Starting to Import: Here’s some help.

It’s so confusing – you find the perfect supplier, but they are based overseas.  All sorts of buzzwords are thrown at you – deferments, DAP, EORI, HS Commodity codes – and it takes so much time to try and work out what you actually have to do, what’s important, what’s not important, what you should be asking a clearance agent to do …. !!!

So here are a few hints to help make you a genius at this importing game.  The information is geared towards assisting people import into the United Kingdom, but hopefully, most of the information will assist in other countries too.

1.  Registration to Import and Export
There is now a requirement in the United Kingdom (UK) for any organisation (or any person) involved in actually importing or exporting to be registered with HM Revenue and Customs and to obtain an EORI number.  EORI stands for Economic Operator Registration and Identification.  It is now becoming common in most countries for importers and exporters to be registered.  The only time you don’t have to have an EORI number is if the goods imported are under US Dollars 300 in value.

This scheme started on 1st July 2009 as part of the Customs Code Implementation Provisions and replaced the previous identification system known as TURN.  Once an organisation is registered for Customs purposes in one EC member state, then their EORI number if valid throughout the EC.  This number (if obtained through the UK) starts with GB and is followed by 12 digits unique to each organisation.

2.  The UK Deferment Scheme
The UK also has a scheme in place called the Deferment Scheme.  Essentially, the UK importing organisation has to set up an account with HM Revenue and Customs which has a certain monthly limit, e.g. £5000.00.  The organisation concerned will be given a unique number called the deferment number.  Every time an import comes in and Duty and/or VAT has to be paid, Revenue and Customs will automatically deduct this from the account by direct debit whenever the deferment number is electronically entered into their system (called CHIEF in the UK).  If the monthly amounts are higher than the agreed limit, then this needs to be adjusted in good time.  Most organisations who only do a few shipments per month may find putting this system into place is not cost effective (especially since the actual funds required to be available is two months worth e.g. £10000).  In which case, most customs clearance agents will have a deferment and for a fee (usually in the region of c. £25.00) will allow you to use their deferment.

3. Why use a Clearance Agent
Since all import declarations should now be done through the CHIEF system, it means that you can only do your own if you have access to CHIEF.  Most organisations in the UK, unless they are a freight forwarder, shipping company or customs clearance agent, will not.  This means that you usually will need to use a clearance agent to assist you with clearing the goods through Customs, ensuring that the correct duties and taxes are paid and helping to arrange for the delivery of the goods to your premises.  So finding a good clearance agent is rather important.  The good news is that there are quite a few good agents out there.  However, there are also some not so good, so when choosing an agent, ask around for references or get quotes from several and see which ones offer you the best deals.

4.  Responsibilities of a Clearance Agent
A good agent will ensure the following.  They will ask you if you have an EORI number and will assist you in obtaining one if you don’t.  They will also ask if you have a Deferment and will assist with that as well.  They will ask for details of the shipment and, in particular, will ask what the sales terms are e.g. CPT or DAP, etc.  They will give you a full and written quotation on their charges.  All of them.  They will, if they are really good, advise you on ways to reduce your costs or highlight particular risks and provide some solutions or they will give additional information.  They will also get to know you and your business and to make suggestions on shipments that are value driven and value added.  A really excellent Customs Clearance Agent is worth their weight in gold.

5.  The Import Procedure (in brief)
Once the goods arrive, the Customs Clearance Agent will clear the goods through Customs (by completing the relevant paperwork), ensure that any duties or taxes are paid, and will arrange for the goods to be delivered to you in a timely fashion.  When they send you the invoices, they will include a copy of the C88 (the import clearance documentation) since this will show what they have done and verify that the Duty and VAT charged by Customs and Revenue is the same as that charged by the agent to you.  You also need to hold onto the C88 in case you have to return the goods for whatever reason, or if you believe that the wrong HS code has been used, so you have paid too much duty, etc.  I have written a number of articles on UK Customs Clearance procedures, so if you do need more information, please do read these.

IMPORTANT NOTE
Although the clearance agent is completing the clearance on your behalf, they have no legal liability if a mistake is made.  The importer is always the party responsible for the import, so please make sure that you give your Clearance Agent clear instructions (preferably in writing) and always check that they have completed the paperwork as per your requirements.

6.  What information is required on the Commercial Invoice
The information that the Customs Clearance Agent will use to correctly complete a C88 (the Import Clearance Entry form) must be detailed on the commercial invoice sent with the goods by your supplier.  This should include name of importer, name of exporter, all goods descriptions, values, origins of goods, weights and dimensions and HS Commodity Codes.  The invoice should also clarify what the sales terms are – anything from Ex-Works to Delivered Duty Paid.

Sometimes the goods are shipped on a Customs Invoice.  It does not really matter whether a commercial or customs invoice is used as long as the information is clearly stated and available to the Clearance Agent.  Most information required by the Clearance Agent will come from the exporter and be detailed on the accompanying documentation which will always include an invoice.

