With EU-UK negotiations unlikely to conclude in a Trade Agreement before the end of the Brexit transition period, it is crucial UK businesses review their export strategy, to allow for new customs arrangements after 11pm on 31 December 2020.
All export shipments, regardless of the nature of the goods, shall require full export declarations from 1 January 2021.
Below is an exporter checklist summarising the key actions to consider when exporting goods from the UK into the EU.
Ensure your business has an Economic Operator Registration and Identification (EORI) number. A UK EORI Number is required for any business trading outside the UK from 11pm on 31 December 2020. Your EORI number will start with GB, followed by your VAT number and three additional numbers at the end (ie GB234567896000). The EORI number is used on all customs declarations. If you haven't got one, apply now. It takes 10 minutes online.
Has your EU customer got an EU EORI number? Again, this will be required for any business trading outside the EU. Where a UK business is exporting from GB and also acting as importer on record into the EU, they will need an EU EORI number. Only one EU EORI number will be required for all EU Member States.
To move goods to or from Northern Ireland from 1 January 2021, you will need an EORI number that starts with XI. You will already require an EORI number that starts with GB. If a business has a GB EORI number and HMRC considers it will require an XI EORI, HMRC will automatically issue one in mid-December 2020.
Incoterms make clear the responsibilities for each party along the shipment lifecycle from leaving origin to arrival at their destination. They determine who pays for each aspect of freight, insurance and duties. Where Incoterms and a contract conflict, the terms of the contract will take precedence. It is important to reflect the Incoterms according to the contract requirements. For more information on the rules, please see the International Chamber of Commerce website here: https://2go.iccwbo.org/
This is an 8-digit code for exports and a 10-digit code for imports. The code system is developed by the World Customs Organisation (WCO) to classify goods into approximately 5,000 different commodity groups. It is crucial to cite the correct commodity code, since this code is used to identify your product, applicable duty rates, licensing requirements or quotas. If cited incorrectly, this could result in delays at the border, disgruntled customers and penalties from HMRC.
If you experience difficulty determining the appropriate commodity code, assistance can be sought from HMRC, however this is informal advice and not legally binding. To obtain a legally binding decision, you can apply for a Binding Tariff Information (BTI) decision, however this can take between 30-60 days for a decision, potentially longer at present.
Troubleshooting
The General Interpretative Rules (GIRs) are a set of 6 rules to ensure uniform interpretation of the Harmonised System for accurate classification of goods.
Most products are classified under Rule 1, which states a commodity code is determined by reading the section, chapter notes and heading descriptions.
If you are unable to find a commodity code that represents goods (i.e. a new product) go through GIRs 2-6 in sequence.
If still encountering difficulty check with:
Once you have classified the product and identified the appropriate commodity code, it is recommended you establish a schedule of regular reviews to ensure nothing has changed within the classification, sign up to tariff updates by RSS feed and keep records of your classification decision by reference to a decision tree (see example below).
All countries have an export control policy, legislation and enforcement mechanisms. Whether you need an export licence will be determined by:
If you supply military, dual use” or other controlled products or you obtain such goods from suppliers in the EU, either you or your suppliers may need licences, prior to notifications or registrations in order to continue with such trade after the transition period. Such requirements could give rise to delays whilst the relevant conditions are complied with.
The EU require all wood pallets to be heat-treated at 56℃ to prevent the spread of pests and have specific markings to confirm they meet legal requirements. There is concern whether the UK will have a sufficient supply of ISPM15 pallets to continue exporting goods to the EU from 1 January 2021. You, or your packing service or freight forwarder must make sure any solid wood packaging you use meets the requirements. If you do not follow the rules your packaging could be rejected or destroyed.
The Customs Procedure Code (CPC) is a 7-digit code used to identify the reason for export/import and applicable customs regime. The code describes the shipment and how it will be processed by customs. It will also indicate whether duties or taxes are to be collected, suspended or waived.
