For many businesses, the first half of 2021 has been about dealing with the impacts of Covid-19 on their business (positive and negative). However, the first half of 2021 has also brought about the new trading reality or any company that is selling/sending goods to or buying/receiving goods from Great Britain.
The New Trading Reality has brought a number of challenges for business, even for those that have previously imported/exported outside of the European Union prior to 01 January 2021.
For many businesses this is the first time they have had to deal with customs. Either way, the New Trading Reality has brought a number of challenges, frustrations, but also opportunities.
Many have tried to work their way through the impacts of Brexit on the flow of goods by ensuring their products can get across the Irish Sea as quickly as possible. This has involved handing out their EORI number
whenever it is requested by a logistics company/supplier, signing numerous representation forms for clearance agents, paying couriers for import charges when their goods arrive at the door, everything they can do to get their products from A to B as quickly as possible.
However, businesses have been doing this in many cases without really understanding why they are doing it, what the consequences are for their business and the missed opportunities that are passing them by (or the risks they are creating for their business).
What is Customs
The first fundamental point all businesses need to understand is that submitting a customs declaration under their EORI number is not merely a tick the box exercise for moving products. Customs in its simplest form is a tax, the customs declaration is the tax return, and when a customs declaration is submitted under your EORI number you are the responsible party for that tax return.
Most businesses would not outsource their PAYE returns or Corporation Tax returns to a third party they didn’t know. Following this same logic, we do not advise that you do this with your customs declarations either.
“My Broker is responsible for customs”
We often hear companies tell us their customs brokers are handling their customs obligations. But it is important to understand that just because you have a third party customs broker submitting your customs declarations does not mean your business is absolved of the responsibilities and obligations attached to that declaration.
A customs clearance agents role is to submit the return. It is the responsibility of the importer/exporter to provide clear instruction to their broker about how these returns should be submitted (e.g. what tariff classification code to use, any particular customs valuation information that should be indicated on the
declaration, how taxes should be paid). Many times a broker will make calls on behalf of the importer/exporter to facilitate the flow of goods across the border however ultimately it is the importer/exporter that will be held responsible for what has been submitted.
“My supplier handles the imports”
Many companies have been informed by their suppliers in Great Britain that they are set up to deal with customs in Ireland and will handle all the import taxes. If your supplier (or their logistics provider) requests
your EORI number for shipments to Ireland, or request that you sign a form to expedite customs clearance then, while they may be paying the customs charges, there is a high risk they are listing you as the importer and you will be the responsible party for that import. You need to be in control of your import profile to ensure nothing is being declared incorrectly on your behalf.
“I haven’t seen any tax costs”
Again, another phrase we hear many times is that there has been no tax costs incurred by a business importing from the UK. But rarely have companies dug into why they may not have been charged import taxes. Were your products imported under the terms of the EU-UK Free Trade Agreement? Was the VAT postponed? Was the correct tariff classification code used? These are all questions that should be asked by importers and needed to answered to ensure you are on top of your compliance obligations.
“Customs is a dead cost”
Customs duties when incurred at import are generally not recoverable. That does not mean that there are not mechanisms available for companies to efficiently manage these costs. This goes back to the point above, that
customs in its simplest form is a tax. Like any other tax, there are mechanisms that can be utilized to efficiently manage these taxes. However, if your business takes an approach of outsourcing everything to your clearance agents and you don’t engage in planning activities you will miss out on these planning opportunities (like you would with any other tax).
What to do six months in
At this stage, the reality of the costs of customs will begin to appear on many businesses financial statements.
If you are seeing these costs come through there are a number of steps you should take. Equally, if you are not seeing any costs come through and you are importing from/exporting to Great Britain there are a number of
steps you need to take to ensure you don’t have a financial risk following your business (customs declarations can be audited for a period of three years after the date of import).
At this point in time there is an opportunity for business to take what has happened over the past six months and review:
- What has worked well
- What has created an additional administrative burden on the business
- What additional costs have been incurred
- What has been declared on your behalf
By doing the above, you can reflect, learn and plan for the future to ensure you are in compliance with your obligations as an importer/exporter and identify any opportunities that can create a competitive advantage for your business.
There are a number of supports still available to assist businesses deal with the impacts of Brexit (such as the InterTradeIreland Brexit planning voucher). Across Borders Consulting is an approved InterTradeIreland Brexit service provider.
If you have any questions on customs or international trade, drop us an email and we would be happy to discuss how we can support. Our team has a specific and deep practical and legal understanding of customs, international trade and supply chain management with our staff composed of former Customs Officers,
Directors of Customs and Trade teams for large US multinationals and former Directors/Managers from Big Four accounting firms (PwC & EY).
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