Customs Declaration by Traders

Irish and UK Side

In order to complete customs on both the UK and Irish sides an establishment i.e. company, partnership or branch will be required in each jurisdiction. Where the following refers to completing declarations on the UK side, it is assumed that such is in the case.

Where this is not the case, then reference to the UK side refer to the Irish company’s counterpart importer or exporter as the case may be.

Costs Issues

The cost of external customs declarations is of the order of €30-€70 per declaration depending on traders’ provider and on whether it is an export declaration or an import declaration (dearer), in some cases more or less. They could be done by a customs agent or traders’ logistics company/ freight forwarder. This would imply a total  external cost of up to €100 per transaction involving both an export and import. The UK cost would be similar on average of about £90.

The logistics provider may separately invoice the customs declarations. It may roll the service into its general costs to traders but there would still be a direct connection between the volume of declarations made and the fees.

In contrast after initial training and standing fees, traders’ marginal cost for additional declaration where traders are a larger user say more than 50 consignments per month could be a little as €5 each or less in the case of inhouse declarations.

The above is indicative and does not take account of costs arising from Revenue and HMRC interventions and incremental cost of the logistics provider for liaising with traders and in relation to its own customs obligations such as an e manifest.

As indicated below depending on how the post Brexit environment works, these costs could be much more significant than the bare cost of making declarations. Time costs could be thereby incurred. A good deal of the time and service provided by freight forwarder involves time on the phone with Revenue / HMRC trying to sort out problems that arise when goods are detained, and requirements are made. The more this happens and the more traders are using services in this regard the high level of costs may be.

Minimum Prerequisites

Traders will have to liaise with the logistics provider as they need certain information from them for the return in order to proceed with the transport movement. Traders will also need certain details from them upfront such as the vessel and other means of transport involved in the case of each movement and the due time of arrival. This would include the ferry and the truck / lorry. The courier / logistics provider will need to be able to supply this information.

Equally, traders would have to pass back information to the logistics provider once traders have made the customs declaration and entry/exit return. They are likely not to accept goods from traders unless traders have a clear message back from Revenue and/or HMRC in relation to the declarations and returns.

The logistics provider may require traders to return the information through a particular channel or may simply accept that traders mail a pdf of the generated return. They may not be prepared to facilitate this interaction at all and may effectively require traders to use it to complete declarations from a coordination and logistics perspective.

Traders would need to train appropriate personnel in-house and coordinate with traders’ logistics providers. Traders would need appropriate software, of which there are a number of providers. Revenue and HMRC publish the software requirements for their systems in a very open fashion for use by software developers. There are a number of customs software systems on the market.

Trader’s personnnel must be available and able to deal with Revenue / HMRC requirements in the event of orange (doumentary check) routing. Documents may need to be sent to Revenue / HMRC to satisfy requirement by emial or through ROS.

UK traders would be obliged to pay an additional fee to have access to port community systems. This may be commonly rolled into traders’ software providers costs so that traders may not have this cost directly in most cases.

ROS (Revenue online) offers some customs interaction with Revenue but is not sufficient to do full customs declarations and all other messaging. This might become a consideration in the longer term after the whole market in customs services settles down and after traders’ experience with the logistics providers matured a bit.

Additional Carrier / Courier Costs Unavoidable

Regardless of whether traders make customs declarations, there would be additional customs costs because the logistics provider will need to return an electronic manifest with linkages to traders’ own customs returns. The overall declarations and returns to Revenue and HMRC look at both the transaction and goods etc. and the transport and movement. The question of who is doing the transportation and movement and what else is in the container is a part of the risk analysis regardless of the individual transaction.

Even if traders make traders’ own customs declarations, traders will still have to fund the additional cost to the logistics provider of correlating information from traders’ customs returns with the data aspects of the returns associated with the movement and dealing with the messaging from Revenue and HMRC arising so as to provide a clear path or liaise with customs if goods are checked by Revenue or HMRC.

There may be that other, perhaps much more significant costs and risk irrespective of whether traders do traders’ own returns or not. It is hard to predict to what extent customs interventions and queries et cetera are likely to arise. Regardless of whether the trader does its own declarations or not and whether or not it can deal with documentary queries, the traders’s logisitics provider will be required to facilitate the Revenue / HMRC check and may  be to only one who can deal with the matter, possibly in conjunciton with the trader.

Much will depend  on whether Revenue has the resources to take a light touch or a more interventionist approach. They are bound under EU law to undertake a certain amount of checks because customs duty is an EU tax. If other traders are making mistakes in the returns, then there is a much higher chance of intervention. Traders would expect the logistics providers to take steps to try to weed out these risks.

Advantages of Doing Customs In-house

An advantage of doing traders’ own customs declarations is that of control. Traders will be able to ensure the integrity of the returns and ensure they are correct. Traders will remain liable to Revenue and HMRC for errors made by others and agents on traders’ behalf.