If a CPC is cited incorrectly on a customs declaration in CHIEF, changes can be made any time before the import or export has been accepted by the system. It is crucial the code is correct, otherwise it could impact the way goods are handled by customs, whether duty and VAT need to be paid, whether duty can be reclaimed and additional responsibilities for an importer.
CPC Code examples
For example 10 00 001 is the standard export procedure
CPC code 51 00 000 for goods imported under Inward Processing
CPC code 40 00 000 for goods imported for home use
CPC code 31 51 000 goods being returned (re-exported) under Inward Processing or Simplified' Inward Processing
CPC code 61 23 F01 Reimportation for entry to free circulation
CPC code 71 00 000 Customs Warehousing procedure
CPC code 06 10 040 for Customs Freight Simplified Procedures (CFSP)
Rules of origin are required to determine how much duty is payable on imports dependent upon where the goods have originated from. Goods imported from certain countries may qualify for preferential treatment, attracting a reduced or zero rate duty.
Rules of origin use two classifications - preferential and non-preferential. Preferential rules of origin are used where a free trade agreement (FTA) exists between the importer and exporter of the goods. The aim of an FTA is to give preferential access for goods between parties in the agreement. Non-preferential rules of origin apply according to the economic nationality of the goods. It is often used to determine the origin of the goods and monitor commercial policy measures (anti-dumping or quantity restrictions).
If your business has access to the National Export System (NES), you can submit the export declaration and appropriate licences yourself. If you are not registered, you can make an application for NES and a CHIEF badge enabling to lodge your own declarations. You will receive a unique consignment reference (UCR), allowing for traceability of your goods while in transit and to obtain the necessary arrival and departure messages. Small businesses often use agents or freight forwarders to process their goods under Customs Freight Simplified Procedures (CFSP) not least because these have the necessary software.
Customs declarations are complicated. The consequences of non-compliance will results in fines, penalties, potentially imprisonment, bankruptcy and strike off. Businesses may feel more comfortable using an intermediary such as freight forwarders, brokers, customs agents or fast parcel operators to submit declarations on their behalf. It is estimated such declarations will cost between £35-50.
If you elect a customs broker or agent to complete your customs declarations, you will need to provide written authorisation as a Direct' or Indirect' representative. You can complete the process online yourself if you are authorised to use the system. This is called self-representation. There are two other kinds of representation:
Direct representation, where a third party (such as an agent) acts in your name and on your behalf. You remain responsible for customs debts and you need to be authorised to use CFSP, although the third party does not.
Indirect representation, where a third party acts in their name but on your behalf. You and the third party share liability for the customs debt. You don't need to be authorised to use CFSP, but the third party does.
This makes it clear what products are where in the shipment, making it easier for customs to check at the port, helps HMRC if they need to open a shipment and makes it easier for the customer to locate what they need, (useful in a large shipment). It is good practice to send a copy of the packing list to the customer and attach the lists ideally to the outside of the parcels/boxes/containers. Through identifying the weight of the consignment on the packing list, this helps keep track of weights and avoid overloading ships or aircraft.
Commercial invoices are a key document to provide information required by the customer for payment, freight forwarders or trader to complete customs declarations and to the Chamber of Commerce as supporting evidence. The commercial invoice will need to be updated to reflect customs requirements, namely a clear description of the goods (that can be identified with a commodity description), Incoterms, buyer and seller EORI numbers, commodity code, type and number of packages, goods value and currency adopted, gross and net weight of the goods.
HMRC requires all businesses to keep and preserve records and accounts for at least 4 years for customs, unless there is a criminal investigation in which case the 10-year rule applies. Excise records should be kept for at least 6 years, as should VAT records. It is crucial to maintain a robust system to enable HMRC to conduct audits effectively. Records must be accurate and up to date; legible; readily accessible and available for inspection at all reasonable times. Although record-keeping is your responsibility you should be aware that if you use an agent or freight forwarder you're liable for any incorrect information they provide to HMRC.
