Most people will associate the 1st May 2016 as that magical occurrence: a bank holiday Sunday (though also remember, washing your face in the dew on the 1st keeps you looking bonny for another year!), however, for the exporting community it’s notable for very different reasons; The largest change to UK and European Customs procedures in the last 20 years is due to take place on 1st May 2016, with the introduction of the Union Customs Code (UCC). Happy Bank Holiday!
If you are one of the companies who are involved in buying or selling goods internationally, these changes will affect the way you do business. So here’s a handy, an in-a-nutshell, overview of the changes.
So, what’s the gist of these changes?
The new legal framework is intended to simplify and standardise customs rules and procedures and facilitate more efficient customs transactions. The key to this will be electronic communication, and the use of centralised IT systems, and transactions will be paperless for both businesses and customs authorities.
Is there anything to worry about?
Some changes will be helpful but there are some that may have a significant impact on the cash flow and profitability of your business.
There are four main changes from 1 May 2016, and these are:
1. You may be required to provide a financial guarantee
Any UK company operating a customs-authorised duty relief or suspension regime (such as customs warehousing or inward processing), will need to provide a financial guarantee to cover the annual amount of potential duty that could be due.
This is a new requirement so will introduce additional costs for the guarantee provision, as well as any potential restriction on working capital in providing security to the guarantor (typically a bank).
2. But you may be able to obtain guarantee waivers
Guarantee waivers will be introduced, but only for those businesses that fulfil the criteria for Authorised Economic Operator (AEO). This is a supply chain security accreditation, approved by Customs for companies that demonstrate that their internal processes fully support customs compliance.
It can take six months or more to obtain AEO authorisation, so this should be considered as soon as possible.
3. The basis of customs valuation is changing
The basis of customs valuation will also change, with the removal of the current provision that allows an importer to attest to the value of an earlier sale in a chain of sales leading to import. Instead, customs valuation will be based on the final sale before import.
4. You may now incur a duty liability in respect of royalty payments
Until May 1st 2016, Customs duty only applies to royalty payments only where they relate to imported goods, and are payable as a condition of sale of those goods. From May 1st, these restrictions will be removed, so that many more royalty payments will be subject to customs duty.
Any agreements which give rise to the payment of a royalty should be reviewed to determine whether reconstruction might be necessary to avoid exposure to a future duty cost.
Anything else changing?
Other changes will impact the Customs declaration processes involving BTIs and BTOs, as well as the Customs transit process, so it’s important that you review your processes as soon as possible.
Remember, the changes take effect on May 1st 2016- time is running out!
We specialise in training options which support businesses developing their Export and International Trade processes so if you’re confused by these changes or stuck on how to prepare for them, give us a call!