Most customs brokers freight forwarders and agents will not act as indirect representatives so that they avoid having a primary liability to Revenue and HMRC as well as traders. It is almost invariably the case that they will act as direct representatives only so that traders have the liability, even for their mistakes. Furthermore, traders’ contract with a freight forwarder or other customs agents may limit or exclude liability to traders.

Just as there is an argument for using third-party expertise, there is a risk that returns will be made by low-level personnel who may like mistakes simply to get the returns through. We are not saying that this is something that will or should happen, but we are certainly aware of people who have had such experiences.

If there are mistakes it may be (and usually will be) because traders have not provided complete or adequate information. There may be scenarios in which mistakes are made and it is hard to prove where they lie whether with traders’ staff or the freight forwarder or customs agent.

Another argument in favour of doing Customs in-house is made by some custom software sellers and brokers in the context of Brexit, namely that there would be reduced capacity and possibly reduce quality in the customs broking / customs agent capacity in freight forwarders and otherwise in the early days after Brexit. Many people will be on a steep learning curve.

Most logistics providers should be able to undertake the relevant functions given that they are already handling many similar functions such as in the in contracting for shipping and where special controls apply, as is the case in many industries. However, some logistics providers and their local agents may operate on a relatively small scale and will find the new customs environment challenging.

There may be the degree of overlap in practice in terms of gathering and delivering the necessary customs information relating to the commercial transaction and furnishing it to the logistics provider/carrier and making the declarations in-house. To some extent, there is a similar process involved in assembling the relevant data and communicating it to traders’ logistics provider to that involved in making the relevant return.

After an initial learning curve, most transactions are likely to be routine. As mentioned, the essence of the process to get to a situation where traders routinely get green routing from the Irish Revenue /HMRC to allow free through movement. Doing returns in-house would have a certain cost as mentioned below in terms of software, training and ongoing staff time and diversion of resources.

Disadvantages of Doing Customs In-house

There are downsides to and against doing customs declarations in-house. There are initial setup costs in terms of buying software and ongoing software fees. In the UK there may also be fees for connection to port systems although they may be rolled into the software providers costs.

They would be below the level of fees which would be incurred with external providers such as the freight forwarder. However, this may be illusory as there would be other internal costs.

Traders will need to incur expenditure in training of personnel to undertake customs declarations. Revenue / HMRC expect tradeers to be avialable to deal with queries which will usualy be made shortly before the ferry arrives.  Traders may need to have more than one person available so that declarations could be done and queries can be answered, while they were absent or outside their working hours. Traders may not have quality assurance in relation to how traders’ own personnel undertakes declarations and they may make mistakes until they are experienced. The mistakes may be expensive.

Traders cannot avoid a lot and possibly most of the costs incurred with the carrier in relation to customs. The carrier will still have obligations to make a manifest and will remain responsible for some of traders’ information in relation to exit and entry summary declarations. They may doublecheck/correct traders’ homework and charge for it.

There will still be incremental costs of customs to the logistics provider, given the other obligations which the carrier has. These would include the costs of liaising with traders’ staff in relation to declarations, feeding information to traders’ staff for the purpose of the declaration and then receiving the declaration back from traders once traders had obtained clearance from Revenue and/ or HMRC.

The freight forwarder/logistics provider is the professional dealing with these issues on an ongoing basis and will have a greater level of experience and knowledge of customs than traders. Even if its staff make mistakes as sometimes happens, it will have responsibility to traders in a client care sense and reputational sense even if its terms and conditions limit or exclude liability.

Although traders’ freight forwarder or agents could be negligent or careless traders would at least have some comeback in dealing with them for mistakes of junior staff by way of basic client relations and service. Traders may get service credits.

Practical Limits

The freight forwarder is usually far more experienced in customs than traders and they should in principle as professionals provide a better result. They may spot mistakes that traders would not spot doing Customs in-house and correct them before they cost substantial money either by way of penalties or for charging too much customs.

Carriers may simply be unwilling or unable to furnish traders with the requisite information required to undertake exit and entry declarations from a logistical perspective. They will not be entitled to load traders’ goods onto the ferry nor are they likely to take traders’ goods in circumstances where traders are doing customs declarations unless traders have clear messages from Revenue / HMRC accepting the notices and declarations.

Traders’ carriers may enjoy simplifications and authorisations which are not available to traders. In some cases, traders may be able to claim these in the return, but traders will need precise information. In other cases, such as the simplified basic declaration followed by a more detailed declaration in books, traders’ carrier may enjoy simplifications which they can use but which traders simply cannot claim under any circumstances.

The freight forwarder / logistics provider may not be willing to take the risk that the trader’s declarations will be subject to interverntion

Traders will need traders’ freight/customs agents to deal with Revenue /HMRC  checks  because they will be the ones on the ground  In many cases the interventions will require that they have to revert back to traders to deal with the queries or issues raised.

