BREXIT IMPORT GUIDE. Telephone :

Transcription

1 BREXIT IMPORT GUIDE Report prepared by : Robert Hardy robert.hardy@oakland-international.com Telephone : Version : 2.6 updated January 2019

2 INTRODUCTION The purpose of this document is to look at the main areas of concern related to Brexit and crossborder trade, particularly imports. We have spent almost two years talking to companies, large and small, about the challenges and opportunities that Brexit brings. Despite the political seesawing and the back and forth of negotiations, our message has not changed. UK import clearances can be smooth, trade can be largely unaffected and companies can continue to thrive. This document deals with the following topics:- UK / EU future relationship No deal Customs formalities Customs simplifications Freight flows WTO tariffs UK import duty rates Customs Union UK import VAT Export VAT process WHICH DEAL OR NO DEAL? The options have distilled in to four main contenders:- Customs Union No Deal Canada++ (CETA) Norway (EEA) NO DEAL is still a distinct possibility with negotiations hanging in the balance. The Irish Backstop has the potential to de-rail the process and, even if further agreement is reached with EU, it still has to get through UK Parliament. The Institute for Government ran a number of scenarios and all but one resulted in NO DEAL. HMRC border teams are currently planning for an abrupt exit at 11pm on the 29 th March 2019 (which incidentally is a Friday). Sensible businesses are doing the same. A summary of the various future options is as follows:- RMHardy Jan19 2 P a g e

3 A Canada style deal would appear to be the most suitable long-term solution with an implementation period until the end of 2020 (at least). It is hoped this would create sufficient time for a more suitable Irish border solution to be found, relying heavily on technology and smart border principles. Bear in mind that trade negotiations have not even started yet. CUSTOMS UNION There is frequent mention of the UK remaining in the Customs Union and this being a possible solution to Brexit. It is true that whilst remaining in a Customs Union will aid UK-EU-UK trade it actually hinders UK s negotiations with the rest of the world. The UK would have to apply the EU import tariff to goods from a 3 rd country but would have no say as to what those tariffs are. This could leave the UK powerless in striking trade deals with the rest of the world as they would be unable to negotiate the import duty rate in order to achieve a reciprocal deal on UK exports. This graph shows the EU and non-eu trade flows for the UK. The significant growth in the last 7 years is in imports from EU and UK exports to non-eu. Staying in a Customs Union would protect the EU import column and put significant risk on the non-eu exports column. RMHardy Jan19 3 P a g e

4 The need for Customs formalities would still exist. In fact, ironically, there is potential for additional documentation in the shape of the A.UK movement certificate. Turkey is in a Customs Union with the EU, as is Switzerland, and both require import, export and transit documentation. The Turkish border with Bulgaria (Customs Union to EU border) is far from frictionless. WTO TARIFFS There is often reference to the WTO tariff and the need to classify goods in order to calculate the worst case scenario. This only applies to UK-EU trade as UK would be treated as a 3 rd country and, in the absence of a Free Trade Agreement (FTA), the EU ERGA OMNES rates of duty would apply. These EU imports rates can be viewed here: However, this is not the case with imports in to UK from EU (assuming goods are of EU origin). There is no such thing as the WTO tariff. There are 164 members of the WTO and each has their own set of tariffs applied to imports in to their country. The UK tariff has not yet been published although WTO schedules have been lodged. The initial schedules are a carbon copy of the current EU ones (even using instead of ). The UK WTO schedules are available here : Dominic Raab s technical notices confirmed that the UK will apply its own WTO MFN rates which may be different to those used by the EU. He also confirmed that the UK trade tariff will be issued soon and, once available, UK importers should no longer use the current [EU] version. Incidentally the technical notices also stated that VAT Postponed Accounting would be re-introduced (for all imports) avoiding the need to pay VAT at the point of importation. Bear in mind that VAT reverse charge will no longer apply, exports would be zero rated and import VAT paid (or accounted for) on arrival in the destination country. INTRASTAT declarations will no longer be required. We have developed a simple (FREE) tool to assist you in classifying your UK imported goods, which can be found here : See TTC UK import tariff aid. RMHardy Jan19 4 P a g e

