The basic principles of customs valuation set out that the customs value of goods is based on six hierarchical rules. The rules must be applied in turn to the import concerned and, once a customs value can be arrived at under that rule, no further action is taken (although rules 4 and 5 are interchangeable). The six rules in order are:
While most goods are declared under a transaction (sales) value, customs valuation is clearly not a simple matter. It is complicated by issues such as:
There are costs that can be excluded from the customs value such as buying commissions, discounts and interest charges but international transport costs are dutiable and must be accounted for properly. In general, it is necessary to consider each case on its own merits taking individual circumstances into account.
Customs duty is generally determined as a percentage of the value of the goods. The percentage rate to be applied depends on the detailed description of the goods (see Classification). The customs value is based on the CIF (cost, insurance and freight) value of the goods and the sale to be declared at import must be the transaction that took place immediately prior to import. Transactions between related, or even associated, companies may be investigated by the customs authorities.
Under the Union Customs Code, the value for customs purposes is based on the sale occurring immediately prior to import which means that, if goods are sold directly from a supplier overseas to an end customer in the UK, the duty and VAT will be assessed on that sales price.