Reliefs against Duties (Hard Brexit)
There are some reliefs from customs duties which may be important if there are customs duties in the first place, such as in a hard Brexit. The reliefs may be reflected in a deferment of duty of in a lower rate of duty. Some reliefs depend on how the particular product is used and whom it is used by.
There is a range of customs procedures such as warehousing which can have the effect of managing the liability to customs duty (and in normal course VAT) which would otherwise arise immediately on importation. As it happens VAT is likely to be deferred.
There are a number of favourable customs processes and arrangements the effect of most of which is likely to defer duty or to lift duty on the value-added element in the importing state,
The UK temporary tariff for a hard Brexit proposes that many third country rates will be reduced to zero on a temporary basis. In the circumstances, reliefs against customs duties may not be that important an issue, even in the case of a hard Brexit.
It is very likely in the event of a longer-term ‘soft’ Brexit, that there would be 0% duty on most non-agricultural goods moving between the EU and UK. An important exception, however, arises from the fact that it appears that most of traders’ goods are of non-EU origin. They are unlikely to be transformed sufficiently by work done in the EU such as to lose their non-EU origin and obtain an EU origin.
Nearly all the simplifications require a track record, compliance with conditions and approval by Revenue or HMRC. They often require a certain scale and level of infrastructure.
It may be that simplifications are made much more widely available in the post Brexit environment. This has been widely proposed as a mitigation against the effects Brexit. It is recognised that many of the so-called simplifications and status are not easily attained by medium-size businesses of significant scale.
IT Making Custom Procedures Easier
Another feature of the simplifications that is relevant is the fact that technology has radically changed customs compliance in very recent years. A new EU customs code, most of which took effect in May 2016 and is being phased in as to other parts, which is much more technology based. Software is now widely available and as set out in other sections the requirements for using it can be easily explained.
Strictly the default position is that most goods arrive at customs and are later cleared through it.. However, in UK to Irish and Irish to UK trade, facilitation by technology is much more feasible and the whole process is much more orientated to getting prior clearance from both Irish Revenue and HMRC in advance with a complete clean twin movement possible in principle to a much greater extent, than say where goods move long-distance through shipping or air transport.
In these cases, it is necessary and, in some cases, more convenient to complete the full customs return in advance for both Revenue and HMRC than, say, undertake a simplified declaration and later complete returns after the event in records. These latter simplifications are usually only available to larger traders with very secure systems. Something like them is being made available on a temporary basis post Brexit for smaller traders.
However modern software interaction with customs is such that in many cases, traders can as easily do a full custom return without much greater inconvenience. Effectively. the technology has overtaken the simplified procedures to some extent and has simplified the full procedures.
There is a distinct possibility that there will be ultra-simplifications on the Republic of Ireland to Northern Ireland trade in a hard or soft Brexit. Certain announcements have been made in the context of a hard Brexit in relation to Northern Ireland which are dealt with in separate chapters.
If anything like these ultra-simplifications were to persist in the long run (and this seems unlikely) there may be arguments in favour of routing goods through Northern Ireland in some cases, either by way of imports from GB or exports to GB, subject to compliance with the ant avoidance conditions.
The UK has indicated that the simplifications will be subject to anti-avoidance conditions. However, where legitimate North-South trade is involved, such as sales to traders’ subsidiarity, then depending on the ultimate EU UK agreement, there may be scope within traders’ business given that it has a genuine North and South footprint to use simplifications that may apply.
Temporary simplified procedure (for hard Brexit)
The UK announced in March 2019, just before the original Brexit deadline, a special temporary simplified procedure to take effect in the event of a hard Brexit. It is possible to register for this procedure. We believe it would be useful if traders’ UK counterparty registered for the procedure given that it is an extreme simplification and could assist traders in the event of a hard Brexit for a period of 1, 2 or more years in completing customs in the United Kingdom.
The new procedure is wholly at variance with normal import procedures. It is not available to professional customs agents and freight forwarders. It is only available to importers who do customs importation themselves.
Because the UK would be out of the EU in the event of a hard Brexit, it is free to make its own customs laws subject only to general WTO considerations. The UK has basically afforded the widest thoroughgoing simplifications that are only normally available to experienced organised and approved traders, to all traders.
It is stated to apply for a period of 3 to 6 months and the UK government has announced that it will give a 12-month notice period if they are withdrawn. This could mean that it continues for quite a period and is likely to apply during the whole of the period when there might be a stand-off between the EU and UK pending a long-term trade agreement.
Under the procedure, traders’ UK counterparty would be entitled to import goods on the basis of a guarantee. Traders’ goods should not be “controlled” goods (which are not covered) so they should generally enjoy the simplifications proposed. We have set out details of the procedure in a separate section.
It is stated that the procedure does not apply to Northern Ireland trade with the Republic of Ireland which is to be subject to no controls at all in accordance with the publication in March for a hard Brexit contingency.
