Guide
Customs valuation: the six WTO methods and when to use each
The customs value of imported goods determines how much import duty you pay. Part 12 of the Customs (Import Duty) (EU Exit) Regulations 2018 sets out six valuation methods that must be applied in strict order. This reference covers each method, the evidence you need, and the most common pitfalls.
The customs value is the amount on which import duty (and, where it applies at the border, import VAT) is calculated. Part 12 of the Customs (Import Duty) (EU Exit) Regulations 2018 (SI 2018/1248) gives effect to the WTO Valuation Agreement and requires you to work through six methods in order. You can only move to the next method if the one above cannot be used.
For roughly 95% of commercial imports, Method 1 (transaction value) is the right answer. The remaining methods exist for consignments where there is no sale, where related parties influenced the price, or where the price cannot be substantiated.
| 1. Transaction value | Goods sold for export to GB; price actually paid or payable can be evidenced; buyer and seller not related (or relationship has not influenced price). | Commercial invoice; bank/SWIFT evidence of payment; sales contract or purchase order; freight contract showing cost to GB frontier. | Treating the invoice price as the customs value without making the additions required by reg.130 (royalties, commissions, freight, assists). |
| 2. Identical goods | No usable transaction value, but identical goods (same in all respects) were imported at or about the same time. | Earlier customs declaration or commercial database record showing the accepted transaction value of the identical consignment. | Treating goods as identical when there are real differences in physical characteristics, quality, or reputation. |
| 3. Similar goods | No identical-goods comparator; comparable goods (same function, commercially interchangeable) were imported at or about the same time. | Earlier customs declaration or trade-data record for the similar consignment, with documented reasoning on comparability. | Stretching 'similar' to cover goods of materially different commercial grade or origin. |
| 4. Deductive value | Goods (or identical/similar goods) are sold in GB in the condition imported; you can work backwards from that resale price. | GB resale invoices; ledger evidence of resale margin, GB transport, GB duties and taxes paid; documented deductions. | Failing to deduct all elements (commissions, profit, GB transport, duty, VAT) and overstating the customs value. |
| 5. Computed value | Manufacturer is willing to share cost data; suitable where goods are made to order or where there is no comparable resale. | Cost-of-production accounts from the manufacturer; allocation of materials, labour, overheads, profit and general expenses. | Relying on a cost-build that the manufacturer cannot or will not stand behind to HMRC on audit. |
| 6. Fall-back method | None of methods 1–5 produces a workable value. You apply a reasonable means consistent with the WTO Valuation Agreement, using methods 1–5 with greater flexibility. | Documented reasoning showing why each earlier method was unavailable; the data set and adjustments used. | Using prohibited bases — selling price in the country of export, minimum customs values, arbitrary or fictitious values. |
Method 1: Transaction value
The default. The customs value is the price actually paid or payable (PAPP) for the goods when sold for export to Great Britain, adjusted by the additions in regulation 130. Use it unless you can show one of the disqualifying conditions applies (no sale, restrictions on use, price subject to undisclosed conditions, related-party influence on price, or proceeds of subsequent resale accruing to the seller without adjustment).
Regulation 130 additions you must add to the invoice price, to the extent not already included:
- Commissions and brokerage (except buying commissions)
- Cost of containers and packing
- The value of "assists" — materials, components, tools, dies, moulds, design work or engineering supplied free or at reduced cost by the buyer for use in producing the goods
- Royalties and licence fees related to the goods that the buyer must pay as a condition of sale
- Any part of the proceeds of subsequent resale that accrues to the seller
- Transport, loading, handling and insurance to the place of introduction into Great Britain
Method 2: Transaction value of identical goods
Use the previously accepted transaction value of identical goods imported at or about the same time. "Identical" means the same in all respects, including physical characteristics, quality and reputation; minor differences in appearance do not disqualify. Adjust for any difference in commercial level or quantity, and for transport costs to the GB frontier.
