Customs Value vs Insurance Value

[dmc6262]

Hi All,

Would appreciate any help.

By way of example:

Purchase goods (from US to import to UK) worth: $1,000

Purchase shipping insurance for $30 that provides cover up to: $3,000

Would it be $1000 or $3000 that is used as the customs value?

I have a U.S exporter telling me that the purchase value must match the insurance cover value on their online forms. Seeing as these two values can vary, I find this bizarre.

And because they don’t match in the above example, the higher value is selected. I’m also told that if the $3,000 value is not used as the customs value then I’d have no way to claim on the $3000 insurance if needed.

If this is the case:

1/ You effectively end up paying duty/VAT on the level of insurance cover rather that the cost of insurance which seems silly.

2/ Surely the carrier (USPS) in this case is aware of the level of cover on any given package without it needing to be declared on a customs form.

Can anyone confirm if the exporter is correct?

 

[lesliedocherty]

The value is the invoice value, it doesn't matter if it doesn't match up with insurance value, never heard of this issue before.
Why would you pay tax and vat on $3,000 when the value ids $1,000, sounds a bit mental

 

[kulture]

The key words here are "up to". The insurance cover is UP TO £3,000. If the shipment was lost the insurance company would only pay the cost, i.e. £1,000. It would be insane for them to do anything else. So the customs declaration should be the cost. If the shipped does not realise this then use a different shipper.

 

[dmc6262]

The key words here are "up to". The insurance cover is UP TO £3,000. If the shipment was lost the insurance company would only pay the cost, i.e. £1,000. It would be insane for them to do anything else. So the customs declaration should be the cost. If the shipped does not realise this then use a different shipper.

I see what you're saying, but even though the transaction purchase price was $1,000, If lost, I would want to claim $3,000 because there are other costs associated with this purchase, that arose in the UK, not the country of export. So, based on what you're saying, it'd appear that if you want to claim for $3000 then that would have to be the figure declared on the customs form.

By way of analogy, you have digital files created in the UK that cost you in GPB, $2000 equivalent. You then pay a firm in the US to manufacture the item - you pay them $1000 and they ship it. If this widget is lost, the cost of reinstatement is $3000, so insurance is purchased to said value.

As such, $3000 is declared on the customs form in order to claim $3000 insurance if lost. But then VAT/duty gets applied to $2000 worth of expenditure which was not imported. That's the part that makes no sense to me.

 

[lesliedocherty]

Good luck claiming $3,000 on a $1,000 invoice, i would read the T&C's as you might a few things in there

 

[Mr D]

I see what you're saying, but even though the transaction purchase price was $1,000, If lost, I would want to claim $3,000 because there are other costs associated with this purchase, that arose in the UK, not the country of export. So, based on what you're saying, it'd appear that if you want to claim for $3000 then that would have to be the figure declared on the customs form.

By way of analogy, you have digital files created in the UK that cost you in GPB, $2000 equivalent. You then pay a firm in the US to manufacture the item - you pay them $1000 and they ship it. If this widget is lost, the cost of reinstatement is $3000, so insurance is purchased to said value.

As such, $3000 is declared on the customs form in order to claim $3000 insurance if lost. But then VAT/duty gets applied to $2000 worth of expenditure which was not imported. That's the part that makes no sense to me.

So what are you worried about then?
Have the two figures match and pay the excess taxes that others do not.
Or figure out your risks.

 

[DontAsk]

By way of analogy, you have digital files created in the UK that cost you in GPB, $2000 equivalent. You then pay a firm in the US to manufacture the item - you pay them $1000 and they ship it. If this widget is lost, the cost of reinstatement is $3000, so insurance is purchased to said value.

No. The files still exist. It costs the same $1000 to make a replacement. May even be less if the original $1000 included making tooling.

 

[dmc6262]

No. The files still exist. It costs the same $1000 to make a replacement. May even be less if the original $1000 included making tooling.

That's a good point - hadn't considered that