The simplified procedures basically allow
- a very simplified declaration at the point of import in traders’ own records
- deferred payment (with a guarantee which must be obtained)
- fuller entry in traders’ own records later.
Traders will still need to do export declarations on the Irish side.
We mention some other long standing customs simplifications in broad terms simply to alert traders of their existence as one or more of these may be of relevance either or both in the circumstances of there being customs duties and customs processes (hard Brexit) and the circumstances of their being customs processes only (soft Brexit)
Most of the simplifications would be relevant only if traders are doing traders’ own customs returns. Indeed, the more important issue is that traders’ logistics provider/carrier enjoys the maximum certifications status simplifications so as to facilitate the efficient movement of goods
It is central to nearly all of the special treatments/reliefs that traders as an economic operator/business are authorised to undertake the particular relieving process. This will require terror examination by Revenue or HMRC approval compliance with conditions which may go to both traders’ premises and traders’ business organisation as well as security.
The following simplifications apply under the EU customs code. Therefore at least initially they will apply in the same terms in the European Union (Ireland) and the UK. As in other contexts, the UK will have greater scope to afford further simplifications. On the other hand, Ireland being part of European Union may only work within the scope of European Union Customs Code as it is EU wide law, the amendment of which requires EU legislation passed by the Council and Parliament.
It is worth saying that there is very considerable scope in the EU Customs Code in force for states / revenue authorities to grant simplifications either formally or in practice. As indicated, we believe in traders’ case the better scenario is likely to be that logistics provider undertakes customs returns in which event the simplifications will not be as important to traders than might otherwise be the case. In this case, the real simplifications will lie in achieving and consolidating effective status as trusted by Revenue and HMRC.
If traders’ past record reputation and that of the carrier are good, there are less likely to be interventions in accordance with the Revenue and HMRC algorithm for interventions.
Nonetheless as indicated a certain amount of intervention is inevitable by way of basic policing. HMRC and Revenue will always wish to see that what is declared is in fact what is passing. Traders may be subject to intervention because traders’ goods are grouped with those of another trader who is subject to intervention either because of specific risk management or on a more random basis.
Favourable Customs Processes and Reliefs
Information on the various reliefs and processes are available from HMRC and Revenues website as well as from this website.
There are a number of reliefs where goods are moved temporarily outside the country and back in particular for processing work.We have not gone further into the various reliefs and processes at this point as there are several such reliefs, they are quite detailed and conditioned, and most of them do not fundamentally change the ultimate customs obligations.
If Brexit heads towards hard Brexit customs duties, further consideration should be given to the possibility of some of the procedures including
- customs warehousing
- inward processing
- outward processing
- temporary importation
- end-use duty relief
Simplified declaration procedure for imports (Irish Revenue Guidance)
A simplified customs declaration allows an economic operator to omit some particulars and supporting documents of a standard declaration at the time of customs clearance. The simplified customs declaration is a two-step procedure:
The simplified declaration, containing the minimum required data elements is lodged by the economic operator.
The supplementary declaration, containing the remaining required data is lodged after the goods have been released. (There are circumstances where the supplementary declaration may be waived.)
Prohibited or restricted goods are not eligible for the simplified declaration procedure at import.
The simplified declaration must contain enough information for the goods to be identified. It must be accompanied by all documents necessary to release the goods. However, if some of traders’ documents are unavailable for reasons outside the traders’ control, it must satisfy Revenue that these documents exist before it will accept a simplified declaration.
Individual consignments may be imported and released for free circulation in any one month under this procedure.
All such declarations made during the month must be supplemented by a single or consolidated declaration covering all importations made during that particular month.
The date of acceptance of the initial simplified declaration will be the date used to apply import duties and any other provisions.
Simplified declaration procedure for imports (UK side)
Customs Freight Simplified Procedure (CFSP) is an electronic customs declaration for speeding up the importation of goods. When CFSP goods arrive at a frontier from outside the EU, an initial declaration known as a Simplified Frontier Declaration is submitted by the trader to allow the release of the goods. Subsequently, details of the consignment are sent via a Supplementary Declaration which is sent to HMRC within a set time. It is possible to use CFSP alongside other favourable custom procedures.
In order to operate CFSP, the business or trader must be authorised by HMRC. In order to qualify for use, the business or the agent must have access to the electronic recording system, have a unique trading reference number, have a good record of compliance and be able to use its duty deferment facility HMRC will inspect books, records and procedures to verify that it is appropriate for the procedures.
Under CFSP, a duty deferment account is operated through HMRC. Traders and representatives must pay by the duty deferment account.
HMRC treat goods imported under CFSP in the same way as goods entered under the normal procedures. On arrival in the EU, HMRC may check the goods for any smuggling, animal, and plant health standards and other controls.