G/VAL/Q/GBR/4  
 
26 April 2023  
(23-2942) Page: 1/6 
Committee on Customs Valuation  Original: English  
 
NOTIFICATION UNDER ARTICLE 22 OF AGREEMENT  ON IMPLEMENTATION  
OF ARTICLE VII OF THE GENERAL AGREEMENT  
ON TARIFFS AND TRADE  1994  
REPLIES  FROM THE UNITED KINGDOM TO QUESTION S FROM THE UNITED STATES  
REGARDING DOCUMENT S G/VAL/ N/1/GBR/1 AND G/VAL/ N/2/GBR/1 
UNITED KINGDOM  
The following communication, dated 19 April 2023 , is being circulated at the request of the 
delegation of the United Kingdom . 
 
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The United Kingdom (UK) would like to thank the United States for its questions submitted in 
response to the UK 's notification of its customs valuation legislation contained in document 
G/VAL/N/1/ GBR/1, as well as its responses to the Checklist of Issues contained in the document 
G/VAL/N/2/ GBR/1. 
 
Regarding document G/VAL/N/ 1/GBR/1  
 
Question 1 : 
 
Could the UK please explain the difference between the total amount of consideration "payable for  
the goods " and the total amount of consideration "payable in connection with the importation of the 
goods into the United Kingdom, " as used in Section 16(3) of the Taxation (Cross -Border Trade) Act?  
 
Response : 
 
By the total amount of consideration "payable for the goods" we mean the price actually paid or 
payable by the buyer to the seller for the goods i.e., the Transaction Value.  
 
The term "payable in connection with the importation of the goods into the United Kingdom " means 
all payments made as a condition of the sale of the imported goods by the buyer to the seller or by 
the buyer to a third party to satisfy an obligation  of the seller which would include any additions and 
exclude any 'deductions ' to/from the price paid or payable.  
 
This allows for situations where the transaction value may be 'built up ' or 'constructed ' by reference 
to the cost of processing items to be a dded. Commonly referred to as 'assists '. 
 
Further detail can be found in our Valuation Guidance: Working out the customs value of your 
imported goods - GOV.UK ( www.gov.uk ). 
 
Question 2:  
 
Regulation 107 defines the "full va lue" of a good as "the total amount which would be payable in an 
arm's length transaction for, or in connection with the importation of, goods. " The reference to 
"arm's length transaction " suggests a connection with related -party sales; however, the term "full 
value " is also used in regulations (such as 108 and 114) that do not deal with related -party G/VAL/Q/GBR/4  
 
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  transactions.  Could the UK please provide further explanation of the concept of "full valu e" and how 
it relates to the determination of customs value?  
 
Response : 
 
In the context of Regulation 107, the term "arm's length transaction " is intended to clarify that the 
"full value " does not recognise any reduced price that is charged in connection w ith the importation 
of goods, that might occur in situations where the buyer and seller being related or not.  
 
As detailed in Regulation 108, the valuation of imported goods based on their transaction value is 
the default UK valuation method (Method 1). Ho wever, a buyer being related to the seller of the 
goods does not preclude Method 1 from being used to determine valuation. The price paid or payable 
is still acceptable provided the buyer can prove that the transaction is at arm 's length . If the buyer 
is unable to prove that the transaction is at arm 's length, they must try to use Method 2, and so on 
until they can arrive at a valuation.  
 
As detailed in Regulation 114 where we are not satisfied that the transaction value is the full value 
of the goods (and no acceptable secondary method is forthcoming) we must make an adjustment.  
 
Question 3 : 
 
Regulation 113 states that a royalty "paid by the buyer to the seller " must, in certain circumstances, 
be included in the transaction value of imported goods.  As a condition for adding such royalties to 
the price actually paid or payable, does the UK require that the royalty payment be related to the 
goods being valued and m ade as a condition of the sale, as contemplated by Article 8.1(c) of the 
Customs Valuation Agreement ( "Agreement ")? 
 
Response : 
 
Yes, the UK requires Royalty or license fees payable to the seller are to be included in the customs 
value as long as they are both related to the imported goods and paid as a condition of the sale 
where:  
 
• The seller or a person related to the seller requires the buyer to make this payment.  
• The payment by the buyer is made to satisfy an obligation of the seller, in accordance with 
contractual obligations.  
• The goods cannot be sold to, or purchased by, the buyer without payment of the royalties or 
license fees to a licensor.  
This rule does not apply where such payments are made for the right to reproduce the imported 
goods.  
 
Regulation 13 is supported by working out the customs value of your imported goods guidance 
(link above) . 
 
