Lowering the Customs Value: Prior sale
Delta PLC imports garments from East Co, a consolidating company in Thailand which incurs £3m of duty each year. East Co buys the garments ready cut and sewn from local factories and merely packages the products for transportation and sells on with a mark-up of 50%.
Delta discovers that the customs regulations allow for various types of planning including the prior sale arrangement. This arrangement allows the importer to use an earlier sale in the supply chain for customs duty purposes only, without affecting the amounts settled between the parties.
Delta discusses the planning with East Co, who on agreeing various conditions decides to co-operate and allow Delta to have evidence of the earlier sales price and use this for duty purposes.
After some initial resistance, Delta gets UK customs to accept that all the necessary conditions of the prior sale arrangement are met and the necessary evidence is available. With all this done, Delta now saves £1.5m each year on duty.