Method 3: Transaction value of similar goods
If no identical comparator exists, use the transaction value of similar goods — goods that are not alike in all respects but have like characteristics and component materials, perform the same functions, and are commercially interchangeable. Quality, reputation, and the existence of a trade mark are relevant.
Method 4: Deductive value
Start from the unit price at which the goods (or identical or similar goods) are sold in Great Britain in the greatest aggregate quantity, in the condition as imported, to a person not related to the seller. Deduct:
- Commissions usually paid (or the addition for profit and general expenses on resales of goods of the same class)
- Transport, insurance and associated costs incurred in GB
- Customs duty and other domestic taxes payable on importation or sale
Method 5: Computed value
Build the value from the producer's accounts:
- Cost or value of materials and of fabrication or other processing
- An amount for profit and general expenses equal to that usually reflected in sales of goods of the same class made by producers in the country of export for export to GB
- Cost of transport and insurance to the place of introduction into GB
Method 5 requires the producer's cooperation. HMRC cannot compel a non-resident producer to give access; if the data is not forthcoming, move to Method 6.
Method 6: Fall-back method
Apply methods 1–5 with reasonable flexibility, using data available in Great Britain. The legislation expressly prohibits using:
- The selling price in GB of goods produced in GB
- A system providing for acceptance of the higher of two alternative values
- The price of goods on the domestic market of the country of export
- A cost of production other than computed values determined under Method 5
- The price of goods for export to a country other than GB
- Minimum customs values
- Arbitrary or fictitious values
Worked example: transaction value with reg.130 additions
A GB importer buys plastic mouldings from a manufacturer in Vietnam under DAP terms. The buyer supplies the moulds free of charge to the manufacturer and pays a royalty to a UK licensor as a condition of the sale. The customs value builds up as follows:
- Goods invoice (price actually paid or payable)
- £100,000
- Royalty paid to licensor (related to imported goods, condition of sale)
- +£5,000
- Selling commission paid to overseas agent
- +£2,000
- Freight and insurance to GB frontier
- +£3,000
- Assists (free moulds supplied to manufacturer, apportioned)
- +£1,500
- Customs value declared on CDS
- £111,500
Buying commissions (paid to the importer's own agent for representing the importer) are not added. Internal GB transport (frontier to warehouse) is not added. Import duty and import VAT are not part of the customs value — duty is calculated on £111,500.
Record-keeping
Keep all valuation evidence — commercial invoice, payment evidence, freight contract, royalty agreement, assist apportionment workings — for four years from the date of the customs declaration (regulation 18 SI 2018/1248). HMRC's standard post-clearance audit window relies on those records.
Notice 252 and the Trade Tariff
HMRC's Notice 252 (Valuation of imported goods for customs purposes, VAT and trade statistics) is the operational reference alongside Part 12. Use it for worked examples, treatment of specific charges (quota premiums, buying commissions, container rentals), and the data elements required on a CDS declaration. The UK Trade Tariff tool gives the duty rate that the customs value is multiplied by.
Under-valuation penalties
duty paid and is a customs contravention. Civil penalties
under Schedule 1 to SI 2018/1248 (and sections 25–28 of the
Finance Act 2003) are tiered at £1,000 for less serious
contraventions and £2,500 for more serious ones, and stack
per declaration. A reasonable-excuse defence is available.</p>
<p>Where the under-valuation is fraudulent — for example,
using a parallel invoice or undeclared royalties — HMRC can
prosecute under section 170 of the Customs and Excise
Management Act 1979 (fraudulent evasion of duty). The maximum
penalty on indictment is seven years' imprisonment and an
unlimited fine.</p>
<p>An unprompted voluntary disclosure of an under-valuation
normally avoids or substantially reduces the civil penalty
and is the safe route if you discover an error during your
own review.</p>
HMRC Notice 252: Valuation of imported goods for customs purposes, VAT and trade statistics
UK Trade Tariff: look up commodity codes, duty and VAT rates