Question 4 : 
 
Also, regarding regulation 113, could the UK please specify under what conditions, if any, royalties 
that the buyer pays to a third party wo uld be added as an addition to the price actually paid or 
payable for the goods?   
 
Response : 
 
To answer this question , it would be best outlining the sequence of legislation that allows a royalty 
payable to a third party to be an addition to the price paid  or payable:  
 
• TCTA 16(3)(b)  establishes that the transaction value must include amounts "payable in 
connection with the importation of the goods into the United Kingdom. " This is, of course 
subject to the rules on inclusions and exclusions.  
 
• CID(EE)R18 107(1)  Establishes that full value must include the full amount payable "in 
connection " with the importation of the goods.  G/VAL/Q/GBR/4  
 
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  • CID(EE)R18 108(7)(c)  includes any amounts payable in respect of the goods or their 
importation at a time other than the time when the goods are sold for export.  
• (7) The specified matters  to be included as elements of a transaction value are — 
(a) the value of each item set out in regulations 111 to 113, ta king into account any 
depreciation for an item which is a re -used item; [My addition - The items set out in 
regulations 111 Transport & insurance, 112 assists, and 113 Royalties.]  
(b) where applicable, any adjusted amount described in regulation 114; and 
(c) any amount which is payable  in respect  of the goods or their importation  at a 
time other than the time when the goods are sold for export to the United 
Kingdom . 
 
As can be seen Regulation 108 (7) (c) allows inclusion of any amounts payable which have not been 
specifically listed in 111 to 113 and thus would be applied to third party royalties. However , we are 
currently liaising with our solicitors to see whether it would be advantageous to be more specific in 
our legislation regarding third party royalties.  
 
Question 5 : 
 
Regarding regulation 117 on "finance interest, " could the UK please explain the purpose of 
subparagraph 3(b) ( "in cases where the buyer sells the goods within a period of 30 days beginning 
with the day after the date of their relea se to free -circulation, they are sold at no less than the value 
declared in the Customs declaration. "), which is not a requirement under WTO Decision 3.1?  
 
Response : 
 
WTO Decision 3.1 provides the context that finance interest is to apply  regardless of whether the 
finance is provided by the seller, a bank or another natural or legal person. This underlines the broad 
general nature of the intention of the parties to the WTO Valuation Agreement to provide for the 
exclusion of interest charge s from the customs value. However, we appreciate that there is no time 
limit included in this decision, but it does not specifically exclude one.  
 
The 30 -day limit is what UK company /business or consumer Law  provides for.  
 
For example, it appears in an SI 2004 No.1483 that deals with  UK Consumer Credit etc.  
 
https://www.legislation.gov.uk/uksi/2004/1483/made  
 
Question 6 : 
 
Could the UK please clarify whether, under regulation 123, the good s must have been produced in 
the same country in order to be considered identical or similar goods?  
 
Response : 
 
The UK can confirm that under Regulation 123, the goods must have been produced in the same 
country in order to be considered identical or simil ar goods.  
 
A condition contained in our working out the customs value of your imported goods guidance is that 
the goods must be produced in the same country in order to be considered identical or similar.  
 
Question 7 : 
 
Regarding regulation 123(6), could th e UK please explain what criteria are used to determine 
whether a quantity is "sufficient " in order to "give a representative quantity in order to determine a 
unit price "? 
 G/VAL/Q/GBR/4  
 
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  Response : 
 
The WCO Interpretative Note to Article 5 (M4) states:  
 
1. The term "unit price at which…goods are sold in the greatest aggregate quantity " means 
the price at which the greatest number of units is sold in sales to persons who are not 
related to the persons from whom they buy such goods at the first commercial leve l after 
importation at which such sales take place.  
2. As an example of this, goods are sold from a price list which grants favourable unit prices 
for purchases made in larger quantities.  
We would expect the circumstances around the item(s) being imported and  the frequency of imports 
to play a part in determining what constitutes a reasonable quantity to determine a unit price. For 
example, an item that is frequently imported, and where there is no existing relationship between 
the parties, is likely to be far  easier to determine than a rarer and/or more unusual item. For this 
reason, we accept that a degree of discretion has to be employed in determining a unit price.  
 
Regarding document G/VAL/N/2/GBR/1  
 
Question 1 : 
 
Regarding the response to Question 1(a)(iii), would the UK please clarify whether the importer is 
entitled to receive an explanation of why HMRC believes that the relationship has influenced the 
price before it takes action, or if such explanation is provided only after HMRC has concluded t hat 
the intercompany price is not acceptable.  
 
