Routes to Market Series: Customs

From a cost perspective, you should also bear in mind that you may be required to pay import duty as well as import VAT (or the local equivalent) when you bring goods into a country for onward sale.

So, what are some of the things you need to consider before bringing goods into GB?

1. What administrative obligations do you have?

Depending on where the goods are being imported from, safety and security declarations will need to be submitted before the goods arrive in GB. This is in addition to the customs declaration that will need to be submitted for the goods on their arrival into GB. It is in the customs declaration that you will declare to HMRC which customs procedure you want to apply to the goods being imported – i.e. will they go into free circulation for sale immediately or do you want a ‘special customs procedure’ to apply to them instead.

2. What happens at the border?

On arrival in GB, goods need to be ‘presented’ to border control – if they aren’t then they will be liable to forfeiture. HMRC can inspect the goods, verify the data logged about them and raise enquiries about the goods once they are imported into GB (and before they are released into free circulation).

3. Will tax be payable at the border?

In GB, the liability to pay import duty etc is typically triggered when goods are released into free circulation.

The amount of import duty etc payable will depend on:

• the customs tariff classification of the good imported;
• the value of the imported good;
• the country of origin of the good; and
• if a preferential duty rate applies to the good import into GB by virtue of (for example) a free trade agreement entered into by the UK.

4. Who is liable to pay the tax?

You would typically expect the importer to be liable to pay import duty on goods brought into GB. This can be affected however if the importer chooses to engage a representative to fulfil their administrative obligations in respect of the import on their behalf – in particular, if the representative is acting as the importer’s indirect representative.

5. How can the sales contract impact the parties’ customs obligations?

Where goods are sold and bought internationally between businesses (i.e. a bike is manufactured in Germany and sold to a UK business), consideration should be given to any Incoterms entered into by the parties prior to the import of the goods into GB. Incoterms set out which party will be responsible for specific actions on the international sale of goods.

6. What about special customs procedures?

There are a variety of special customs procedures a business might choose to make use of when bringing goods into GB (instead of immediately bringing those goods into free circulation). These include the storage procedure whereby goods can be held in a specific storage facility when they are imported into GB before they are released for free circulation. Use of the storage procedure can help delay when import duty is payable by an importer.

Each special customs procedure has specific requirements that need to be met for a business to qualify for them. These requirements should be checked before goods are brought into GB if you want those goods to benefit from them.

7. What are the risks of getting it wrong?

If HMRC disagrees with a customs declaration on inspection of the goods imported at the border, they can seize those goods pending payment of the correct amount of import duty for them. After the goods have been released into free circulation, HMRC can also raise a C18 post clearance demand note (if they believe that there has been an underpayment of import duty) requiring the importer to pay such underpayment of duty.