Last week we held a Brexit Broadcast attended by 482 people to discuss the issues facing clients as the country prepares for the end of the Transition Period. Ian Moran, our Group Customs and Trade Compliance Manager, shared his deep knowledge and understanding. He talked attendees through the many changes due to take place once the UK leaves the customs arrangements at the end of this year. Here we summarise the insights that Ian shared, covering the critical topics.
Where are we now?
The deal is still not yet finalised, and our options appear to be:
The Canadian model which is thought to be favoured by the Government and its advantages are that is it already a functioning model, although it’s not liked by the EU. Canada is a relatively small trading partner and the current trade deal has little impact to EU business, unlike the UK where the UK and EU supply chains are so interlinked due to the proximity of the UK to the EU and the UK is a significant trading partner to many EU countries. The EU does not want to allow the creation of a situation where the UK has easy access to EU markets without applying EU standards and common tariffs.
The Australian model is likely government code for ‘no deal’.
The Alternative model is largely unknown and still in negotiation. This model could be a phased in approach as it seems impractical to have a totally new arrangement from the 1st January 2021, giving businesses little time to prepare.
There are several issues to consider including:
- Fishing arrangements – a relatively small issue but very politically sensitive
- Level playing field (tariffs, product standards, etc.)
- Governance
- Northern Ireland Protocol – the most significant. The UK has been preparing for an EU exit for several years now, but until this year we haven’t had to consider preparing for the need to do customs declarations for goods going to Northern Ireland.
Key areas for consideration
Customs declarations
There will be little change to current procedures for non-EU traffic, but regardless of whether a trade deal is agreed, customs declarations will still need to be completed for goods moving to and from the EU. Up to 30th June, UK exports moving via the short sea roll-off ports such as Dover, must be entered and customs cleared before they leave the premises.
Import declarations will be required to be submitted by the end of the next working day following import, but simplifications will be in place for the first six months, allowing traders to postpone declarations to give them time to get ready for the EU exit. Customers interested in this option need to apply for Customs Freight Simplified Procedures (CFSP), but the application process is currently complex and time consuming.
New UK Global Customs Tariff and Duty Rates
The UK has published a new Customs Tariff, which will take effect from 1st January 2021. For many goods there will be some reductions in duty rates and some simplifications. There is still uncertainty whether this is a definite proposal by the Government, or if it’s a negotiating tool with the EU to encourage a trade deal.
VAT charges
One of the good news stories is the payment of VAT on imported goods will move to postponed accounting. For customs declarations made after 1st January 2021, VAT will be accounted for on a trader’s VAT return, irrespective of whether goods are imported from inside or outside the EU. This is a cash flow advantage to importers.
VAT changes for Northern Ireland
This will be different because Northern Ireland will be treated as part of the EU customs area. From 1st January 2021, traders will need an EORI number with an XI prefix to move goods between Northern Ireland and non-EU countries, make a declaration in Northern Ireland and obtain a customs decision in Northern Ireland.
Duty deferment
If there is no free trade deal with the EU, duty will be payable for many goods imported from EU member states.
Free trade and preferential tariffs
All the trade arrangements previously agreed with the European Union will continue until the end of the year. The Government has been busy negotiating bi-lateral trade deals between the UK and the countries we have an agreement with currently. The aim is to replicate the existing trade deals we have with EU countries.
Safety and security declarations
These are included in the export customs declaration for shipments from the UK but will be a separate declaration for imports. For Northern Ireland deliveries, these declarations will be required from 1st January 2021, and 1st July 2021 for shipments arriving from EU member states.
Goods Vehicle Movement Service (GVMs)
This system is to provide an inventory of goods moving via the short sea ferry ports (Dover, Holyhead, Channel Tunnel, etc.) to enable authorities to check that goods are being properly imported or exported against a customs procedure. A disadvantage about the GVMS system is that all declarations need to be accurate and any changes that take place during travel – such as mode of transport change from ferry to train, will need to be completed, requiring some companies to work a 24/7 operation.
