BREXIT: prepare for change
From 1st January 2021, the UK will officially no longer be part of the European Union.
Understanding the risk and potential impact on your business is crucial.
Whatever you do, DON'T do nothing.
From 1st January 2021, all movements of goods between the UK and EU will require customs declarations to be completed. If you have not traded outside of the EU previously then customs declarations may be new to you. If so, below is a checklist of the basics that you should consider in advance of shipping:
EORI & VAT registration
HS Codes & compliance
Incoterms and legals
Deferment of Duty & Tax
The UK Government checklist.
GOV.UK have a webpage dedicated to the transition that contains useful information too. To view the Govt information, click HERE.
HOW CAN WE HELP YOU?
Remember, we are all in this together!
Now whilst the issues surrounding Brexit, and the policy changes to go with it can seem confusing, NNR Global Logistics are doing everything possible to keep our customers informed of what will change for their businesses to help avoid any impact on 1st January 2021. We are in constant contact with numerous industry experts and service providers, to ensure we have the most up-to-date information on all Brexit matters, enabling us to support a smooth transition for your business.
BORDER PROCESSES WILL CHANGE!
Customs declarations are required between the EU & UK.
To allow time for UK companies to adapt to the new changes in regulation, there is going to be a period of “relaxed” UK border procedures between 1st January and 30th June 2021. This is part of the governments phased approach to the changing customs requirements. This period of “relaxed” procedures only applies to general ‘uncontrolled’ goods. Any controlled goods (certain foodstuffs, tobacco, etc.) that may require additional checks or licenses must be declared in advance and goods presented to Customs for inspection if required. Whilst all goods that move between the UK and EU will require a customs clearance from 1st January 2021, this will not initially be required for Imports into the UK at the time of arrival - for uncontrolled goods.
During this period, importers can choose to arrange an Entry In Declarant’s Records (EIDR), which involves keeping records of all shipment details at the time of import. This removes the requirement for a formal declaration initially and allows the goods swift passage with no customs delay. A Supplementary Declaration is required before the deadline on 30th June 2021, completed by a registered customs broker. This will initially allow for the majority of imports from the EU to arrive much as they do now and will minimize port congestion while UK companies get used to the new requirements. It will be the importer’s responsibility to maintain records of their imports and ensure that all customs entries are completed prior to the deadline.
The government has offered this 6-month period of “relaxed” procedures; however, it is recommended that you maintain prompt customs clearances to avoid any issues at a later date that could result from a large back-log of entries to be completed.
The UK Government Border Operating Model.
HMRC have now issued their Border Operating Model, which outlines the various Customs processes from 1st January 2021. It is important to note that these processes will be in place from 1st January regardless of whether the UK and EU strike a trade deal. To view the Govt information, click HERE
What options do we have when Importing?
Full pre-entered declarations at both export and import borders. Largely the same as any customs clearance is handled for products arriving from outside of the EU now, full customs declarations can be arranged. To avoid any delays, these declarations will need to be made in advance of arrival at the Border Inspection Post (BIP). In order for these to be completed, you will be required to provide your customs broker with full clearance instructions and documentation, to include:
- UK VAT and EORI number.
- Deferment account number (if you have one).
- Commodity description and tariff codes for all items.
- Applicable Customs Procedure Code (CPC).
- Copies of all import documentation – Commercial Invoice, Packing List, Preference Certificates, etc.
Any payment of import Duty and/or VAT will need to be accounted for immediately on arrival. Once customs cleared through this method and any applicable Duty and/or VAT has been paid, goods are then in free-circulation and can then be distributed as required.
TRANSIT UNDER T1
Goods can also transit across the border via transit documents (T1). When goods are travelling under T1 status, this is considered a customs-controlled movement. Therefore, provided there are no controlled goods contained within, the shipment will
not be held at the import ‘BIP’ awaiting clearance. The process of transiting goods via T1 requires that the loading and unloading facilities be registered to be able to raise and discharge the transit document. The movement is controlled as below:
- Loading facility raise the T1 document.
- Goods are loaded onto the truck for transit.
- On arrival at both export and import BIP, the T1 document is produced by the driver to ensure clear passage.
- Goods must then be destined for a registered warehouse or External Temporary Storage Facility [‘ETSF’] that is able to discharge the T1.
- Full customs clearance must then take place in the registered ‘ETSF’ and any import Duty and/or VAT paid
(full details must be provided as outlined in Option 1)
- Goods can then move freely.
This method allows for uncontrolled goods to move swiftly across ‘BIP’s and for customs clearance to be controlled from an approved customs controlled warehouse. Please be aware, imports using transit documents will come with some additional cost and obligation.
CUSTOMS FREIGHT SIMPLIFIED PROCEDURE [CFSP]
CFSP clearances allow for an initial simplified 'Frontier Declaration' to be made to customs. This must be completed prior to arrival at the import BIP and will ensure goods are not held and can move easily across UK borders. A final 'Supplementary Declaration' must then be made after arrival, at which point any applicable import Duty and/or VAT will need to be paid. Any clearances using this method require that your nominated customs broker be registered and approved for CFSP by HMRC. The customs broker can then manage both the simplified and latterly, the supplementary declarations for you. Supplementary declarations must be submitted to customs by the 4th working day of the month after the goods were imported. To enable the supplementary declaration to be completed, you will need to provide your customs broker with all of the details outlined in Option 1.
Imports using CFSP require excellent record keeping to ensure supplementary declarations are submitted prior to the deadline.
Failure to do so can result in penalties from HMRC. As your broker will be jointly and severally liable in this case as an ‘Indirect Representative’ they would most likely insist on being involved in the supplementary declaration.
