Clarity on customs duties
Businesses often struggle to have a good understanding of their customs declarations as they tend to either employ third parties to submit on their behalf or use systems that produce limited reporting. With a lack of a clear roadmap, businesses can find it difficult to achieve customs conformity and standardised processes.
Those who are looking to enter new markets will benefit from making sense of their own customs data. This can be achieved by having access to software which flags any errors in custom declarations, automates the process of spotting common over-payments and under-payments, and has the ability to make real-time amendments to customs data.
Good customs planning can help reduce your cost of sales on imports and ensure your product will be more competitive in overseas markets.
There are many factors to think about when looking to export goods to a new market but taking a holistic view is always prudent.
3 common mistakes
Firstly, where multiple shipments are made during the same period using the same supplier, the Incoterms declared are not always the same. If you agree the Incoterms with the supplier, it is important that the agreed terms are actually used. If there is no agreement, the terms used for each shipment may not be consistent. Where there is agreement between importer and supplier, you should also ensure that the custom broker enters the correct terms on the customs declaration.
Custom brokers can make anomalous customs declarations and this is the second most common mistake. If you find that there is a high error rate, you should look to put further control in place by setting out the obligations in a contractual agreement.
Finally, where multiple shipments are made during the same period using the same supplier, the currency declared is not always the same. As an importer, you must ensure that the same currency is used for each shipment with the same supplier. For example, your use of either GDP or USD must be consistent.
To avoid any discrepancies, it is beneficial to agree to the use of one currency and enter into a formal agreement to reflect this.
Free Trade Agreements
The UK has agreed Free Trade Agreements (FTAs) with over 70 countries which grant reduced customs duty rate on imports of UK-originating goods into overseas markets. Using an FTA can make your exports more competitive.
An importer will typically rely on a supplier to provide the information needed to claim the preferential tariff rates under the FTA. The necessary information should be a contractual requirement on the supplier to ensure that the information is shared.
You should also seek to have an indemnity in the contract to provide cover for instances where you have relied on incorrect information given by the supplier. This is especially important as HMRC can assess the use of any preferential tariffs up to three years after the date of import.
HMRC heads-up
All businesses can subscribe to a monthly report from HMRC which will provide them with a list of their customs export declarations and evidence of shipment for only £240 plus VAT per year. By subscribing, you will save your business considerable time and effort.
The number of HMRC customs audits conducted last year was up 19% compared to the previous year.
The penalties issued as a result of those audits also increased by 29%. The rise in activity shows that HMRC are now taking a more proactive approach and this may be due to the fact post-Brexit customs duty is now recoverable by the UK, as opposed to the EU.
Womble Bond Dickinson and Barbourne Brook Partnership
Womble Bond Dickinson have partnered with Barbourne Brook to help their clients spot risks and opportunities within their businesses' customs operations.
Through extensive customs consultancy experience and data science from Barbourne Brook and legal expertise from Womble Bond Dickinson, together we offer a "one stop shop" to assist with customs optimisation.
The partnership between Womble Bond Dickinson and Barbourne Brook has been well received by our clients and has provided substantial savings in their custom duties.
Throughout 2022, Barbourne Brook have been successful in spotting £1.6 million in overpaid customs duty by our clients, which has now been reclaimed from HMRC.
To build on this success in 2023, Barbourne Brook are offering an entirely free-of-charge analysis session using their own analytical software, CAT360. This analysis will scan for risk and opportunity within your customs landscape. After the session, you will better understand whether there are any development areas, saving opportunities and duty reclaims available.
If you are planning to export goods or services from the UK then it is likely you'll need legal advice to protect you against various risks. Please get in touch if you need any support with this.