5 WHAT DUTY RATE WILL THE UK APPLY? UK income from duty today is 3bn per annum (average 1.6% of non-eu import value). However 80% of that income goes to Brussels, 20% is retained to fund the infrastructure required to collect the duty due. It is not possible to have a free circulation model unless the money is in the centre of the circle; Brussels in this case. So, the UK income from duty today is net nil. It would be a waste of resources to calculate the likely UK import tariffs at this time. Indeed, it is an impossible task until the UK formally publish their tariff. Whether or not tariffs apply has no bearing on the need for Customs formalities. Zero duty may be available but there will be a need to prove eligibility and that requires a Customs declaration. To further validate our argument that multiple WTO tariffs exist (163 to be precise, the UK one is not ready yet!). We took a standard Customs tariff heading (car parts) and compared the min and max WTO duty rates in various countries, including the EU. CUSTOMS TARIFF Min Duty Max Duty Argentina 14% 18% Australia - 5% China 6% 10% European Union 3% 4.5% Israel - 6% Japan - - Korea (Republic of) 8% 8% Mexico - 5% USA - 2.5% UK (post Brexit) Perhaps nil Probably this one It is estimated that, should UK employ current EU ERGA OMNES rates, it would generate 14bn in import duty revenue, per year. Bear in mind that EU ERGA OMNES rates are higher on the type of products produced in the EU (to protect that production from 3 rd party imports). Would UK really adopt a duty rate of 188/100kilos on parmesan cheese? Or 9.6% on Evian bottled water? RMHardy Jan19 5 P a g e

6 CUSTOMS FORMALITIES According to Carol O Keefe of the Irish Revenue Commissioners, no matter which arrangement is finally decided upon Customs formalities would be required. How and where those formalities take place is a matter for ongoing discussion. Recognising the potential need to suddenly process large quantities of entries, CHIEF has been temporarily upgraded. CDS (the new UK Customs Declaration Service) is being implemented and is intended to accommodate the new UCC (Union Customs Code) requirements as well as the increased volume of declarations (up from 55 million to 255 million and with 145,000+ UK traders exposed to Customs formalities for the first time). We estimate that 350,000 traders across Europe will be exposed to Customs formalities for the first time as a result of UK leaving the EU. To avoid friction at the border, Customs and the trade need import clearance processes to be (a) simplified and (b) audit based where possible. Tools exist today to make this possible but many traders are unaware of their existence or importance. More than 95% of entries are capable of instant clearance and our underlying objective is to make sure you are regularly in this green lane. RMHardy Jan19 6 P a g e

7 CUSTOMS SIMPLIFICATIONS Amongst the simplifications and components available to lessen the impact are:- AEO (Trusted Trader) status, for example, offers a number of benefits, not least:- Faster transit at the border Fewer physical Customs examinations Preferential treatment by Customs Easier access to Customs simplifications 70% reduction in bonds and guarantees (including deferment account) CFSP (Customs Freight Simplified Procedures) and CBW (Customs bonded warehousing) can be used for most Customs regimes including home use, end use, excise goods, OPR and IPR transactions. Very few restrictions apply. The benefit of these procedures is that the final clearance can, largely, be disconnected from the physical movement of the goods and therefore avoid potential delays enroute. Just-in-time supply chains are not founded on speed but rather on predictability. ETSF (External Temporary Storage Facility) is suitable in some cases as it provides the ability for Temporary Storage under Customs control. ETSF is typically suited to a port or inland clearance facility. ETSF also offers the ability to obtain Authorised Consignor/Consignee status meaning that transit documents can be authenticated (or finalised) at your premises. This may be extended to Trusted Trader status. The final Customs process employed will largely depend on whether or not tariffs apply. AEO status and CFSP authorisation are suitable with or without tariffs. Customs Warehousing is only really effective if imports attract a positive rate of duty since this allows the tax point to be shifted to warehouse exit rather than point of import arrival. RMHardy Jan19 7 P a g e

