What is happening?
From 1 January 2021 the EU-exit transition period will be over, and the UK will start to act independently of the EU in terms of managing its imports. Last week, the government announced its plans to introduce import controls on goods coming from the EU to Great Britain. This excludes Northern Island, for which there is a separate protocol.
It appears that there will be full border controls on goods arriving from the EU, but these will be introduced in stages over the coming year, with the ambition to have a “world-leading” border by 2025.
There are three intended key milestones in the coming year:
● From January 2021: Traders importing most types of goods need to prepare for basic customs requirements, such as keeping sufficient records of imported goods, and will have up to six months to complete customs declarations. Tariffs are to be paid on all imports, but payments can be deferred until the customs declaration has been made.
There are stronger controls for controlled goods, and some food, plant and animals.
● From April 2021: All products of animal origin and all regulated plants and plant products will also require pre-notification and the relevant health documentation.
● From July 2021: Traders moving all goods will have to make declarations at the point of importation and pay relevant tariffs. Full Safety and Security declarations will be required, while for SPS commodities there will be an increase in physical checks.
In addition, the UK Global Tariff was published in May. The tariffs are different to those set in the EU, and you can view them here. These will apply to imports for all goods from the EU and the rest of the world, although preferential rates may apply on imports from some countries.
What should you do to prepare?
- Prepare to make customs declarations for all trade with the EU.
If you haven’t done so already, look at all trade flows and ask yourselves the following questions?
- Is my usual freight forwarder capable and ready to make customs declarations (as well as safety and security declarations) on imports from the EU and exports to the EU? Is my forwarder ready for any specific country requirements for the EU states you will import into? What about those Member States that it will transit through?
- Have I got a customs classification for every product that will be imported from the EU? (Note, this is your responsibility as the importer and you will bear any consequences if it is wrong, even if an agent did it for you).
- Do you have all the registrations you need to facilitate the trade – such as a deferment account and EORI.
- Prepare to pay import VAT. VAT registered traders will be able to account for import VAT on their VAT return by using Postponed VAT Accounting (PVA) from 1st Jan 2021, but this is not mandatory.
- Expand your compliance activities to cover the additional workload. The importer is responsible for submission of accurate customs declarations, and the consequences of non-compliance can include demands for (often large amounts of) underpaid duties and taxes, as well as penalties, and reputational damage.
- Check that all your EU suppliers are able to properly manage the export process.
- Check that your EU customers are able to manage the import process into the EU.
- Look at any specific requirements for countries you will import into.
- Review your supply chains
- Some companies choose to conduct a macro analysis of the financial impact. This allows them to identify any specific supply chains that represent a risk, and to analyse these specific chains in more detail. It is a really useful exercise and often throws out examples of cost that can be mitigated.
- Would a customs process or procedure be able to mitigate some increased costs? Use of a relief such as Inward processing might replicate some of the lost benefits of EU free movement of goods.
- Check your Incoterms – are they still appropriate? Incoterms allocate responsibility for import and export formalities between the parties. When the contract was agreed, there were no customs formalities with intra-EU trade, but suddenly these clauses will apply. Which party pays the duty and taxes? Can any of the parties in the chain of sales mitigate some of the cost?
- Check that the operational processes for management of customs formalities matches the theory. In practice its very easy for incorrect data to find its way into a declaration, or the wrong party to take responsibility for formalities. Mistakes could result in delays in the supply chain, unnecessary cost incurred, or compliance errors.
- Check the impact of loss of EU trade agreements. Lower, preferential rates of duty are available on some goods coming from countries depending on EU agreements. From 1st January 2021, the EU schemes and agreements will no longer apply, and UK ones will take over, where they have been agreed. Identify which EU trade agreements are important to you, then check the status of the UK replacement.
- Consider goods subject to excise, controlled goods and goods with specific customs requirements. If you are trading any of these goods, you will need to consider the specific rules around them – the rules have not yet been published, but we do know a lot already. We can help with this.
- Do you need to use a customs process or procedure? Most will operate very similarly to the status quo, except that a customs comprehensive guarantee (CCG) will likely no longer be required. We do expect changes to the temporary storage procedure.
- If you currently operate a customs process or procedure, you should look at the new UK global tariff to check the duty rates of goods covered, and whether the procedure still serves a purpose for you in light of these changed rates.
- As mentioned in point 2, some processes may be able to mitigate additional costs incurred on import duties from EU sources.
How can we help?
The volume of work required at this time can be overwhelming. Especially if customs is an unfamiliar specialism. I can support with advice, hands-on practical support to implement new processes or training. Please just call me for no-obligation chat about your needs.