Frequently Asked Questions
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What is the UK EU Free Trade Agreement?
The UK EU Free Trade Agreement is known as the Trade Cooperation Agreement. UK:EU trade agreement was signed on 30 December 2020, and has been applied provisionally since 1 January 2021. Governed by international law rather than domestic. It includes tariff and quota liberalisation, rules of origin provision, introduction of customs formalities and Sanitary and phytosanitary measures.
How does the Trade Cooperation Agreement impact me?
The Trade Coooperation Agreement means:
Most goods will be tariff and quota free
Rules of Origin will be applied to goods
Rest of World goods will be subject to customs duties
Customs formalities will apply
Product compliance with EU and UK standards
What is the UK Border Operating Model?
The Border Operating Model commonly known as the BOM was introduced on the 13th July 2020. It sets out obligations when the UK left the EU. It defines obligations businesses must comply with when moving goods through a UK customs border. This is a staged approach for introducing import controls. It also confirms information surrounding controlled goods and how they will be managed during the staged approach. It does not relate to Northern Ireland as that is covered under the NI Protocol.
What is the Northern Ireland Protocol?
The NI Protoccol was introduced as Northern Ireland will remain in the UK but also be part of the EU single community without any hard border being in place with the Republic of Ireland. With the purpose of
Maintain Irish border
Protect EU single market and customs union
Ensure as close to free flow of goods from GB to NI
Ensure trader experience changes as little as possible, by launch of the Trader Support Service.
What is an import?
Imports are an action of buying or acquiring products or services from another country/market. Businesses that source goods from overseas due to quality, price or lack of domestic availability. The import follows export in international trade transactions. Such movements subject to customs formalities, checks and duty/tax liabilities.
What do i need to import goods into the UK?
Get an EORI
Commodity code
Duty and VAT
Commercial Invoice
Incoterms® 2020
Country of origin
Customs value
Customs declarations
Deferment account
Additional documentation
What is an export?
Exports are goods or services made in one country and shipped to another.
These can be goods moved out of the UK customs territory. International trade is the exchange of goods or services with other countries.
What are customs simplified procedures?
When you make a customs declaration, you may be able to make a simplified declaration when your goods arrive at a UK port or airport
You can enter the goods to free circulation and special procedures using CFSP.
Customs Freight Simplified Procedures was introduced in 2001. This Customs scheme enables the import of shipments by Traders from third countries to be more efficient and provide the trader with greater control.
A CFSP authorizations can cover a host of customs simplifications which can be advantageous to Traders in the new world after Brexit.
We know understand what CFSP is, but what other benefits can this provide to a Trader?
Permits the speeder release of goods from Customs
It allows the holder to use a combination of simplified procedures, such as using a normal entry and warehouse procedures – which allows Traders to manage this to suit their business demands.
Improved organizational cash flow as the duty and Import VAT do not need to be paid immediately and can be deferred.
Enables the electronic submission of frontier declarations and all Supplementary Declarations.
What are Incoterms?
Incoterms 2020 rules are the official terms published by the International Chamber of Commerce (ICC). They are a voluntary, authoritative, globally-accepted, and adhered-to text for determining the responsibilities of buyers and sellers for the delivery of goods under sales contracts for international trade.
Importance - Each Incoterms rule provides exporters and importers clear, succinct rules that help them understand their responsibilities, clarify any gray areas in contracts, and can save a lot of headaches when used correctly. When a seller and a buyer agree to employ a particular Incoterm, each accepts the corresponding obligations and responsibilities as clearly set forth and defined under that particular Incoterm. Incoterms reduce the risk of legal complications by giving buyers and sellers a single home base from which to reference trade practices.
The most current revision of the terms, Incoterms 2020, went into effect on January 1, 2020, and consists of 11 Incoterms.
What is a harmonised tariff code – or harmonised code?
The Harmonized System is a standardized numerical method of classifying traded products. It is used by customs authorities around the world to identify products when assessing duties and taxes and for gathering statistics. The HS is administrated by the World Customs Organization (WCO) and is updated every five years.
A harmonised code is a customs tariff code and a key element of customs declarations. The harmonised tariff code identifies the type of goods that are being imported / exported. It is the basis for calculations of duties – such as customs duty and import duty – and defines whether goods are subject to import or export controls.
The system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics.
Over 98 % of the merchandise in international trade is classified in terms of the HS.
The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.
It is also extensively used by governments, international organizations and the private sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis.
The HS is a universal economic language and code for goods, and an indispensable tool for international trade.
It also helps governments to produce statistics on international trade flows and understand the impact of trading agreements across the world.
A harmonised code is also known as a “tariff number”, “commodity code” or “HS code” (HS stands for harmonised system), and is an internationally agreed common protocol for identifying goods.