8 In most cases we recommend CFSP with optional AEOC as together these offer cost effective benefits to both supply chain and finance. A brief summary of each element is contained at the back of this report. With the right approvals and simplifications, process flows can be as shown here. The vast majority of the 55 million entries currently processed are done so using CFSP. Companies such as UPS, Amazon, ASOS, Procter & Gamble and others currently use Customs simplifications extensively. Simplified Frontier Declarations normally clear instantly and as such your vehicle can pass through the port un-impeded. The final Customs declaration being done later (after delivery in most cases). We recently released a video explaining how EU/UK freight movements might look. Follow this link to view We released a further short video detailing who needs to do what for both imports and exports and in a simplified environment compared to a standard one. Simplifications appear essential if you want to keep the supply chain moving. The video can be viewed here: WHICH SOLUTION IS BEST FOR YOU? The UK Customs approvals and simplifications that best fit your business will depend on the role you play in the process, we have drawn up the following table to highlight what is available and what process is the most appropriate in each case:- RMHardy Jan19 8 P a g e

9 If, for example, you are an EU producer supplying UK retail you may well be the importer under consignment stock rules. This would require you to register for VAT in the UK under the NETP (Non Established Taxable Person) rules. You do not need a UK company. For our explainer video please follow this link : BARE MINIMUM The absolute minimum requirement is for a UK EORI number. Once you have this we can at least perform import Customs clearance for you. It would be on a port clearance basis which would not be our preferred option. We would rather use Customs simplifications in order to avoid potential delays or congestion at the port. If you do not currently have a UK EORI number you should apply for one now : It is quick, easy and FREE. You normally receive your EORI number within two days (providing you already have a UK VAT number). RMHardy Jan19 9 P a g e

10 USING CUSTOMS SIMPLIFICATIONS The most efficient way to negotiate the import Customs process is with simplifications which are designed to divorce the clearance process from the physical movement of the goods and thus avoid unnecessary delays. CFSP only requires a simplified frontier (border) declaration with the promise to submit a full declaration later, by the 4 th working day of the following month. This means that your [EU] imports can move pretty much as they do today, with Customs formalities being completed after the event. A little like INTRASTAT today and we never hear of supply chains disrupted by the need to complete INTRASTAT declarations! CFSP is seen by many (including Customs) as the best way to avoid congestion at the UK border. Access to CFSP is under-written by a Deferment Account (DAN). If you fail to submit the final Customs entry your deferment account will be debited using the full rate of duty for the goods declared on the initial frontier declaration. To obtain a DAN you must provide security which is generally calculated as follows:- (One month duty and VAT liability x 2) x 100% This security takes the form of a CCG (Customs Comprehensive Guarantee) and the application form (CCG1) automatically calculates the level of bond required depending on the type of application. IS AEO (AUTHORISED ECONOMIC OPERATOR) STATUS REQUIRED? You do NOT require AEO status to obtain a DAN or access to CFSP but it is easier (and cheaper) if you are AEOC approved. It is not urgent at this stage. AEOC status will mean that the bond calculation is reduced by 70%. However, AEO applications (C and S) are arriving thick and fast at Customs and many will not be in place by 29 th March. Do not start with AEO. RMHardy Jan19 10 P a g e

