Real world Q&As from the Brexit webinar
Tracey Renshaw, Import Export Support
Speaking at the recent Norfolk Chambers’ Brexit webinar showed me just how important the current situation is to businesses who trade in Europe, and that everyone has a different set of issues to wrestle with.
So I thought it would be useful to share Import Export Support’s answers to the detailed questions asked in the Q&A session.
Q.1 Will any customer outside the UK be zero rated for Sales invoices? B.L.
Will we need to add VAT to our invoices when selling to our EU clients ? P. R.
A. Exports to the EU will follow the same VAT rules as current exports to the RoW with no sales VAT applied to the invoice. However Import VAT will be applied on imports into EU member states, which can only be reclaimed if the importer's EORI number is that of the owner of the imported goods. T.R.
Q.2 The Gov. website shows conflicting information: one article says we only need to make a Safety & Security Declaration when goods enter the UK, and can raise a supplementary declaration later on. Another article says that we’ll need to complete a simplified declaration as well. Which is correct? M.M.
A. The answer is that both are right. There are a number of easements regarding the submission of declarations available, but these easements do not apply for all movements, all products or all destinations. So for RoW imports, requirements for safety declarations will continue as they are today. For imports from the EU, S&S declarations will be phased in for standard goods only, according to paragraph 3.1.5 of the border operating model S&S import declarations will be required for imports from the EU into GB from July 2021. This will be the same model currently used for RoW trade. T.R.
Q.3 What happens to commodity codes after 2021? R.M.
The UK is moving to the UK General Tariff (UKGT) for all imported goods. These tariffs apply to all RoW imports into the UK. T.R.
Q.4 Our contacts in Spain are telling us that our vehicles will be stop at checkpoints in Europe to be given paperwork for onward travel - is this correct? M.M.
A. Firstly, I would advise asking them to explain why they believe this is the case. You will need to plan the journey to find out in which country your shipment will enter the EU, and the route it will take to its end destination. It will need a guarantee and the customer must discharge the movement when it arrives. As Kevin outlined in the webinar, you might want to consider taking a direct route to Spain using air to sea freight options. Alternatively, you could apply for a registered consignee status to make use of community transit when sending goods overland through several EU countries. T.R.
Q.5 Do the government plan to stop using the CHIEF system after 2021? R.M.
CHIEF will be replaced by the Customs Declaration System (CDS) sometime in the future, the latest date being talked about is autumn 2021. CDS is currently being rolled out to some traders but they are hitting issues which prohibit a wider roll-out any time soon. However, in the shorter term there are plans to use CDS to submit import declarations for goods sent from the UK to NI. T.R.
Q.6 Will our freight forwarders submit customs declarations on our behalf as a standard part of the service? S.G.
A. Some but not all freight forwarders can submit declarations themselves, or they may outsource this to a bureau provider. Your FF will have certain easements/agreements in place with HMRC to facilitate bulk shipments, so ask them what services they offer for exports arriving in EU. This service isn’t always included as part of the freight charges and I have seen some very high quotes from agents to act as a direct representative and submit import declarations, as the complexity of filling in a full SAD/C88 declaration for a large consignment of goods requires time, knowledge and software. Remember, even if your agent acts as your direct representative and submits a customs declaration on your behalf, you are the importer/exporter and fully responsible for the accuracy of the declaration. T.R.
A. LV Shipping offer a full customs declaration service direct, i.e not sub-contracted out, and we also offer the use of a VAT deferment account. Our fees are in line with market rates, but we have seen some very high fees being quoted as a result of Brexit. K.W.
Q.7 If we offer Incoterm DAP (Delivered at Place) to customers, I understand that means we will arrange everything up to the named place of delivery, except for customs clearance and duty. However, I want our customer to cover the freight cost. What’s the terminology to inform them that we'll arrange and prepay the delivery, but that we'll invoice them for it?
A. Incoterms are not obligatory and they can be tweaked by including extra detail in the sales contract. So, in this instance, you can quote Incoterm DAP but add in a sentence to explain that the customer will be required to prepay you for the cost of the freight. T.R.
Q.8 We have had problems gaining indirect representation in the EU for import clearances in our UK company name, do you have any advice C.G.
A. You will need to have an EU EORI number and fiscal representation in the EU to submit an EU import /export declaration and a GB EORI number to submit an UK import/export declaration. For NI you will need a NI EORI number which you can get through the Trader Support Service (TSS). Applications are closed for this, as of 14th December they are supplied automatically. T.R.
Q.9 We buy training equipment from Ireland and the company usually drives over here with the goods. Will this be affected? B.L.
A. After Brexit, full customs declarations will be required for all goods imports and exports shipped between Ireland and the UK. T.R.
Q.10 We receive material from EU customers to which we apply hard coatings and return the product. The material remains the property of our customers. How can we avoid duty on the material coming in and going out of UK and only have duty on our hard coating element? P.L.
A. A customs simplification called Inward Processing Relief is used specifically for circumstances like this where you are importing items for repair/rework/processing before they are re-exported. You can use this up to three times a year without authorisation but for regular use you will need to be authorised. T.R.
Q.11 Our company receives free issue consignment stock from our EU customers to rework. When we ship the product back, do we put the value of the goods or the cost of our service on our customs invoices. So, for example, if a customers part is worth 20 euros, our service cost is £10, which value do we put on the customs declaration? N.R.
A. Customs valuation is very complex and I’d need full details to answer your question, however you cannot simply declare the value as you suggest. I can see several areas of concern in your query: as the goods being imported is consignment stock, you will not be the owner the imported goods, therefore you will need to establish how you will handle import VAT. On a customs declaration an accurate value for customs must always be declared and this must reflect the true cost of the goods being shipped, including freight and insurance if they aren’t included in the landed cost. If there is no sale then there are five alternative valuation methods, but these must be used with caution and agreed with HMRC. T.R.
Q.12 For suppliers stating DDP (Delivery Duty Paid) I understand that the customer will have to pay the duty and VAT but who would be responsible for submitting the declaration? S.G.
A. DDP is where the supplier picks up the duty and VAT bill, not the customer. This isn’t possible to do without the correct EORI for that country. You will need to ensure that the importer of record's EORI number is used as the consignee on the import declaration (not always the case with DDP) and that the they have the relevant VAT registrations in that country to be able to reclaim import VAT. T.R.
Q.13 We act as UK distributor for a manufacturer in the USA and they have told us that they understand that, as a result of Brexit, they will need to apply and register for a VAT tax. Are they correct? How might Brexit affect a US company exporting for resale in the UK, and ourselves, collect, pay and reclaim VAT on sales to the UK. R.H.
A. If you are talking about imports into the UK from US then there will be no change. Provided the sale is done from you as the UK entity directly to a UK customer then you as the importer of record will be able to reclaim the import VAT provided that you are VAT registered and you have an original C79. You may like to look into using PIVA (Postponed Import VAT Accounting) which comes into force on 1st Jan 2021. T.R.
These questions raise some important points and I’m sure the discussion will be of use to other businesses. I just want to add that there is rarely a simple answer, so if you need more information please contact me or Norfolk Chambers
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