What is Customs Value and How Do You Calculate It?

The customs value of goods forms the basis for calculating import duties and VAT. It is the value of the goods at the point they reach the EU's external border. Correct determination of this value is crucial to ensure the correct taxes and duties are paid, as incorrect calculations can lead to fines and delays.

Transaction value of imported goods

In most cases, the customs value is based on the transaction value. This is the price actually paid or payable for the goods when sold for export to the EU customs territory. Additional costs that must be included are:

• Brokerage fees (excluding buying commissions)
• Packing costs
• The value of goods or services provided by the buyer in exchange for the goods
• Royalties or license fees that the buyer must pay
• Profits made when the buyer resells the goods
• Transport and insurance costs incurred to transport the goods to the European Union

Costs that can be deducted from the transaction value include:

• Transport costs within the European Union
• Installation or assembly costs after importation
• Interest paid for financing
• Reproduction rights
• Buying commissions
• Other import duties or taxes paid on import or sale within the European Union

Alternative methods for customs valuation

When the transaction value cannot be used, there are five alternative methods to determine the customs value:

Transaction value of identical goods: If the transaction value cannot be determined by the first option, the value of identical goods may be used. These goods must closely match in appearance, function, and material. The quality and reputation of the manufacturer must also be the same.

Transaction value of similar goods: When identical goods are not available, the value of similar goods may be used. These must be sold at the same time and in the same country, be interchangeable, and have similar properties and functions. The quality and reputation of the manufacturer must also be the same.

Deductive value method: This method is based on the selling price of the goods in the EU, provided they have already been sold to an independent third party without further processing. Deductible costs include profit and general expenses, domestic transport and insurance costs, and import duties and taxes paid. If not sold directly, the sale value of identical or similar goods can be used.

Computed value method: This method calculates the value based on the total cost of production in the country of origin, including material costs, manufacturing costs, and associated operations. Additionally, a profit and general expenses margin and transport costs up to the EU border are added. Transport costs within the EU are not included.

Fallback method: In this method, the customs value is determined based on available data, such as the value of the same goods in previous shipments.

Role of incoterms

Incoterms are internationally recognized rules that define the responsibilities of buyers and sellers during the transportation of goods. They play an important role in determining the customs value as they clarify who is responsible for certain costs. For example, under the Incoterm “Free on Board (FOB),” the buyer bears the transportation costs from the moment the goods are loaded onto the ship. These costs must then be included in the customs value.

📚 Want to learn more about Incoterms®? Read our blog article: Everything You Need to Know About Incoterms 2020.

Automation with customs software

Gateway's customs software greatly simplifies the process of determining the customs value. The software automatically includes the transaction value, insurance costs, and transportation costs in the declaration, ensuring an accurate calculation of the customs value and reducing the risk of errors.

Accurate calculation of the customs value is essential for the smooth import of goods. Want to know more about how Gateway can help you with your import process through our customs software solution? Feel free to contact us.