5th January 2021
The Trade and Co-operation Agreement or the ‘Deal’ for short was agreed just in time for Christmas and there were no real surprises from our initial understanding. Clearly there was a rush to get an agreement by the end of the year, given the consequences of not doing so to both parties and there does appear to be some lose ends which need addressing, however, it is good to note that structures have been agreed with the aim of working together to build upon what has been agreed to date. These take the form of a Partnership Council, trade partnership committees and working groups which will cover various aspects which include duty and taxes, sanitary and phytosanitary measures, rules of origin, etc. It is expected that the experiences of the next few months will keep these bodies quite busy as arrangements are fine tuned.
The key elements which clients need to be minded of are as follows:
New Global Customs Tariff
The UK tariff will use the same commodity codes as the Tariff published by the European Union (EU), but there will be some lower import duty rates. The Tariff will apply to both EU and non-EU goods. There is a very useful look up tool which can be found here which is a user-friendly innovation.
Postponed VAT Accounting (PVA)
Import VAT due on all imports, including from European Union member states, can be postponed and accounted for on your VAT return. If you have not already advised us of your intentions, please do so, as a formal instruction is required. The default arrangement will be continuing to account for VAT as we do now.
Importers opting to use PVA will also need to subscribe to Customs Declaration Service (CDS) in order to receive their online VAT statement using this link. VAT statements will only be available for six months, so should be downloaded. Further information can be found here.
These are now required for goods moving to and from the EU, so for EU transactions, do allow a little more time in your supply chains to so these can be arranged prior to despatch from your premises for exports and prior to arrival at the EU port or terminal of loading for imports. Drivers will have to have evidence with them that goods are covered by some sort of customs process prior to arriving at the port or terminal of departure. Vehicles arriving without the correct documentation are likely to be turned away and in the case of UK exports, may be subject to a financial penalty.
Free Trade Deals
The Government has managed to secure UK trade deals to replace those which were in place while the UK was following the customs rules of the EU. The arrangements currently in place can be found here. The good news is that an agreement was signed with Turkey during the last week of December. It should be noted that at the time of writing, agreements with Serbia and Montenegro were still outstanding, so customs duty will be payable if applicable, although it is possible that any deal may be backdated which would allow duty to be reclaimed.
EU Imports – Origin of Goods
Even though the UK and EU have negotiated a free trade deal, this only applies to goods which have an EU origin status, that is, the make-up of the product is predominantly of EU origin. There are complex rules which define the EU origin content depending on the nature of the product. A product made in China imported from Italy will be subject to customs duty in the UK even though it has already been imported into free circulation in the EU. Likewise, a product imported from China into the UK for subsequent shipment to the EU will be subject to import duty in the EU.
The Agreement allows for full bilateral cumulation (cumulation of both materials and processing) between the UK and the EU, allowing EU inputs and processing to be counted as UK input in UK products exported to the EU and vice versa.
New GSP Arrangements
The UK will continue with the GSP system which will run in parallel with, but outside the EU regime. Goods that meet the UK GSP rules of origin requirements are eligible to claim a GSP rate of import duty based on a valid proof of origin. A valid proof of origin must be either of the following:
GSP Form A – which does not need to be stamped and signed by an authority designated by the GSP country: you can submit a copy
An origin declaration – which must include information to enable the identification of an originating good
For goods released for free circulation in the UK up to 12 months after 31 December 2020, HMRC will accept a Registered Exporter System (REX) statement on origin as proof that goods originate from a GSP country dated 31st December 2020 or earlier.
Full details can be found here.
Goods being despatched to Northern Ireland from Great Britain now need to be declared to HMRC in the form of an import declaration; no export declaration is required. For goods moving from Northern Ireland to Great Britain, no customs declaration is required unless the goods are moving under customs control, such as customs warehousing, inward processing or similar.
Our recommendation is that clients should register with the Trader Support Service (TSS), who can provide the required service at no cost to traders. The TSS will be using their CFSP authorisation which will involve traders submitting an initial data set to allow the goods to be delivered and comply with the safety and security declarations, with a further more detailed submission of shipment data to allow a supplementary declaration to be completed by the fourth working day following import into Northern Ireland.
Goods being imported directly into Northern Ireland from outside the UK and EU can be declared in the normal way, as the proposed system which was to use the Customs Declaration Service (CDS) is not yet ready as the Government had hopped.
Authorised Economic Operator (AEO)
There will be mutual recognition between the UK and EU’s respective Authorised Economic Operator security and safety schemes, so fewer controls relating to safety and security when moving their goods between the UK and the EU than would otherwise be the case.
Both imported and exported goods must comply with the ISPM 15 Wood Packing Regulations which cover pallets, cases, crates and the like. These regulations already apply to goods moving to and from non-EU countries. Further details can be found here.
Should you require any further information, please do not hesitate to speak to your normal EV Cargo Global Forwarding contact.