With the Brexit deadline fast approaching, and the recent communications from HM Revenue & Customs (HMRC), regarding the Border Operating Model (BOM) is this the time for Traders to embrace UK Customs Simplifications for future business activities?
From 1st January 2021, UK importers on non-controlled goods will have access to simplified procedures. So, Traders should review their customs operations and utilize Customs Freight Simplified Procedure (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.
On the 1st January 2021 all EU imports will be categorized as 3rd country imports, and as such would apply for using simplified procedures. This will be applicable through Deferred Declarations also known as Entry in the Declarant’s records (EIDR). This allows Traders to create a record in their commercial records, when goods arrive in Great Britain. This allows the entry of goods into Great Britain, without the Trader needing to complete a full custom import declaration. This must be followed up by a Supplementary Declaration that needs to be supplied to HMRC to determine Import VAT owed, within 6 months of the date of import.
Any Trader that uses the Deferred Declaration process must report this on the import declaration to Postponed VAT Accounting scheme. This allows the Trader to account for Import VAT on a periodic basis through their VAT return.
Please note that any Trader that has a poor compliance record with HMRC will not be able to use the Deferred Declarations process but will need to complete full import declarations that are applicable to controlled goods.
While EIDR permits imports of goods for Free circulation, Customs warehousing, Inward Processing, Outward Processing, End use, Temporary admission, Export and Re-export. It does not permit Low value import procedures, controlled goods and Onward supply Relief on the removal of goods from Customs Warehousing.
A CFSP authorizations can cover a host of customs simplifications which can be advantageous to Traders in the new world after Brexit. Especially when EIDR will be accessible without any HMRC approval until the 30th June 2021. After 1st July 2021, Traders may formally apply to stay on the deferred customs scheme – but else it will not be freely available after this date.
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.
So CFSP sounds beneficial but who can apply for it?
To be eligible for CFSP, you must fulfil set criteria and comply with any additional criteria for the procedure(s) a Trader wishes to utilize. For the full list, please refer to section 14 of the HMRC Notice 760. Traders will need to have:
Adequate level of customs compliance
Record keeping for all imports or exports completed to 3rd countries
Documented processes and controls for Customs activities
Compliance with UK Customs legislation
A Trader can represent themselves to submit CFSP declarations or appoint an intermediary to complete this on their behalf.
But what must a Trader do.
§ All Traders using this simplification method must maintain records for all shipments processed under CFSP for 5 years. This needs to include all shipping documents, electronic customs declarations and any other supporting documents such as proof of origin and preference / certificates of conformity / release certificates and any other specific licenses pertaining to the shipment and its products.
§ A Trader must meet licensing needs
§ Traders must define who, what, where, when and how the CFSP records will be maintained.
§ Traders must keep a clear audit trail, and ensure your records are backed up and kept secure.
If a Trader decides to use CFSP they would need to apply for authorisation in advance of importing Key factors to consider when applying is that it is not merely and application process and being granted the authorization. The applicant needs to acquire software that works with CHIEF and that can complete standard business practices such as VAT reporting.
Such requirements can be a costly and time-consuming for the Trader, and as such should be weighed up against an intermediary completing such activities on the Traders behalf.
It is imperative that controls are in place by Traders to validate customs declarations made on their behalf to ensure errors are captured and correction made.
Although CFSP will allow faster release of goods, use of simpler customs declarations and cashflow benefits to Traders; this can be out-weighed by the additional fees and software costs a through cost analysis should therefore be completed
Simplified Procedures will assist Traders customs activities and have benefits where the trader has enough volumes. The total volume of declarations is due to rise by 20% after Brexit Day, when an effective free flowing supply chain will be critical to all traders.
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