11 The best NO DEAL sequence is:- We normally apply for a small bond level on CCG (approx. 10K in most cases). This gives a DAN of 5K and, more importantly, gives you access to the tools that will be used to avoid congestion at the border. We lodge the AEOC application soon after although we expect this to be delayed. Once AEOC comes through you can either reduce your bond (for the same DAN level) or keep the bond the same and automatically increase your DAN level by 333% without additional security required. THE UK IMPORT PROCESS The process will depend on whether or not you have EORI or CFSP. Before there can be a UK import there must be an export (from somewhere). We would urge you to read our Brexit Export Guide to understand the process relationship between the two. In simple terms, the exporter will issue an export declaration which will also create an EXS (Exit Summary Declaration). The export declaration is required to discharge the exporters VAT liability as they will be zero rating their export (remember, reverse charge and INTRASTAT will no longer apply). Depending on the INCOTERMS this will leave you with the import formalities to take care of. EORI ONLY : a full Customs entry (48 data fields) needs to be pre-lodged so that the vehicle can be allowed to board the ferry/train en-route to the UK. No pre-lodgement : no loading. The entry will be routed in one of three ways : RMHardy Jan19 11 P a g e

12 Route 1 indicates that your goods have been selected for a documentary check and you must furnish Customs with all relevant documents, before your goods can be cleared. Route 2 indicates that your goods have been selected for a documentary check and a physical examination. Customs will check to ensure that the goods declared on the import declaration correspond to the actual goods. Significant potential for delay here. Route 6 indicates that your goods have been cleared on the basis of the import declaration received. Good to proceed. The vast majority will achieve route 6 status but this is not guaranteed. CFSP APPROVAL : a simplified Customs entry (10 data fields) needs to be pre-lodged so that the vehicle can be allowed to board the ferry/train en-route to the UK. No pre-lodgement : no loading. The simplified entry will nearly always achieve route 6. We then have up until the 4 th working day of the next month to present the full entry. You can do what you like with the goods in the meantime. DATA FLOW The flow of data is probably the most important element in post Brexit trade. Even in the most basic cross border movement four things need to happen:- Export declaration Exit summary declaration (EXS) Entry summary declaration (ENS) Import declaration We have not yet spoken of the ENS (Entry Summary Declaration) as we have, so far, concentrated on the import declaration. An overview of ENS is included further in this guide. It is likely that one or all of these formalities will be completed by a 3 rd party agent (such as Oakland Invicta) acting on behalf of either the exporter, the carrier, the importer or all three. Data flow is therefore essential and can be broken down as follows:- RMHardy Jan19 12 P a g e

13 HEADER INFORMATION (PRE RECORDED) Consignor name and address Consignor EORI number CFSP approval number Deferment approval number Authorisation to represent C1207N deferment List of regular consignees & EORI s Incoterms per consignee CIF* additions/deductions List of product codes with, for each:- Tariff number Country of origin The items shown in GREEN are only required if you have CFSP approval or your own DAN. *CIF is the value for duty. This is the value up to UK arrival. For DDP we deduct freight costs after arrival and for Ex Works we add the freight costs up to point of UK arrival. TRANSACTIONAL INFORMATION Trailer number Intended export route (eg Calais/Dover) ETA at UK point of arrival Type of import (home use, IPR etc) Consignee Confirm incoterms for this consignment Export invoice currency List of product codes with, for each:- Packages (no. and type) Weight (gross and net) Value The items shown in GREEN are ONLY required in an EORI only port clearance. For CFSP we do not require the items in GREEN until after the goods have been delivered. The transactional information shown above is largely what was required by the exporter to create their initial export declaration. This data needs to be transferred to your Customs agent without delay so that the ENS and import entry can be pre-lodged. You will see that CFSP has more requirements in the set-up phase but far fewer in the transactional stage. This is precisely why we favour CFSP and would urge you to seriously consider this aspect. ENS ENTRY SUMMARY DECLARATION EVERY border crossing requires an EXIT and an ENTRY, whether that be UKEU or EUUK. This is in addition to any formal Customs import or export entries. When an export declaration is done it automatically creates the EXIT Safety & Security Declaration (EXS). Therefore, providing export declarations are prepared, as they should be, then you can safely disregard the EXIT declaration. RMHardy Jan19 13 P a g e

