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Preparing for a no-deal Brexit – customs and tariffs

Peter Legge Peter Legge

If the UK leaves the EU without a deal on 31 October 2019, trade between the UK and EU would revert to World Trade Organisation (WTO) terms. This means the movement of goods between the UK and EU would be subject to Customs Duty and customs processes and controls.

We set out below the top 5 steps businesses should take to prepare for a ‘no deal’ Brexit from a customs and tariffs perspective.

1. Apply for an EORI number if you don’t have one

An Economic Operator Registration and Identification (EORI) number is needed to import from and export to the EU after Brexit. Currently, businesses only need an EORI number if they are trading with countries outside the EU.

In mid-August, HMRC announced that it would automatically allocate EORI numbers to businesses with a history of trading with the EU.

However, some businesses may not have been issued with a number automatically, including because they:

  • Only make distance sales to consumers in other EU countries
  • Have only just started trading with the EU
  • Are not VAT registered because they trade below the VAT registration threshold

If you have not been issued with an EORI number, you should apply now.

If you wish to take responsibility for importing goods into an EU country (perhaps to save your customers from having to comply with customs formalities) you are also likely to need an EORI number issued by an EU country.

2. Apply to HMRC to use transitional simplified procedures (TSP) when importing into the UK

TSP allows your business to defer payment of Customs Duty and submission of import declarations when you import goods into the UK after Brexit.

You can only apply if your business is established in the UK, currently imports from the EU (TSP is not available if you only import from outside the EU) and meet certain other conditions.

For most goods (“standard” goods), under TSP you will only need to make a simplified import declaration in your own records when you import goods. You will then have:

  • until the 4th working day of the following calendar month to make a supplementary import declaration to HMRC, and
  • until the 15th day of the following calendar month to pay any duty (provided you have a duty deferment account, which you will also need to apply for).

“Controlled” goods (including excise goods and some goods that need an import licence) follow a different procedure.

3. Consider customs processes and how you will submit customs declarations

Customs declarations must be submitted to HMRC for each consignment imported to or exported from the UK. You will either need to use a customs agent to make these declarations, or acquire the special software and training needed to do this yourself.

However, UK customs declarations are not needed where you import or export goods from Northern Ireland across the land border with the Republic of Ireland. Please see here for details of the special arrangements applicable to the Irish border:

4. Determine your commodity codes and the tariffs payable on your imports and exports

The classification of your products will determine what tariffs are paid when you import goods into the UK, or your goods are imported into the EU. It is vital that the goods are correctly classified, which means determining the correct 10 digit commodity code. This is based on the characteristics of the specific product.

The tariffs payable on import into the EU are determined under the EU’s Common External Tariff. The UK government has announced a temporary import tariff that will apply when goods are imported into the UK under a ‘no deal’ Brexit. This eliminates or reduces duties on many goods in order to protect consumers.

In order to complete customs declarations, you will also need to determine the customs value and origin of your goods.

However, Customs Duty will not be payable when goods are imported into Northern Ireland across the land border with the Republic of Ireland.

5. Consider whether any customs reliefs or special procedures could help your business

You can apply for certain customs reliefs that could eliminate or mitigate the tariffs you face.

These include:

  • Transit relief (for goods moving from the EU to the UK and then shipped back to the EU)
  • Customs warehousing (to avoid double taxation on goods bound for the EU)
  • Processing relief (for manufacturing in UK using EU components, where the finished product is exported to the EU)
  • Temporary admission (for goods moving temporarily into the UK from the EU, or vice versa)

As well as these 5 points, businesses should also consider:

  • Whether their international trade could be impacted by the loss of the EU’s free trade agreements (FTAs)
  • Changes to the VAT treatment of their cross-border trade
  • Whether their imports or exports need to comply with any licensing requirements
  • Which party in their supply chain will be responsible for import formalities and paying duties
    • This may require changes to contracts
    • Businesses may wish to act as importer of record when their goods are imported into EU countries – if so, they may need VAT registrations in those countries