How the tariff works?
Each tariff code has preferential duty rates attached. A tariff code will determine duty rate applicable to the product when it is imported
It is used to determine:
Internal import duty rates
Rules of Origin
Trade protection measures
Licensed goods
Sanctions and export controls
Statistics
What is origin?
This is how customs authorities classify where an export has come from in international trade. Each product has a country of origin, and is ised to define source. Defines treatment of the goods if it is prohibited, restricted or if any preferential rules could apply.
It will confirm the economic nationality of goods.
Rules of Origin derive from: national legislation, international agreements i.e. EU-UK TCA or multilateral agreement i.e. Kyoto Convention. They can be general (and apply to all products)
Specific to some sectors or goods only (product specific rules). A declaration or Certificate of Origin can prove or demonstrate the origin of a goods. It will assist in determining customs duty and tax, and is based on international rules.
What is preferential origin?
Preferential origin is reduced duty rates applied through reciprocal trade preference agreements and non-reciprocal trade preference agreements
They include general provisons such as:
Cumulation
Insufficient production
Spare parts and accessories
Direct transport
Tolerance
Accounting segregation
They also include product specific rules such as:
Wholly obtained
Change of tariff heading
Value added/percentage rule
Specified processes
Whats is GSP?
Generalised Systems Preferences (GSP) was instituted in 1971 with the aim to creating an enabling trading environment for developing countries.
Preferential tariff system providing tariff reduction, on certain products, to least developed countries. Waiver is permitted allowing permanent exemption to the most-favoured-nation (MFN) schedule by way of the enabling clause. Tariff system is “generalized, non-discriminatory and non-reciprocal”
The GSP framework
Least developed countries framework are countries that the UN classifies as least developed countries. They get Quota-free access, Nil rates of import duty on all goods other than arms and ammunition.
General framework relates to countries that the World Bank classifies as low-income and lower-middle income countries. They get reduced rates of import duty on certain goods.
What is UK GSP?
To receive UK GSP rates of import duty, goods must originate from a GSP country. A list of operations which should be carried out on materials to gain originating status can be found at HMRC.
Importers will have to pay import duty at the full (non-GSP) rate, if checks carried out by HMRC reveal that the goods do not satisfy the GSP rules of origin.
Cumulation rule can occur as long as the processing done in the GSP country, and goes beyond minimal levels. The UK cumulation arrangements include: Bilateral, Regional and Extended, Cumulation with the EU, Norway and Switzerland. The UK permits materials from EU, Norway and Switzerland to be further processed or incorporated in a finished product in a GSP beneficiary country.
Any goods entering the UK via the EU (as a transit country) may still be eligible for GSP preferences.
What is a CPC?
The customs procedure codes (CPCs) identify the customs and and/or excise regimes which goods are being entered into and removed from. The CPC is based on a 2-digit community code which identifies a customs procedure, e.g. removal from warehouse, entry to free zone, and export under Outward Processing Relief (OPR). The CPC is built up into a 7-digit code from this.
What is Inward Processing Relief?
Inward processing allows companies to obtain VAT and duty relief on goods moving cross-border.
The purpose of Inward Processing Relief is to provide duty relief on imports from third countries of goods for the purpose of manufacturing or repair. It will enable businesses the possibility to process goods under duty suspension prior to deciding the final destination of the finished goods. It can also be used for goods which just have to undergo standard forms of handling intended to preserve them, improve their appearance or marketable quality or prepare them for distribution or resale.
It works by duty on goods being suspended that would normally be payable upon import. Duty is only payable when moved into Home Use.
Types on inward processing are:
Full authorisation
Authorisation by declaration
Retrospective authorisation
What is Outward Processing Relief?
Outward processing allows businesses to temporarily export outside the EU, for processing or repairs.
Its purpose is it provides duty relief on imports from third countries of goods which have been produced from previously exported goods. This enables faulty goods to be returned to a third country for repair or for replacement with equivalent goods.
It works when you import goods from outside the UK you normally have to pay duty on the full customs value of the goods. This is suspended under this customs procedure and no duties would be liable if they are exorted back out of the UK customs territory.
What is customs warehousing?
Customs warehousing allows owner to hold imported non-UK goods in UK and choose when he pays duties or re-exports the goods wihtout paying any duty levies. The amount of working or processing allowed on goods held in warehouses is limited to keeping them preserved with a view to subsequent distribution
There are three main categories of customs warehouses
Public type I
Public type II
Private
Public warehouse is for businesses who want to store goods belonging to other people (businesses) also known as depositors. A private warehouse is for businesses who want to store their own goods. A warehouse authorisation holder and depositor are the same business.