14 Not so with imports. Reason is that import entries can be done AFTER the border crossing whereas exports cannot. So, for imports a declaration is required, even if the eventual destination of the cargo is outside the territory of the border about to be crossed. It is mandatory for carriers to provide Customs authorities with advance information for goods being brought into that Customs territory. Customs are very likely to stop a vehicle that does NOT have an ENS message pre-lodged. The ENS message must be submitted 2 hours before arrival at the named border (not the point of exit but the point of entry). For Eurotunnel this may be relaxed to one hour as the point-to-point transit is quicker. Customs will use the information contained in the ENS message to identify whether or not they need to control the vehicle on arrival. The data required on the ENTRY SAFETY & SECURITY (ENS) includes: Declarant Carrier Goods Routing Vehicle Import information Valid EORI number Name and address details Reference no Haulier (accompanied) Ferry operator (unaccompanied) Total packages and weight Type of packages Marks & numbers Place of loading Route to border (which countries passed) Border ENTRY point (name of port for example) ETA time and date Vehicle identification number Trailer seal if applicable Importer EORI number Description of goods Tariff numbers involved It is not clear, at this stage, as to what level of consolidation will be allowed for groupage trailers. It would make sense that the consolidator details are shown as the importer but this is not yet agreed. RMHardy Jan19 14 P a g e

15 ARE THERE ANY OTHER THINGS TO CONSIDER? Customs processes can be as complex or simple as you want them to be. Whilst we have covered the basics there are other aspects that you need to consider and plan for:- FOOD LABELLING According to EU DIRECTIVE 2000/13/EC the name and [local] address of the manufacturer, seller or distributor MUST appear on food labelling. Post Brexit this means an address in EU for UK export food and similarly a UK address for EU import food. We have legal entities in UK and EU and can provide local contact information for food labelling post Brexit. Similarly we have contract packing facilities in Redditch, Corby and Dublin and can apply replacement labels should you require. RULES OF ORIGIN The duty rate applicable to imported goods is defined by the tariff classification AND the origin of the goods. Deciding the origin of a product is complex but as a rule of thumb consider that 60% of the value decides its origin. There is no hard and fast rule and it may be worth obtaining a BOI (Binding Origin Information) ruling to avoid doubt, complication or retrospective duty demands. We have a wealth of experience in this field and are certified by WCO (World Customs Organisation) in respect of rules of origin. WHAT IS INWARD PROCESSING RELIEF (IPR)? Inward processing is a customs procedure which allows goods to be temporarily imported in order to undergo processing or repair. You can claim full or partial relief from import duty for these goods. Inward processing may be particularly useful when considering the integrated EU/UK/EU supply chains that exist today. Inward processing may be useful in moving goods across borders without duty becoming payable. IMPORT LICENCING Check the Customs tariff to see if a licence is required. The following licences are those commonly required for imports: military equipment, firearms, ammunition, explosives and related goods dual-use goods (a wide range of civil goods that can have a military application) goods that may be for use in connection with chemical, biological or nuclear weapons goods being exported to countries that have UN, EU or OSCE sanctions against them RMHardy Jan19 15 P a g e

16 HELP & SUPPORT Oakland Invicta has first-hand working knowledge of Customs regulations and how to employ them to maximum effect. The Oakland Invicta team includes certified advisors to HMRC, Institute for Government, InterTradeIreland, BordBia and others. The Operations Director of Oakland Invicta, a registered international trade expert with the EU Commission, successfully developed the largest 24hour Customs clearance station in the UK, based at the Port of Dover. This expertise and experience is available to you and able to quickly decipher the fast-moving Brexit negotiations and nuances. Oakland Invicta take care of the various elements as well as being by your side throughout and beyond the transition from full EU membership to post Brexit trade. Oakland Invicta fees are shown below:- A1 AEOC : Customs Simplifications approval 3, A2 AEOS : Safety & Security approval 3, A3 AEOF : Full approval (both elements) 6, A4 BTI : Binding Tariff application (per tariff item) A5 BOI : Binding Origin application (per tariff item) A6 Customs Comprehensive Guarantee application I1 UK VAT registration and EORI application I2 Customs Freight Simplified Procedure (CFSP) application 2, I3 External Temporary Storage Facility (ETSF) application 2, I4 Customs Bonded Warehouse (CBW) application 2, I5 Import Customs training per delegate day (min 4) A7 Consultancy day rate, excluding travel We are known to a number of funding providers and it may be possible to secure up to 5,000 support funding for the services we provide:- Up to 2,000 funding available under the start-to-plan scheme : CLICK HERE Up to 5,000 funding available under the Be Prepared scheme : CLICK HERE Up to 1,050 per employee for training : CLICK HERE RMHardy Jan19 16 P a g e

