Method 5 - Computed method
Source: gov.uk (2025-06-25)

Information about method 5, computed method.

Introduction

Method 5 (computed value) is the fifth method an importer can try and is based on the production cost of the goods plus profit and general expenses. This method is rarely used because of the difficulties in obtaining the relevant documentation. Both the importer and Customs have to rely on the producer of the imported goods to provide detailed ‘costings’. Normally use of Method 5 will be limited to those cases where the importer and supplier are related or limited to those instances where the producer of the goods is also the exporter of the goods.

An importer can try Method 5 before Method 4 if they so elect.

The customs value is a built-up value. No cost element shall be counted twice. It is based on the sum of the following:
- the cost or value of materials and fabrication or other processing employed in producing the imported goods - this includes the elements listed at 112(1) CIDEER (https://www.legislation.gov.uk/uksi/2018/1248/regulation/112) and those at 125(3)(4) CIDEER (https://www.legislation.gov.uk/uksi/2018/1248/regulation/125) - if the importer makes any payments (periodically or ‘one off’) to the seller for any of the above goods and services, they must include the amounts in the customs value
- the cost of the container or packaging of the goods
- the costs of transport and insurance of the goods, up to the time the goods are imported into the UK
- loading and handling charges of the goods, up to the time the goods are imported into the UK
- the amount of expenses usually incurred in enabling comparable goods to be sold in the place of export of the goods
- the amount of profit usually arising on a sale of comparable goods in the place of export of the goods
Amount for profit and general expenses

The amount of profit and general expenses is to be taken as a whole. It represents the gross margin of the producer. General expenses are to include all direct and indirect costs of both producing and selling the goods which have not already been included under ‘cost or value’. Where the producer’s profit figure is low, but the general expenses are high, the amount for profit and general expenses taken together may nevertheless be acceptable. This would depend on the producer being able to demonstrate that they are taking a low profit on their sales of the imported goods because of particular commercial circumstances. Such a situation might occur where:
- a product is being launched in the UK - the producer may accept a nil or low profit to offset high general expenses associated with the launch
- producers have been forced to lower prices temporarily because of an unforeseeable drop in demand
- producers supply goods to complement a range of goods being produced in the UK and accept a low profit to maintain competitivity
When determining usual profits and general expenses, sales for import to the UK of the narrowest range of goods, which includes the goods to be valued, for which the necessary information can be provided will be examined.

‘Comparable goods’

Whether certain goods are ‘comparable’ to other goods is to be determined on a case-by-basis with reference to the circumstances involved. However, they must be from the same country as the goods to be valued.

Example

Scenario

Company A manufactures electric bikes in a third country. They sell these bikes to Company B which is a subsidiary of Company A based within the UK. As such this sale is between related parties, however the sale is not at arm’s length as Company A sells these bikes to Company B for below market value. Therefore Method 1 cannot be used to value the goods.

Methods 2 and 3 cannot be used as Company B does not import identical or similar goods under a Method 1 valuation.

Company B has chosen to use Method 5 before attempting Method 4. As Company A and B are related, Company B is able to provide the required documentation, obtained directly from Company A, needed for valuation under Method 5. These include original documents showing the costings for the production, packaging, insurance, transport, loading and handling of the goods, up until their entry into the UK; and documents showing the profit margin of Company A.

Valuation treatment

Based on all the above, Method 5 valuation is acceptable as a means of calculating the value of the goods.