Customs & Indirect Taxation

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The profession of Customs is unquestionable the foundation of international trade. Customs areas can be an individual country such as Norway, or a large cluster of countries such as the EU. 

Indirect taxation, or as its more commonly known ‘VAT’ in Europe and ‘GST’ in the US, is inherently linked to Customs charges; where there is one there is invariably the other, although the ability to reclaim indirect tax, and how it is administered and regulated is different. 

Customs is a highly complex area of knowledge, but in recent years it has been required to absorb responsibility for a significantly wider remit, fuelled by governments desire for greater cross border trade visibility for economic, political, environmental, social, and security reasons. While there is a continued desire from the likes of the World Trade Organisation to see ever-more open global trade to increase the development of markets across the globe, increasing numbers of trade agreements between customs areas and nations are undermining this desire. 

To trade between different customs areas, or to take advantage of international trade agreements, it is essential to have a full understanding of this highly complex and forever-changing specialist area of knowledge. 

If you would like to understand a little more about the multiple elements within Customs and indirect taxation, please read on below……

 

 

 

 

The correct interpretation and use of Customs and indirect taxation is vital in order to compete within markets within different customs areas. The reality is however that the majority of businesses trading internationally fail to optimise basic efficiencies made available to them by legislators. 

A simple example being the continual complaint from UK and EU businesses about the payment of further import duties and indirect taxes when moving goods between the EU and the UK, a procedure that pre-Brexit did not incur any additional duty payment. If however goods are classified as of UK origin, there is no duty to pay upon import to the EU and visa-versa. When those products are imported back however, for whatever commercial reason, despite being of UK origin, import duty would apply. However, there are Customs mechanisms available to avoid the need to pay this added import duty, with VAT also be recoverable. While duties and VAT are payable for goods imported from outside the EU or UK, this duty and tax can be suspended, even when moved between the UK and EU, until that is they are released into free circulation. Essentially when they are sold, which makes a huge difference to cashflow, avoiding or reducing borrowing costs, freeing up highly valuable capital.  

Here are just some of the areas we, as Customs specialists, need to assess when developing an efficient and compliant customs strategy for you.  

  • International sales contract terms.
  • Import and export declarations.
  • Export and import of controlled goods.
  • HS / Tariff / Commodity code classification, affecting VAT and import duty levels.
  • CAP/Excise Charges.  
  • Packaging requirements.
  • Controls and licences with checks required with numerous government agencies for a licence, including ECJU, ILB, Forestry Commission, Rural Payment Agency, Home office, Health & Safety Executive, DEFRA, and various other areas of government with special interests
  • Tariff and Licence quotas, end-use suspensions, special permits/certificates, restriction of supply of products or to certain countries, additional duties, dual purpose goods, Quota Requirements, Anti-dumping duties, tariff quotas, tariff suspension, as well as systems including TRACES, IPAFFS, PEACH ad SPS checks.   
  • Health checks required.
  • Authorisation Scheme – Authorised Economic Operator – Customs, Security or both, or Trust a Trade Scheme.
  • Valuation – methods, declarations, and rulings..
  • Calculations of duty and taxes on consignments
  • Packing lists requirements.
  • Preference Documentation.
  • Movement Certificates.
  • Transport Documentation.
  • Dangerous Goods Note.
  • Certificates of Conformity.
  • Port Health certificate.
  • Country Procedure Coding.
  • Documentory Proof of Origin.
  • Duty relief Schemes.
    • Inward & Outward Processin
    • Customs Warehousing
    • Authorised Use
    • Temporary Admission
    • Returned Goods Relief Identification and Claims
    • Special System of Duty relief
    • Duty Suspension and Tariff Quotas
    • Temporary Storage

Prohibitions and Restrictions covering:

  • Protection of the environment
  • Human, animal and plant health
  • Cultural and economic protection

Protection of public policy and security.

Simplified Procedures.

Customs Freight Simplified Procedures.

Comprehensive Gurantees.

Entry in Declarant’s Records.

Authorised Economic Operator Customs Simplification Accreditation (AEO).

Simplified Declarations Procedures.

  • The Unique Consignment Reference number
  • Declaration Unique Consignment Reference (DUCR),
  • Master Unique Consignment Reference numbers
  • Provision of trade statistics to authorities within customs areas in the absence of declarations

The implications of non-Customs compliance:

  • Delays at the port/airport/border
  • Duty relief/VAT zero-rating being disallowed.
  • Seizure of goods
  • Business disruption
  • Fines
  • Criminal penalties
  • Repayment of tax unpaid where there is  no proof of export. A recent debt recovery of unpaid VAT of £18,000,000 has been demanded by HMRC. 

Authorisations may be revoked, affecting business operations, including those that relate to:

  • Customs Warehousing (CW): Customs warehouses are operated by warehouse keepers, who must be authorised by HMRC. CW allows goods to be held duty- and VAT-free until they are released to free circulation
  • Authorised Economic Operator (AEO): significant or repeated errors may result in the authorisation being withdrawn

Controlled goods penalties:

It is a strict liability offence to export or attempt to export controlled goods without a licence and can result in:

  • goods being seized by UK Border Force/HMRC.
  • a penalty of up to three times the value of the goods seized being served.
  • imprisonment if there’s a knowledge of weapons of mass destruction (WMD).
  • criminal prosecution if the exporter is deemed to have intentionally failed to comply.

Export control penalties:

It is a serious criminal offence to deliberately evade or attempt to evade controls and can result in these penalties from:

  • Magistrates Court – £5,000 fine or 3 times the value of the goods and 6 months’ imprisonment.

  • Crown Court – unlimited fine and up to 10 years’ imprisonment.

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