17 We hope this Brexit Import Guide gives you a better understanding of import procedures and the confidence that you will have an expert guiding hand through the entire process should you so wish. We have also published a Brexit Export Guide and would urge you to consult that document also. We urge you to visit to view our latest blogs, which include Brexit updates, policy statements and process flows and we also recommend that you and follow: as regular updates are posted on this page. You might like to know that we do not stop once the approvals and processes are in place, we can handle Customs declarations for you as well as Safety & Security declarations. We have access to all UK port systems and are in the process of establishing the same in Ireland. We look forward to the prospect of working with you. All the best Robert Hardy Commercial Director Useful links :- To obtain a UK EORI number : NO DEAL importing guide : NO DEAL exporting guide : Authorised Economic Operator (AEO) : Customs Freight Simplified Procedures (CFSP) : Customs Warehousing : External Temporary Storage Facility (ETSF) : RMHardy Jan19 17 P a g e

18 SUMMARY OF BENEFITS (relevant to each recommended component) AEO CFSP CBW ETSF Authorised Economic Customs Freight Simplified Customs Bonded External Temporary Operator Procedures Warehousing Storage Facility 1. Faster transit at the 1. Simplified entry at the 1. Simplified entry at the 1. Vehicle is in transit to border port/frontier port/frontier ETSF and by-passes port 2. Fewer physical Customs 2. High probability of 2. High probability of processes examinations instant clearance instant clearance 2. ETSF is same status as 3. Preferential treatment 3. Final entry not required 3. Goods can be delivered inland port and by Customs until end of month directly to your effectively shifts the 4. 70% reduction in bonds 4. Good can be unloaded warehouse and frontier to your and guarantees required and handled as today, unloaded as normal. No nominated [approved] 5. Access to SIVA for import with Customs entry additional Customs entry premises VAT (further reduces following later is required at this stage 3. Particularly useful for security required for 5. Converts Customs 4. Duty and VAT is NOT Port Health controls as deferment account) formalities from payable until goods these can be located at 6. Easier access to Customs transactional leave the warehouse ETSF (subject to simplified procedures (truck/load) to audit 5. No time restrictions for confirmation from your (such as CFSP, CBW, based (month end period of storage local Environmental ETSF) admin) without final entry Health Officer) 7. AEOC (Customs status is 6. CFSP can be used with or 6. Goods are only cleared 4. Goods must be entered sufficient in most cases) without the CBW when they leave the within 90 days of arrival Can be upgraded to components warehouse (recommend at ETSF (can be entered AEOS once settled 7. A bond (monetary) is CFSP entry so included in to CFSP or divert to required but this is monthly return of CBW) reduced by AEOC status imports/exports) 5. Customs takes place at (see point 4 in AEO 7. Goods can be entered to ETSF location and no column) home use, transit requirement for frontier (Ireland), re-export etc entry (providing goods no need to decide until are consigned to ETSF sold/ordered on travelling transit documents) TRUSTED TRADER STATUS EASIER CUSTOMS MORE FLEXIBILITY FULL FLEXIBILITY REDUCED FEES ADDITIONAL TIME CUSTOMS SUSPENDED SIMILAR STATUS AS PORT Please note : we are able to process your CFSP and/or CBW returns on a bureau basis until you are ready or able to handle in-house. We can also handle frontier declarations. RMHardy Jan19 18 P a g e