Liaison with Courier / Logistics Provider

Traders would need to discuss the matter of traders’ doing returns directly with the logistics provider concerned. Traders would need to have certain of the core mandatory information to get prior green routing on traders’ customs declarations. This may be difficult for traders do not have visibility on the precise means of transport across the border et cetera.

Traders need to explore with the logistics provider/carrier what its minimum requirements would be in advance of accepting goods where traders make declarations in-house and how this would reduce their costs. Traders need to ensure traders can get the minimum transport details from them. If traders systematically enter data which  later requires correction, traders may possibly suffer damage to reputation which leads to further interventions.

If traders were to do traders’  own customs declarations, traders  would in effect complete the parts of the required dataset relating to the particular purchase and sale. Data on the means of transport and the movement would be required from the logistics provider. There may be practical difficulties in getting this information from the logistics provider in all cases or it may not be available on time.

The references which would be generated if traders completed declarations would need to be communicated to the logistics provider/carrier. The logistics provider/carrier would retain responsibility for making an e-manifest/notification to Revenue / HMRC with the transport details together with linking details to the customs declarations on both sides.

Traders would need to consider the mechanism whereby traders communicate with the carrier and how to undertake the necessary interaction so that traders can communicate to them the references and information traders obtain from Revenue and HMRC on foot of making declarations. Some systems of online software allow traders to print off a PDF of the SAD which are emailed to the carrier

It might be that traders’ carrier is unwilling or unable to facilitate traders at all and can only proceed on the basis that traders supply the full data set and they do the full return. They may not offer any cost reduction as it might be marginally less work for them only (and in some cases, might even be more work for them).

If traders do traders’ own returns or use a broker, the references generated from HMRC or Revenue are part of the dataset need to be communicated to the logistics provider who undertakes the movement. Traders will need some minimum information from the logistics provider about the means of transport both the lorry and vessel in order to get a clear customs declaration.

The carrier is responsible for making an exit and entry declarations about the goods and when traders do returns, they delegate this responsibility to traders. However, they must pull back the data from traders wot the relevant messages.

An e-manifest will also be required on movements across the Irish Sea which contains a lot of the same data. Unless a unique special customs arrangement which is devoid of any transport element is evolved for North-South trade, then traders’ carrier would require an e-manifest in respect of movements of goods across the border.

Connecting to Revenue and HMRC

Traders will need to purchase customs software and train up one or more members of staff who would always be available when required. Traders are already registered with Revenue and traders’ UK counterparty needs to register with HMRC for basic EORI registration.

The process of making direct declarations require registration for direct trader input in Ireland and the UK. The Irish process is available online and application can be made through traders’ ROS system Each return is ultimately verified by traders’ digital certificate.

Traders would need stand-alone software to do customs returns. Unlike other Revenue services ROS does not allow traders to make customs declarations by itself. Traders need to purchase custom software. This is discussed below.

Traders can apply on the Revenue’s website to use direct trader input. The so-called AEP system allows for automated entry into Revenue systems by traders and agents. Traders need to be approved for use. The return is associated with traders’ digital signature.

On the UK side, DTI is the same. The   Direct Trader Input facility that allows importers, exporters or their agents to clear consignments at import or export by electronic data transfer of the SAD declarations (Single Administrative Document) to the Customs computer system (UK CHIEF — Customs Handling of Import/Export Freight (being replaced by the new CDS system), DTI users require a digital certificate and must be registered as users of this system.

Customs Software

Traders need to purchase software for declarations to and interaction with Irish Revenue and UK HMRC. The UK temporary simplified procedures can operate without software. Software is available which facilitates its use.

There are a number of providers of customs software in the Irish and UK markets. It would be desirable to acquire custom software that is compatible or could be made compatible with traders’ existing stock management, sales, and purchase order systems.

Traders will also need to purchase software for both the (Irish) Revenue and HMRC side. Custom software effectively digitises and simplifies the customs forms and allows for input. It allows for the collection of standard data and reuse. HMRC, Irish Revenue and the EU publish manuals to allow software developers to interact with their systems.

The customs software is available on a stand-alone basis. There are patches or programs which can pull in the data from either large IT systems are some of the smaller IT systems used by many businesses.

There will be ongoing software licensing fees depending on the scale of use together with fees to cover support on issues that arise with any software. We could point traders to a number of software providers if traders were minded putting a system in place to do traders’ own customs returns on day one of any Brexit. Providers have different revenue models with a combination of a flat fee and fees based on volume.

If traders do traders’ own returns traders will need to train an individual within traders’ organisation to complete the returns and liaise with the logistics provider. There may need to be a second person who can do returns if the primary person is absent.

The EU Irish and UK customs authorities have published the full software technical information for interaction with Revenue and HMRC by way of returns and by way of dealing with various signals that come back from them to traders and logistics providers.