Policy paper

Import Duty: rulings as to method of valuation of goods

Published 15 March 2023

Who is likely to be affected

Any customers involved in international trade and responsible for importing goods to the UK or making customs declarations on behalf of others.

General description of the measure

This measure will enable HMRC to grant Advance Valuation Rulings (AVRs) to customers importing goods into the UK.

AVRs are written decisions made by customs authorities at the request of a trader that are legally binding on both parties. They are a trade facilitation and are not mandatory. They will provide certainty to customers on how to arrive at the customs value for their goods. The customs value impacts the amount of duty that may be due. AVRs will, in turn, assist customers in the completion of customs declarations.

Policy objective

To provide UK legislation to allow a customer to apply to HMRC for an advance valuation ruling (AVR) decision.

Advance rulings provide traders with a legally binding decision from customs authorities in advance of shipment, giving them certainty on how their goods are treated with implications for duty levied.

The UK currently issues advance rulings in respect to tariff classification and origin of goods but has not provided advance rulings on customs valuation. This is because customs valuation rulings were not provided for in the EU. However, they are widely offered by customs authorities worldwide.

The new AVR service will contribute to the government’s objective to deliver a modern digital customs service for traders in the UK.

Additionally, AVRs will allow the UK to meet the requirements of new Free Trade Agreements (FTAs) and to support the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Background to the measure

Since the UK left the EU, the government has considered new customs policies that will support traders and open the way for new trade agreements. This measure is being delivered in time to enable UK accession to the CPTPP.

Detailed proposal

Operative date

The measure will have effect on and after the date of Royal Assent to the Spring Finance Bill 2023.

Current law

UK legislative provision to grant AVRs does not currently exist. However, legislation for advance tariff classification and advance origin rulings is contained in primary legislation at Section 24 of the Taxation (Cross-border-Trade) Act 2018 (‘TCTA’). This primary legislation provides for a Notice with force of law that sets out the rulings system for tariff classification and origin rulings.

Proposed revisions

Legislation will be introduced in Spring Finance Bill 2023 to amend section 24 of the TCTA 2018 to additionally include customs valuation. To align with current provisions, Section 24 will similarly establish, by Notice with force of law, the system under which a customer may apply for an AVR for specified goods when they are imported into the UK. Once provided, the ruling decision will be legally binding on the customer and HMRC for the specified goods and scenario, for a period of three years, subject to cancellation or a withdrawal of the ruling.

Each of the following is an example of the kind of provision that the revision and supporting Notice will provide for -

a) provision specifying cases in which rulings need not be given,

b) provision about the making of the applications (including their form, the information to be contained in them and any documents to accompany them),

c) provision requiring the applications to be determined within a specified period,

d) provision about the period for which, and other conditions subject to which, the rulings are to have effect,

e) provision about the form in which the rulings are to be given,

f) provision for the withdrawal or amendment of rulings,

g) provision determining the extent to which the rulings may be relied on by applicants, and

h) provision requiring any person to whom a ruling has been given to disclose that fact to HMRC.

Summary of impacts

Exchequer impact (£m)

2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
—	Nil	Nil	Nil	Nil	Nil

This measure is not expected to have an Exchequer impact.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

This measure is not expected to impact on individuals as only affects businesses. This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not expected that there will be adverse effects on any group sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on approximately 252,000 businesses responsible for importing into the UK and/or those that are making customs declarations on behalf of others.

This measure will have a positive impact for those wishing to apply for an AVR as it will reduce resource requirements by simplifying the means of identifying the correct method of valuation. This will be achieved by supplementing the existing guidance with a legally binding valuation ruling, providing the customers with assurance and certainty. Additionally, businesses may rely on a single ruling for multiple imports where the goods and other factors the ruling is based on, are the same.

One-off costs for those wishing to apply for an AVR will be familiarisation with the application process. This is expected to be minimal because the process will mirror existing ruling services with which businesses and their employees are already familiar.

Overall, this measure is expected to improve businesses experience of dealing with HMRC as AVRs will provide the correct valuation methodology to be used in the calculation of customs value for specified goods to ensure the right duty calculations are applied to the goods they are intending to import in into the UK.

It is not expected to impact on civil society organisations.

Operational impact (£m) (HMRC or other)

HMRC will need to make changes to IT systems, at an estimated cost of £15,800,000 and incur extra staff costs to support this measure at an estimated cost of £2,100,000 over a five year period.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from HMRCs ruling application service and from customer feedback through existing engagement routes.

Further advice

If you have any questions about this change, please contact Daniel Foster, Duty Liability Policy at: [email protected].