Invoice discounts and free goods

The US takes a similar view on later changes: the transaction value uses the price paid or payable, and 19 CFR 152.103 disregards a rebate or other decrease made after the date of importation. So a US importer can't use a year-end volume rebate to reduce the value of goods already entered. A cash discount actually taken is fine: the regulation's own example is a $100 price, less 2% for cash, paid at $98, with a transaction value of $98.

Worked example, our own illustration. A UK importer buys 2,000 tea towels at a list price of GBP 4.00, with a 10% trade discount earned on the order and 2% for payment before dispatch, taken at the time of the order. Also, a promised 3% year-end rebate if annual purchases pass GBP 50,000.

No payment doesn't mean no value. HMRC's guidance on free-of-charge goods says the transaction value usually can't be used, because nothing's being paid. You then work down the methods: identical or similar goods, then deductive, then computed, and finally the fall-back method, which can be based on what you'd have paid the supplier, supported by a price list or a statement of value.

So write a value on the invoice, and say why there's no charge:

20 pieces stoneware mugs, trade samples, not for resale. No payment. Value for customs purposes only: GBP 8.50 each, total GBP 170.00.

"No commercial value" and "value 1.00" don't give customs a value it can use. The US rule is along the same lines: without a purchase, the invoice shows the value for each item, or what the seller would have received.

Goods shipped free alongside paid goods

If an order says "buy 100, get 10 free" and all 110 arrive together, we'd treat the price paid as covering 110. HMRC's wording is about free replacements in the same shipment, so confirm with your broker. On that reading, declare 110 pieces, spreading the price over them. The unit value falls, and the total is unchanged. Don't declare 100 pieces plus 10 at zero, or you'll have a mismatch on quantity. A line of 100 at GBP 5.50 then reads: 110 pieces, GBP 550.00, unit value GBP 5.00.

Free replacements

HMRC says that if replacements come in the same shipment, the contract price covers the total. If they come separately, you normally can't use method 1, though you can ask HMRC to amend the original value. A replacement for a faulty item is a separate declaration, so don't describe it as a new sale. For the original, check whether you can claim relief.

A discount brings the value down. These bring it back up, even when no one has invoiced them. The HMRC list of additions includes:

• Assists: materials, tools, moulds, or engineering and design done outside the UK, that you supplied free or at a reduced price.
• Royalties and licence fees, if they relate to the goods and are a condition of the sale.
• Your payment to someone else that satisfies an obligation of the seller.
• A share of resale proceeds that goes back to the seller.
• A condition with a measurable value, added as an indirect payment.

For a worked case, see the mould on common invoice mistakes. HMRC says dividends paid to the seller can be left out. If the seller has set the price on a condition whose value you can't measure, such as buying other goods from it, method 1 generally isn't available.

The import duty calculator works from the value you enter, so settle these questions first.