Response : 
 
In any case where HMRC has doubts that the declared transaction value represents the total amount 
paid or payable, we will ask the trader or their representative for more information. If those doubt s 
continue, we will notify them in writing of the grounds for those doubts and they will be given a 
reasonable opportunity to respond. We will then make a final decision and notify them of it in writing.  
 
Question 2 : 
 
Regarding the response to Question 1(a)(iv), would the UK please identify the specific provision of 
law that implements the methods provided for in Article 1.2(b)?  The cited provision (Part 12, Chapter 
2, 108) does not appear to reference the methods in Article 1.2(b)(i), (ii), or (iii). 
 
Response : 
 
UK legislation or Regulation does not specifically identify Article 1.2 (b) of the CVA. However, the 
following National Regulations in CID(EE)R set the legal framework for the tests, where the parties 
are related.  
 
Regulation 107 (1) identifies that full value is an arm 's length value which implies that this condition 
is not met where a relationship between the parties influences the price.  
 
Regulation 108 (9) states that in related party transactions, "the transaction value of the goo ds is 
not the full value unless HMRC are satisfied to the contrary ". That is the importer must satisfy HMRC 
that the price is an arm's length price to use the transaction Method (Method 1) . 
 
These regulations are supported by the working out the value of y our imported goods guidance sets 
out the 'tests' as detailed in Article 1.2(b)(i), (ii) and (iii) of the CVA.  
 
Question 3 : 
 
Regarding the response to Question 1(b), please clarify where the cited provision addresses 
valuation procedures for lost or damaged  goods.  
 G/VAL/Q/GBR/4  
 
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  Response : 
 
We can confirm that Regulation 114 addresses the issue when an adjustment in the valuation method 
is required. This provision is applied to lost or damaged goods.  
 
This regulation is supported by the working out the value of your import ed goods guidance.  
 
Question 4 : 
 
Regarding the response to Question 2, which concerns the importer 's option to reverse the order of 
application of Articles 5 and 6, the UK notes that it "allows the application of Articles 5 and 6 to be 
reversed where the use of Article 6 above Article 5 is reasoned to be the appropriate course of action, 
and where evidence to this effect can be produced upon request. " The cited provision, however, 
states that Methods 4 and 5 can be applied "in reverse order as the pers on who makes the Customs 
declaration elects. " Would the UK please clarify what criteria, if any, the importer must meet in order 
to reverse the application of Methods 4 and 5?  
 
Response : 
 
There are no specific criteria that the trader must meet. However, if the importer decides to reserve 
the Methods, then they would need to meet the legal requirements of Regulation 123 for Method 4 
and Regulation 125 for Method 5 . 
 
The criteria contained in Regulation 124 and 125 are supported by the working out the customs 
value of your imported goods guidance . 
 
Question 5 : 
 
Regarding the response to Question 5, please clarify whether the importer must demand a review 
or appeal in order to receive a written explanation of how the value was determined under Articl e 7 
of the Agreement.  
 
Response : 
 
If an importer does not agree with the decision issued to them, there are two options available:  
 
• If they would like a review, they should write back to the decision maker within 30 days, 
giving their reasons why they do n ot agree with the decision, or  
• They may appeal direct to the tribunal who are independent of HMRC.  
If they choose to have their case reviewed, they will still be able to appeal to the tribunal if they 
disagree with the outcome.  
The above guidance is contai ned in the working out the customs value of your imported goods . 
 
Question 6 : 
 
Regarding the response to Question 5(c), please identify the UK legislation or regulation that 
specifically lists the prohibited valuation methods provided for in Article 7.2(a)  through (g) of the 
Agreement.  
 
Response : 
 
There is no specific UK legislation or regulation that specifically lists the prohibited valuation as you 
have requested. However, Regulation 126 (b) states the following the following:  
 
126.  "Method 6 valuation " means the valuation of chargeable goods presented to Customs on 
import which is the value determined by applying — 
(a)such of the elements of valuation used in any other method of valuation in this chapter; 
and 
(b)the principles for the valuation  of goods adopted by the WTO in the Agreement on 
Implementation of Article VII of the General Agreement on Tariffs and Trade 1994( 14), G/VAL/Q/GBR/4  
 
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  as are reas onable to apply in order to determine the value of the chargeable goods immediately 
before they are released for free circulation . 
 
Question 7 : 
 
Regarding  the response to Question 7, the cited provision on currency conversion, at subparagraph 
18(3), states  that "[t]he conversion must be made in accordance with provision contained in a public 
notice given by HMRC Commissioners. " We note that the conversion rates are provided online 
(Exchange rates from HMRC in CSV and XML format - GOV.UK (www.gov.uk) ), but would the UK 
please specify whether this is the public notice required?  
 
Response : 
 
The UK  can confirm that this is the public notice.  
 
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