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Businesses importing used or second-hand goods into the United Kingdom must take note of updated guidance regarding customs valuation methods and how prior use of goods impacts their duty treatment.
Under UK customs law, second-hand goods fall into two distinct categories:
- Goods not used by the importer before entry into free circulation
- Goods used by the importer in a non-UK country prior to entry into free circulation
This distinction determines the valuation methodology to be applied under customs valuation rules, which align with the internationally recognized WTO Valuation Agreement.
Category 1: Goods Not Previously Used by the Importer
When goods fall into the first category—i.e., they are used goods but were not previously used by the importer—the importer is required to apply the standard customs valuation hierarchy under Methods 1 to 6.
Method 1 (Transaction Value Method) is typically applicable when the goods are imported directly after a sale transaction, even if the goods are second-hand. This method values the goods based on the price actually paid or payable for the goods when sold for export to the UK.
This remains the preferred and primary method unless specific conditions render it inapplicable.
Category 2: Goods Used by the Importer Prior to Entry
If the goods were used by the importer themselves in a non-UK country prior to entry into free circulation, the customs value cannot be based on a sale transaction, as no arms-length sale took place.
In such cases, Method 1 is not applicable, and HMRC requires businesses to explore alternative valuation methods. This usually leads to Method 4 (Deductive Value), Method 5 (Computed Value), or Method 6 (Fallback Method)—whichever best suits the circumstances and provides a reasonable approximation of commercial value.
Practical Implications for Importers
Importers must be proactive in determining the correct category of second-hand goods and maintaining adequate documentation to support the valuation method used. This includes invoices, shipping records, and any evidence of prior use.
Incorrect categorization or misuse of valuation methods can result in compliance risks, duty reassessments, and potential penalties.
Strategic Considerations
For multinational businesses importing refurbished, repurposed, or leased equipment, this distinction has significant valuation and compliance implications. Firms should consult customs specialists or valuation advisors to ensure that the correct methodology is used and that their processes align with HMRC’s expectations.
As customs scrutiny increases post-Brexit, understanding the nuances of valuation for second-hand goods is essential. HMRC’s classification criteria serve to ensure fair and consistent duty assessment, while also preventing undervaluation.
Importers should review their internal procedures and train relevant personnel to categorize goods correctly and apply the appropriate valuation method.
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