
The Origin and Valuation Unit of Revenue deal with valuation issues and may be in a position to assist. The form of valuation declaration is on the Revenue website.
UK Value Declaration
In the same way, HMRC may request a value declaration on UK imports. UK HMRC practice and valuation are here. https://www.gov.uk/government/publications/notice-252-valuation-of-imported-goods-for-customs-purposes-vat-and-trade-statistics/notice-252-valuation-of-imported-goods-for-customs-purposes-vat-and-trade-statistics
HMRC may request a value declaration. UK HMRC practice and valuation are here. https://www.gov.uk/government/publications/notice-252-valuation-of-imported-goods-for-customs-purposes-vat-and-trade-statistics/notice-252-valuation-of-imported-goods-for-customs-purposes-vat-and-trade-statistics
Alternatively, a long-term declaration can be registered instead of a separate declaration for each import consignment for three years.
