Importing and Exporting Goods from and to the EU from 1st January 2021

On Monday 13th July Cabinet Minister Michael Gove published its post-transition border plans for goods moving between the GB and EU and provided guidelines for how importers and exporters can prepare for new trade rules.

The plan was a result of "extensive consultation and collaboration" with trade bodies, Gove said. 

that ￡705m will be spent on preparing England, Scotland and Wales for the new border operating model.

Here are ten key takeaways from the government’s announcement today.

1. Get ready for Customs declarations

Importers and exporters will need to complete Customs declarations next year, regardless of whether the UK strikes a free trade deal with the EU.

To complete declarations, the government has asked businesses to ensure they:

• Have a GB economic Operator Registration and Identification number (EORI number)
• Decide if they will use a customs intermediary such as the Sheffield Chamber of Commerce.
• Know the customs value and commodity code for their goods
• Consider simplifications and facilitations such as customs freight simplified procedures (CFSPs), warehousing, inward processing, and transit.

Fact:

Currently 55 million import and export declarations are submitted to HMRC each year for our non-EU trade. There are approximately 138,000 businesses which only trade within the EU. For the last 47 years they have not had to follow full customs procedures, just Intrastat. 45% of our total trade is with the EU. This means that the number of Import and Export declarations will increase by at least 200 million.  UK and European road hauliers (not dealing in Global Logistics) will be required to ensure pre-lodged export declarations have been submitted before they will be able to continue their journey. When they arrive at the EU country of destination, they will be required to ensure the import declaration has been lodged with Customs.

Sheffield Chamber of Commerce is an authorised Customs broker and has AEO (Authorised Economic Operator) Status since July 2019

2. 3-phase plan for imports confirmed

The three-phase plan for introducing controls on imports, initially announced in June, has been confirmed.

Under this plan, declarations can be deferred (for up to six months) for all imports of standard goods from the EU until July next year and will be introduced earlier in January for controlled goods such as alcohol and tobacco.

Fact: Only those businesses who have obtained a deferment account facility from HMRC will be allowed to defer duties for up to 6 months. The application process for a deferment account is not a simple process. Before gaining this facility the business must first apply for a Customs Conditional Guarantee (CCG) and Customs Freight Simplified Procedures (CFSP).

The application process could take up to 4 months so businesses need to act now.

The Sheffield Chamber International Trade Centre has a dedicated customs Compliance Consultancy department helping companies to apply for the above customs systems plus others such as Customs Warehouse and Inward / Outward processing relief (IPR/OPR)

3. Import VAT

VAT will be levied on consignments of EU goods exceeding ￡135 in value.

VAT-registered importers will be able to use postponed VAT accounting and different rules will apply to consignments valued less than ￡135.

Fact: While UK VAT registered companies will be able to reclaim Import VAT in their quarterly VAT returns it could still cause cashflow concerns. Your EU customers will also have to start paying VAT on imports from the UK and while they should be able to reclaim this VAT in their Quarterly returns they may not be fully aware that the import VAT must be paid at the time of the import declaration, if this is not paid the transporter may not be able to proceed on their journey. Pre-warning your EU customers now will be far better than waiting.

Sheffield Chamber International Trade Centre has contacted many EU customers at the request of South Yorkshire companies advising how their existing relationship will change from 1st January 2021. The key points are:

1: VAT will not automatically be deferred to their Quarterly returns as the INTRASTATsystem between the UK and EU will no longer be operable.

2: Import Duty will be applied. This means goods arriving in December 2020 will be duty free but goods arriving on 1st January 2021 will carry both Duty and VAT charges.

3: Any deliveries whether organised by the seller or the EU buyer will have to be declared at both the EU and UK customs border control.

4: INCOTERMS will be used again (for the first time in 47 years) This means that the contractual agreement for transporting the goods will be legally binding. For example FCA (Free carrier) means the UK seller will be responsible for declaring the export but the buyer will arrange the transport and cover the costs.

DAP (Delivered at place) states the seller will arrange the transport, process the declaration for export and cover the charges for the truck to deliver the goods to the customer’s premises in the EU. (The place in the DAP must be defined) However the customer must arrange the import declaration and pre-lodge it with the relevant customs authorities. This also applies for goods travelling between the EU and UK.

5: If the goods are controlled, an export / import licence may be required.

6: Proof of origin may be requested.