Check an HGV is Ready to Cross the Border Service
The purpose of this service is to ensure that vehicles arriving at Kent have the correct customs documentation in place to minimise delays, avoid queues and ensure vehicles aren’t crossing without the required documentation. A Kent Access Permit will be issued and held by the driver.
Food health controls
Exports to the EU will be subject to EU controls from 1st January 2021 requiring several new checks and certifications.
Northern Ireland Protocol
Northern Ireland will remain in the customs area of the EU, so needs to be treated in the same way as if it were France, for example. All goods travelling to Northern Ireland will need an import customs declaration, and all goods in Northern Ireland will conform with EU regulations.
The Government has recognised the lack of capacity in the market and has established the Trader Support Service, to facilitate declarations at no initial cost to traders.
“For those with business in Northern Ireland, we strongly recommend you register for the Trader Support Service (TSS) which will give you a Northern Ireland EORI number in the process.” -Ian Moran, Group Customs and Trade Compliance Manager
Incoterms
EU traffic traditionally works on the basis that the shipper arranges all the transport under delivered duty paid terms (DDP), or the buyer makes all the arrangements under ex works terms (EXW).
There are some big concerns for Germany for those that sell using DDP terms. For VAT, German customs deem that anybody selling DDP must be based in Germany or in the EU at least. If you are a UK supplier selling DDP to Germany, it’s strongly recommended you obtain a local VAT number, to provide a local supply, a local German EORI number and ideally a representative to complete the customs declaration. The best way around this is to change your terms to DAP, so you are responsible for all charges going to Germany and you are not paying the duty or the customs entry.
Most other countries allow DDP.
Intrastats
Businesses currently registered for Intrastat will need to continue to provide HMRC with Intrastat declarations for the movement of goods imported into Great Britain from the EU, goods imported into Northern Ireland from the EU, and goods exported from Northern Ireland to the EU. Intrastats covering sales to the EU will not be required.
Consignments of value below £135
UK VAT registered businesses importing goods in a consignment not exceeding £135 that have not been charged VAT at the time of purchase will be required to account for VAT on their return under the reverse charge method. Effective from 1st January 2021.
Wood packing requirements
From 1st January 2021, shipments which contain wood packaging will be subject to the International Wood Packing Regulations (ISPM15). This requires timber, such as pallets and crates to be treated. These regulations are already in operation for shipments going non-EU countries such as United States, China etc.
Other considerations
EV Cargo expects an increase in volumes in the run up to the end of the year as traders seek to import and export goods prior to any duty being payable if no trade deal is agreed.
Goods sent to the EU for processing for re-import into the UK after 1st January 2021 may be subject to UK import duty so clients should consider an application for outward processing to save the payment of duty on the UK element of the re-import. An application for inward processing is advised for traders importing goods from the EU for processing and subsequent re-export.
Top takeaways
- Incoterms – check suppliers and clients are aware of their responsibilities
- CFSP traders – consider extending your authorisation to include EIDR
- Records – keep control of your import shipments as you are responsible that they are declared to HMRC
- Transit – check that your carriers can comply with any transit requirements such as having sufficient guarantee to cover custom dues
- Duty deferment – is this sufficient for your EU Exit requirements? Remember, your EU suppliers will not have access to a UK deferred account
- Lead times – do you need to allow more time for customs arrangements to take place?
- Shipping procedures – you may need to adapt certain procedures, for example, preparing commercial invoices one to two days prior to dispatch
- Confirm responsibilities with suppliers and clients, do not take things for granted
- Check your supplier is prepared – when buying non-UK goods from UK suppliers.
We hope you have found this summary of our Brexit Broadcast useful. EV Cargo Global Forwarding is ready to support you throughout the Transition. If you have any further questions, please do get in touch with our customs team.
