Customs procedures worldwide require both export declarations and import declarations. The export declarations are necessary for statistical, VAT, customs control, regulatory and other reasons. Effectively the signal to proceed, green routing or equivalent, must be given both on the export and import side to transport smoothly/seamlessly to the state of import.
There may be simplifications in the ultimate UK EU trade agreement in the longer term. In the event of a hard Brexit, the full default rules would kick in, subject to the simplifications announced by the UK for GB imports. It may be that because of the special Northern Ireland circumstances and the absence of border infrastructure that the provisions operate somewhat differently in practice in RoI / Northern Ireland trade.
In practice, the export declarations and import declaration must be lodged and cleared on both sides before the movement over the border takes place. The summary export declaration for land movements requires notification at least two hours before the goods arrive. This is likely to be waived for NI exports, even in a hard Brexit.
In the case of movements by sea or ferry, at least four hours’ notice is required. In practice, this is usually incorporated in the full export customs declaration allowing enough time for a green routing to come through on the Republic of Ireland and UK side.
The essence of customs control both on the export and import side is that the key information is communicated to the revenue authorities whether the Revenue in the Republic of Ireland HMRC or a continental revenue authority. On or before arrival, it is subjects it computer program based profiling exercise with a view to giving it a green routing or orange routing (document checks) or red routing (physical checks).
Technically the default on both import and to a lesser extent on export is that the goods are presented to the revenue authorities and examined. However, 92% of the movements in the present well-established customs environment involve no checks.
Putting aside for one moment the special border issues in Ireland, Irish Revenue would have obligations under EU law to make a certain number of random checks regardless of goods profiling and effective trusted trader status. HMRC would have similar obligations under UK law but they may be more scope for
The objective both whether undertaking declarations directly or using the services of the logistics provider should be to obtain routine export clearance and green routing on the import side in each import and export scenario.
The essence of the customs process on export and import is risk profiling. As a long-established company, with we presume a good compliance record, traders should in principle be capable of achieving effective trusted status in the sense of being designated low / zero risk.
The UK has introduced a new very light temporary import procedure in the event of a hard Brexit. It appears that this will last at least 18 months. There are however conditions including a UK establishment and that the trader undertakes the returns itself. Furthermore, it does not apply to Northern Ireland to the Republic of Ireland trade. It might be a model for NI trade later.
Basically, the customs code requires detailed information across a range of standardised headings in relation to the parties, the transaction, goods, and valuation. It also requires information in relation to the transport, the means of movement and time of movement across the border.
What arrangements apply will depend on traders’ particular arrangements with the supplier concerned. Even if traders’ supplier is not willing to act as an importer into Ireland it will almost certainly wish to act as an exporter from the United Kingdom from a control and VAT perspective. As mentioned below if traders act as UK exporter it would imply that the UK supplier charges traders’ UK branch VAT.
The import and export data requirements have very significant overlap. Although the data is overlapping to a great extent and is largely identical and organised in similar ways, at present there is no single mechanism for declaring both to UK customs and Irish customs in a single return. Either traders, a broker or traders’ carrier needs make both returns. However, the software can facilitate copying over the data from one to the other very easily.
Essentially the customs process involves the communication of a range of data relating both to the transaction in terms of the supplier, purchaser and the goods and also the circumstances of the movement across the border. All of this information is risk assessed on an automatic basis by Revenue and HMRC on the UK side.
Essentially what traders would want is that in relation to traders and traders’ goods, that HMRC Revenue and any third country revenue authority routinely give traders green routing as low risk. This may involve payment of customs duties or not depending on the situation.
If a hard Brexit came there would be some customs duties across the range of products traders import. In a softer long-term Brexit, it is distinctly possible that there will be zero customs duties on all or almost all types of products traders import, in which event, customs duty payment is not a risk. In this latter case, the risks from a customs perspective would be more in the area of origin and regulation which are set out separately. These risk issues will determine the extent to which HMRC and Revenue will consider intervention in by way of physical stopping and checking under their risk analysis.