4. UK Global Tariff

Importers will need to pay customs duties as set out under the new UK Global Tariff, which was announced in May.

Duty will need to be paid on the basis of the origin, classification and customs value of the imported goods.

Duty deferment options are available, and traders should note that any declarations for EU-to-GB trade which are deferred under the three stage import controls will also result in postponed payment of duty.

Should the UK agree a trade deal with the EU, this deal will determine the tariffs the UK will set for EU goods instead of the UK Global Tariff.

5. Export checks from January

The EU has said it will not replicate the UK’s phased plan, so declarations will be needed for exports from 1 January 2021.

Exporters can also use the new ‘Check Duties and Customs Procedures for export goods’ tool on gov.uk to identify what additional paperwork, tariffs and quotas are applicable.

Businesses can also apply to HMRC for an advance ruling on the commodity code that should be used for their goods and the origin of their goods.

6.1 S&S declarations, sanitary and phytosanitary checks

Safety and Security declarations for EU-to-GB standard goods are not required until July 2021.

There will also be physical checks at the point of destination or other approved premises on all high-risk live animals (cows, pigs and sheep) and plants from January. Documentary checks will be carried out remotely.

Products of animal origin will require pre-notification of relevant health documentation from April.

Sanitary and phytosanitary checks on animals, plants and their products arriving from the EU will be completed at specified Border Control Posts (BCPs) from July.

Fact: Safety and security declarations will require goods to be pre-cleared in the country of destination before they leave the UK. This could mean they must be pre-cleared before they leave the exporters warehouse

6.2 Export controls

The paper also says that any UK-EU deal is not expected to have an impact on strategic export controls on dual-use or possible military goods.

Exporters affected by controls will need to apply for a licence in the way they do now, using the SPIRE system run by the Department for International Trade’s Export Control Joint Unit.

7. ‘Pre-lodgement’ and ‘Temporary Storage’ models at ports

Border posts receiving goods from the EU will use one of two models:

• The traditional Temporary Storage model, where imported goods can be stored at the frontier for up to 90 days before being declared to customs
• The pre-lodgement model, where a customs declaration will be submitted in advance of boarding on the EU side.

Sheffield Chamber International Trade Centre will be able to assist and advise on exactly what this means and if there are any additional considerations that need to be taken.

8. GVMS

A new Goods Vehicle Movement Services (GVMS) is being developed for the pre-lodgement model and will be used in Northern Ireland from 1 January and for imports to Great Britain from 1 January for transit movements and thereafter as checks are introduced, with full use in July 2021.

Goods moving between GB, NI and onto the EU will be governed by the Northern Ireland Protocol and so are not subject to the same ‘Core Models’ as GB-EU trade.

9. New ‘Smart Freight Service’ for Ro-Ro export

Government is also looking to develop a new ‘Smart Freight Service’ (SFS) to support ‘Roll-on, Roll off’ (Ro-Ro) exports, to ensure goods needing to be transported quickly are not held up by additional checks.

Ro-Ro ferries allow for trucks, trailers and vans – to drive on and off seamlessly and are vital for the quick transportation of perishable goods, including many food items and medicines.

10. Plans for Kent traffic

The government is working with the Kent Resilience Forum to explore making the use of the SFS enforceable in Kent, where there are concerns over traffic management at the start of next year when the new rules are introduced.

One option the paper says is being considered is fining HGV drivers in Kent who do not use the SFS, or who travel in contravention of advice from the SFS not to travel to the port.

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The Sheffield International Trade Centre offers bespoke advice and guidance to companies regarding how the end of the transition period will affect their business and crucially their EU customers and suppliers.

The Sheffield Chamber International Trade Centre has been conducting Brexit compliance audits on companies for the past 2 years, during the audit discussions we get a clear insight into how the company works and the nature of there relationships between their EU suppliers and Customers.

We will consider every aspect of how your usual method of operation will alter from 1st January 2021, look at additional customs systems that could be implemented to lessen the impact, reduce the cost and mitigate risk, at the same time we will advise how your EU customers and suppliers will be affected and what you need to discuss with them.

For more information or to arrange a Brexit preparation and compliance audit call 0114 213 2991 or email [email protected].

Authors:

Mark Rowbotham FCILT:  Customs Adviser to the Sheffield Chamber International Trade Centre

Nick Patrick: Head of the Sheffield Chamber International Trade Centre.