Now that Brexit has taken effect, businesses which trade internationally need to find solutions on how they can continue to operate. Brightfinch’s Holly Tonge answers some common questions around the challenges of the current trading environment.

Why does a business have to pay duty on goods it imported from the EU?

Firstly, it might be that the supplier has not provided a preferential statement or other evidence in their commercial documentation that the goods are eligible for the EU-UK trade deal – which means the customs broker may treat them as ‘rest of world’ goods where third country duty rates are applicable. Since Brexit, we have seen this happen regularly and it means that the importer may be paying unnecessary duties due to lack of knowledge on the exporter’s part.

Secondly, it might be that the goods do not qualify for the UK-EU trade deal. To qualify, the goods must meet preferential rules of origin. This is usually a percentage of the goods value which must have originated in the UK or EU, such as materials and labour (the rule or percentage depends on the type of goods being traded). 

What evidence is needed to claim the lower rate of duty under the EU-UK Trade Cooperation Agreement?

A statement on the invoice from the exporter is accepted as evidence. If the exporter is from the EU and the value of the goods is more than €6000, a Registered Exporter Status (REX) number is needed to make the statement valid. This is evidenced on the customs declaration using a U110 code.

Another form of evidence, known as importer knowledge, is also available. This allows importers who are certain the goods meet the preferential rules of origin to hold and supply their own evidence. This is evidenced on the customs declaration using a U112 code.

What if I am importing goods from the EU which are dutiable, but plan to re-export them?

To avoid paying customs duty and import VAT on goods which will be re-exported, wholesalers and retailers can use customs ‘bonded’ warehousing. This means goods can be stored in a customs-approved warehouse to avoid paying those import taxes, and there is no time limit for the storage of the goods. We are currently seeing a big uptake in applications for customs warehousing.

If the goods are going to be processed or repaired by the importer before being re-exported, inward processing can be used to suspend import duty in a similar fashion. This approval permits processing of the goods whilst they are under customs control.

An authorisation is needed to use inward processing more than three times a year.

What if I am exporting goods for processing or repair which I plan to re-import?

In the same way that inward processing benefits importers, outward processing benefits exporters who are planning to re-import goods which have been processed or repaired. The exporter can benefit from duty-free or reduced duty using this method when re-importing goods. An authorisation is needed to use outward processing more than three times a year.

My overseas client has rejected my shipment – what is the return process?

If a customer has a shipment rejected, the UK exporter can claim returned goods relief when re-importing to avoid paying duty and VAT. To do this, the UK company needs the original UK export entry number, which is why record-keeping is very important when trading goods internationally.

What are my responsibilities now I am classed as an importer/exporter?

In most cases when you use a customs broker, they act under direct representation meaning you are solely liable for the accuracy of the declaration made in your name.

HMRC can backdate fines and demands for taxes for up to three years, so one incorrect tariff code or valuation omission applied repeatedly on imports can lead to significant issues.

It is important to obtain, check and retain all declarations and supporting commercial paperwork – we recommend this is stored for a minimum of six years.

How do I know if my goods require an import or export licence?

Any goods which require a licence will be identified by reference to the commodity code in the UK tariff. If you require a licence, it will be stated under import or export controls. However, controls for some goods are only applicable in certain circumstances, so it’s best to check with the relevant licence department before making any assumptions.

How do I select the right Incoterms?

Incoterms, or International Commercial Terms, are globally recognised three-letter acronyms – such as EXW, FCA and DDP – which prevent confusion in trade contracts by clarifying a split of responsibilities between the seller and the buyer.

There are 11 Incoterms under the lasted edition, Incoterms 2020. The terms cover the risk, obligation and cost arrangements between the parties. For example, cost, insurance, and freight (CIF) terms indicate the seller must deliver the goods to a designated port, load them on a specified vessel, and pay all transportation, insurance and loading costs.

Incoterms form part of a commercial agreement between buyer and seller, and therefore there is no right and wrong. Ultimately it is for each party to decide what obligations, costs and risks they are willing to accept.

Where do I find more information?

The gov.uk website contains up-to-date information on importing and exporting, but we recommend using a consultant to ensure you are compliant with the latest regulations.

At Brightfinch, we offer hands-on assistance with customs authorisations, compliance and training. Our free telephone consultation service enables us to find out what your business needs are and how we can assist you.

To set up a consultation, contact the Sheffield office on 0114 3210165.

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