The issues around the importation also focus on the transport movement itself including other goods accompanying movement. Traders’ goods could get held up because of risk issues that arise with other goods that they are grouped with. Traders would expect that over time, traders’ logistics provider would not group goods that are more vulnerable to Revenue checking and intervention with goods that are less likely to be checked.
There would be the risk and likelihood that a certain amount of random policing intervention will take place by Revenue / HMRC, no matter how trusted traders or traders’ logistics provider is. This could lead to delays at the border and problems in terms of traders’ ability to supply customers. It is very hard to predict how this might turn out, but traders would need to detect any patterns which leave traders in difficulties in supplying traders’ own customers and try to address these issues with the supplier or the logistics provider.
Organising Traders’ Data for Customs Purposes
Regardless of whether traders undertake traders’ own customs returns, use a broker or use the logistics provider to undertake traders’ declarations, there are certain data which is required to be communicated to HMRC Revenue or continental Europe revenue authority) to complete an import declaration. This data will be required regardless of who makes the returns. Some of the data including the critical customs codes will be required from the supplier and carrier.
Regardless of whether or not traders undertake their own declarations with their own customs software (which should ideally be integrated into traders’ existing software and goods management systems) or in other cases, use the carrier / logistics provider, traders need the data available for each order. The data concerned should be associated with the goods under traders’ internal system so that when they place an order or move goods, traders can readily furnish the required information either to the logistics provider or for direct customs declarations.
In a customs duty environment (hypothetically in a hard Brexit or in a softer Brexit but with some duties) traders can make mistakes by undercharging and overcharging customs duties. This can occur by getting the classification of the goods wrong or misunderstanding the treatment in the code.
Overcharging is obviously an act of self-harm to traders’ business. Undercharging leaves traders vulnerable in a future customs audit to arrears of customs duties plus interest and penalties on goods where traders have not recovered passed on the costs to traders’ own customers.
In relation to imports and / or exports whether on the purchase side or on the sales side the same questions and issues arise in relation to how customs are handled. Broadly, there are three alternatives.
Traders can undertake the customs returns with specialised customs software. Traders need to liaise with the carrier/legitimate provider when doing thier own customs declarations. Traders need to get information from them in advance in each case with precise transport details. It is only possible for traders or an external customs broker to do the customs return if the mandatory information mentioned in the previous chapter is available upfront and is communicated to Revenue or HMRC prior to any commencement of movement.
This includes certain details of the vehicles, ferries, time of arrival et cetera which traders will need to get from the logistics provider to do the declaration. Traders then need to send the logistics provider a movement reference number and a copy of the completed and accepted customs declaration at a minimum.The logistics provider may be unable or unwilling to facilitate traders in relation to giving the necessary information to allow traders to make the returns.
It is technically possible to put in returns and get a customs clearance with incorrect information and seek to correct it afterwards. This is highly inadvisable and will impact on traders’ reputation as well as being a breach of criminal and civil customs legislation. It would leave traders both personally exposed to criminal and civil sanctions as well as leaving traders’ business subject to further interventions and losing trust.
Traders’ goods will not be accepted by a ferry provider unless the exporter or exit declaration has been given and accepted by Revenue and / or HMRC as the case may be. Traders can see this from the logistics providers perspective. The ferry company will not allow it to load the vehicles without at least the entry or exit declarations.
A second possibility is that traders pay a customs agent or broker to do the returns for traders. This is potentially more costly, particularly since there would be high demand for their services. They would still have to liaise with traders’ logistics providers who would also incur extra expense which would be passed back to traders both in liaison and in their own extra obligations to customs, which would arise in any Brexit. Traders may need specialist customs broker advice if particular issues arise with Revenue or HMRC.