Direct .v. Indirect representation.
A representative can be appointed on either a Direct or Indirect basis. In reality when acting for a party established outside the UK, the Representation will be Indirect, whilst it may be Direct when appointed by a UK based entity. Unless agreed in advance and a contract has been signed accordingly, NNR will act under Direct Representation.
- Direct Representation
In this scenario the customs representative acts in the name of and on behalf of another party. The party being represented is the declarant and is obliged to meet all the obligations arising from the declaration. The declarant will be responsible for maintaining the records and also providing an audit trail. Download a DIRECT REPRESENTATION template HERE
- Indirect Representation
In this case the customs representative acts on behalf of another person but acts in their own name. It is incumbent on the customs representative to maintain a full audit trail with regard to the customs declaration. The Indirect representative shall be jointly and severally liable for all customs liabilities arising from the customs related transactions.
UK Global Tariff (UKGT)
From 1st January 2021, the UK Global Tariff (UKGT) will apply to all goods imported from overseas (EU or otherwise).
From 1 Jan 2021 the EU's common external tariff (CET) will be replaced by the UK Global Tariff (UKGT). This new regime will be defaulted to where no trade deal has been agreed between the UK and a particular country, including EU member states. Discussions are ongoing between UK and EU governments, and should a deal be struck between now and 31st December, then some of the tariffs described in the UKGT are liable to change or be removed entirely.
Whilst, on the whole, this is unlikely to have a significant impact on how your goods are imported into the UK, it will affect the amount of Import Duty and VAT incurred on your products. The UKGT is not currently fully operational but you will be able to check the tariffs that will apply to your imported goods from 1st January 2021 using the following link: www.gov.uk/check-tariffs-1-january-2021
The UKGT will not apply if the goods you are importing:
- are from a developing country that pays less or no duty because it’s part of the Generalised Scheme of Preferences.
- are from a country that has a trade agreement with the UK.
- have a relief or tariff suspension that’s operated by the UK.
We should highlight again that, should a trade deal be agreed between the EU and UK, some of the tariffs described in the UKGT are liable to change or be removed entirely.
How do we export to the EU?
From 01st January 2021, you'll need to make customs declarations when exporting goods to the EU. These rules currently apply when exporting goods to the rest of the world, including Switzerland, Norway, Iceland and Liechtenstein.
You can make the declarations yourself, however we recommend that you authorise a licenced, approved Customs agent [AEO certified] to make these declarations on your behalf. NNR has all of the necessary qualifications and certifications to manage this for you.
Any EU based company importing your goods will also need to prepare for 01st January 2021. Before sending your products to the company, you should check they can make the necessary import customs declarations. They may need a licence or certificate for some products.
It is always important to reduce the risk in any international transaction and this is no exception. Buyers and sellers should ensure the correct Incoterms are applied in their commercial agreement. Contracts which were previously only EU related certainly need reviewing.
Failure to understand the correct definition and obligation within each Incoterm applied may lead to delays and Supply Chain disruption. It could cause unecessary conflict between both parties, especially if there is any third party involvement in the sales process. In the worst case it could cause payment issues and disputes over ownership of the goods in the event of any insurance claim, duty liability, etc.
For example, a buyer should arguably avoid buying products on an Ex Works basis [EXW], as they would then be responsible for the origin export declaration. A seller should take similar caution, possibly avoiding selling on a Delivered Duty Paid basis [DDP], as they will become liable for the destination declaration to import the product. Either way, the implications and responsibilities must be understood.
We recommend you download the document ICC 803e_incoterms2020wallchart-a4 provided by the International Chamber of Commerce [ICC].
What about Ireland and the Irish border?
Issues surrounding the movement of goods from the UK to Ireland are widely documented and a priority between UK and EU governments, therefore the circumstances we currently have will change over the coming weeks or months. This confusion means that exact details as to how the required customs entries are to be completed, or the safety and security declarations to be raised, are yet to be 100% confirmed.The system platforms to be used for raising the required documentation for movements to Northern Ireland will be different to those currently used across the freight industry, so how these are rolled-out by the government over the coming weeks will largely dictate the success or failure of the policy and process.
In a recent BIFA survey, 86% of freight forwarders declared that they would like to receive more information from the government regarding import/export procedures involved in the “Northern Ireland protocol”. When asked about safety and security declarations, 82% declared that they would require more information on this subject also. The lack of information on this subject is felt throughout the industry and a lot more details will be required from the government before “Go Live” on 1st January 2021.
What about delivery to Northern Ireland?
To ensure that goods are not freely moved into the EU across the Irish border, from 1st January 2021, as far as customs procedures are concerned, both Northern Ireland and Republic of Ireland are to be treated as “the Island of Ireland”. As such, any goods moving from the UK to Northern Ireland will require a customs declaration. Any goods that can be proved are remaining in Northern Ireland and not moving across the border into Republic of Ireland, can be imported into Northern Ireland duty free. The means by which this “proof” needs to be provided is still not clear as of October 2020. In addition to a customs declaration, any vehicles moving to Northern Ireland will require a safety and security declaration via the Goods Vehicle Movement Service (GVMS). A separate declaration is required for each shipment contained within a vehicle, so in the case of groupage trucking, multiple security declarations would be required.
HOW CAN WE HELP YOU?
If you need help, please use the below support contacts below:
- UK Import enquiries: firstname.lastname@example.org
- UK Export enquiries: email@example.com
- UK Commercial Support: firstname.lastname@example.org
- Webform: www.nnrglobal.com/contact-us
The information within this webpage is also contained within our advisory document.