Accept factory replacements for warranty costs?
Accept replacement units only if their usable value after delivery, import and handling costs compares favourably with the cash offer. Keep UK labour already incurred in the loss calculation: extra stock does not repay that bill. Ask for cash or a mixed settlement where a shortfall remains. Discuss the comparison with Cambridge China Bridge.
Compare the settlement, not the carton count
The related guides explain hidden import costs and ways to reduce import costs. This decision needs a separate recovery calculation: how much of your existing warranty loss does the factory's offer actually cover?
Put the cash offer beside the replacement offer for the same claims. Separate what the factory has agreed to provide from what you have merely requested. A promise of stock on a future order is less useful if you would need to place an unwanted order to receive it.
Give replacements a usable value
For units that replace stock you would otherwise buy, start with the purchase cost genuinely avoided. For surplus units, use realistic net sale proceeds after selling costs. Do not value the same units on both bases or use the factory's quoted retail value.
Check model, specification, condition, packaging and likely demand. Reduce the credited value for units you cannot use or sell, further defects and expected rework. Ask for evidence that the original fault has been corrected before accepting another batch.
Keep UK labour in the unrecovered loss
Build the existing loss from records: affected stock written off, customer refunds, replacement stock already used, diagnosis, repair labour, collection and redelivery. Avoid counting both a refund and the same underlying product loss twice. Keep paid contractor invoices and recorded staff time separate.
Net replacement recovery is usable value less the extra costs of receiving and using the replacements. Remaining unrecovered loss is the existing loss less that net recovery and any cash agreed alongside it. Labour already incurred stays in the existing loss; future installation or handling belongs in the extra costs.
Price the shipment before accepting
Request a delivered-cost breakdown covering freight, insurance, clearance, duty, import VAT, UK delivery, inspection and storage. HMRC says that later free replacements fulfilling the original transaction are valued using that transaction's unit price. Free supply therefore does not mean a nil customs value. See customs value for free replacements.
Keep recoverable import VAT separate from permanent loss. When using the import-cost guide, confirm with HMRC or your tax adviser whether you can recover import VAT on these replacements. Treat recoverable VAT as cash flow and unrecoverable VAT as cost; ask your customs agent to confirm any relief before crediting it.
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Agree the shortfall and delivery conditions
If replacements leave a material shortfall, propose replacement stock plus cash for the uncovered balance, or ask for cash alone. Existing labour costs do not change the extra cost of bringing replacements in, but they do show why a stock-only offer may leave you out of pocket.
Record the claims covered, replacement specification, fault correction, dispatch arrangements, inspection acceptance and who pays each shipment charge. State whether the proposal settles the whole claim or only an agreed part. Keep the claim open in your records until the agreed stock and cash have arrived and been checked.
Frequently asked questions
Are free factory replacements worth the invoice value?
Use the cost of purchases genuinely avoided or realistic net sale proceeds. Deduct extra freight, import, handling and rework costs. The factory's stated value is not necessarily your recovery.
Do replacement units cover UK repair labour?
They can offset part of the overall loss, but they do not repay a labour invoice in cash. Keep labour already incurred in the loss record and negotiate the uncovered balance separately.
Can free warranty replacements have a customs value?
Yes. HMRC says later free replacements fulfilling the original transaction use that transaction's unit price for customs valuation. Ask your customs agent to check the arrangements before shipment.
Should I take replacements with my next order?
Compare the freight saving with the delay, stock need and any purchase commitment. Accept only if you need the next order and the replacements still provide useful recovery when they arrive.