The third possibility is to use traders’ logistics provider to undertake the declarations for traders. Very often the carrier/logistics provider is best placed to make the declarations for the reason that the carrier/logistics provider must, in any event, complete a significant part of the data set which must be returned to customs on each movement regardless of whether traders complete declarations. They would also have access to a lot of the basic data in their systems which is also required for shipping and road movements quite apart from customs issues. Traders will be aware of the logic of this process in the context of traders’ existing imports from outside the EU.
UK Simplifications for Hard Brexit
The UK has unilaterally announced a number of simplifications on import trade into the United Kingdom. This is to apply for an initial period of at least a year with a further notice period before it is withdrawn which is stated to be up to 12 months. This may mean continues for significantly longer than a year.
The announcement was made in the context of hard Brexit risk so may not apply in the longer term. The relief does not apply to North-South trade which is to be totally customs free in a hard Brexit scenario. However, it would seem to be available to the UK counterparty in respect of imports other than from the Republic of Ireland.
Unfortunately, there are no equivalent simplifications on movements in and out of Ireland which remain subject to Irish customs processes. The UK has not waived an export declaration requirement.
Handling Customs on UK Purchases
In the case of purchases from England, there are three possible methods by which customs may be handled. The first option, is that traders’ UK supplier would complete export declarations on the UK side, and trader would complete import declarations on the Irish side.
The UK suppliers may nominate a particular freight forwarder/logistics providers and it may be convenient to have them do customs on the UK and Irish side where they are set up to do this. Many larger UK freight forwarder/logistics providers are in a position to provide the service.
Many UK supplier insist on doing the export declarations from their own VAT management perspective so that they can prove that the goods have been moved out of the United Kingdom. Many such suppliers are gearing up for customs in the context of supply to other EU countries.
The second possibility which may arise with some suppliers who are unable or unwilling to do the UK export declarations either at all or on economic terms is that traders’ UK company buys directly from those suppliers and then executes an export to traders. It would have an implication that traders’ UK company would have to pay UK VAT without any possibility of deferral. We presume it could usually claim back the VAT.
Conceivably, traders’ UK counterparty could act as traders’ agent in undertaking the export declarations on traders’ behalf in the UK. In this case, traders would be an exporter with the UK company having full customs responsibility, as HMRC require either an exporter who is established in the UK (as would be the case with traders’ UK counterparty) or an indirect representative who takes 100% responsibility for customs.
The traders’ UK supplier might actually import the goods into Ireland doing both UK export and Irish import procedures. This is probably unlikely to happen or be economic. In some cases, UK suppliers might have some logistical means to use an Irish distributor or agent. This may not be commercially desirable apart from issues of cost.
Logistics Provider’s Unavoidable Costs
Regardless of making the declaration’s in-house traders will need customs services at the point of an intervention. A customs adviser or the carrier may be required to deal with whatever queries may arise.
The logistics provider is going to have to return much the same information in relation to the goods even if it does not make the customs declaration. It is required to file an e-manifest with a lot of the same data. If traders made the declaration traders would have to supply reference numbers that can be shown to prove that the goods have been cleared. Most of the key data can be carried across with the reference number. The ferries will not take traders’ goods unless there are pre-cleared, and it is likely that traders’ logistics provider won’t take them earlier.
Even if traders make their own import declarations there will be extra costs from the logistics provider in the price charged to traders because they would also be required to undertake new processes when shipping the goods including an e-manifest with full customs details of all goods aboard which is collated from all the relevant returns.
Logistics Providers and Freight Forwarders
Effectively logistics providers and freight forwarder provide a continuum of service types. Many logistics providers effectively provide freight forwarding services including full custom services. Those who do not do so at present will have to adapt to do so in the context of Brexit. Some freight forwarders may not necessarily undertake carriage and transport but may arrange it only.
Some categories of logistics providers effectively are service providers whose roles be very similar to a freight forwarder in that they don’t maintain their own vehicles and contract out the process. Logistics providers may retain customs agents to assist them or undertake some or all customs work inhouse.