7.  What information must be supplied by the importer
Apart from the EORI number and deferment number (if applicable) the importer also needs to advise the Clearance agent about the CPC (Community Processing Code).  Most good agents will know what to use as a matter of course, but it is important for all importers to understand the importance and relevance of the CPC.

The CPC is a seven digit number (sometimes a six digit number and a letter) and if this is a ‘normal’ import, this will read 4000000.  (The CPC for a normal export is 1000001 for your information).  However, there are a number of different CPC’s for different types of goods and movements and it is the responsibility of the importer to advise the clearance agent if any code other than 4000000 is to be used.  This must be advised BEFORE the customs clearance takes place and the information on the C88 is entered.  If in any doubt, talk to the clearance agent first.  They will advise if at any time a different code needs to be used.  This is usually only relevant if importing goods under IPR suspension, for example.

8.  How Duty and Taxes are charged in the UK
Any duty or taxes chargeable are calculated as follows.

We have two charges in the UK for most goods – Duty and VAT (Value Added Tax).  Certain goods also have additional duty (such as Excise Duty for alcohol and tobacco and CAP).  In some circumstances, duty is not charged, or is charged at a 0%.  Generally speaking, however, duty is charged on a number of items.  The rate of duty is based on the type of goods being shipped.  Each different type of item has a special unique code, called an HS Commodity Code (also known as a Tariff Heading, etc).  The HS code should be supplied by the seller/shipper of the goods and detailed on the commercial invoice.  Each different HS code imported should have the value of those goods clearly defined.

Each HS code is allocated a duty rate, which is calculated as a percentage of the total value of the goods, plus the cost of freight, plus the cost of Goods in Transit insurance.  In most countries this is called the CIF value.  So if the CIF value of the goods is £1,000.00 and the HS code for the goods carries a duty rate of 5%, then the amount of duty which should be charged is £50.00.

VAT is calculated by taking the CIF value, plus the Duty charged (which with the above example would come to £1,050.00) and then multiplying this at the present rate (which is 20% in May 2013).  So the total amount of VAT charged will be 20% on £1,050 which comes to £210.00.

9.  When is Duty not charged on Imported Goods
When goods are imported into a country and all the relevant taxes and duties are paid, the goods are then deemed to be in “free circulation”.  Since the United Kingdom is part of the European Community (EC) any goods imported into the UK (from outside the EC) is also deemed to have been imported into the EC.  So any goods either manufactured in the EC, or already in free circulation in another EC country, can be imported into the UK without being charged any duty.  VAT, however, will always be charged.

If goods are being imported into the UK from Turkey (as long as certain conditions are met) then the Turkish exporter will issue an ATR1, which must be supplied as an original document.  The presence of this document allows the goods (which are of Turkish origin) to be imported into the EC without the payment of any duties.  There are also a number of countries outside the EC, which the EC has a reciprocal agreement with (such as Norway and Switzerland, amongst many) where the issuance of an EUR form will also mean that no duty is charged (as long as certain conditions are met and the original document is supplied to Customs).

The EC also offers preferential access to the markets of the EC from certain other countries.  This preferential treatment means that goods imported into the UK either have a reduced or zero rate of duty applied on import.  The exporter of the goods needs to issue a GSP Certificate of Origin – Form A.  GSP stands for Generalised System of Preferences.  As long as the original GSP Certificate of Origin is supplied with the documents, then the goods can be imported with a reduced or zero rate of duty.  There are a lot of countries that this system allows to issue this document, including India and Pakistan.

Certain goods can also be imported with a 0% rate of duty because of the type of goods they are.  These include, but are not limited to, items used in civil aircraft construction/repair; items supplied as commissary stores; items supplied as ships/aircraft store/equipment; aviation fuel supplied for non EC or intra EC flights and goods for sale under the IPR tax free shopping scheme.  Some inherited goods can also claim relief from customs duty, CAP charges and VAT.  In addition, goods supplied to the armed forces/NAAFI and goods imported as part of the baggage of Embassy, Consulate and Diplomatic staff are also often exempt of taxes, although there are some exceptions.

10.  Other situations when Duty is not charged on Import
It is possible to bring goods into the UK, but not clear them through Customs.  These goods can either be held at the premises of a freight forwarder in their bonded area awaiting transhipment out of the EC, or placed into a bonded warehouse or destroyed.

It is also possible to physically bring goods into the UK and clear them through Customs, but not pay any Duty or VAT.  In these circumstances the goods are imported in under a Customs procedure known as Authorised IPR (Inward Processing Relief) Suspension, or under IPR Suspension Simplified.

Goods being returned to the UK under the OPR (Outward Processing Relief) system or goods transported back on a Carnet can also enter the UK without payments of duty or VAT being levied.

If goods are imported in using a postal service, and as long as they are under a certain value (usually about £15.00) these items can also be brought into the UK through the Customs system and not be charged Duty or VAT and are then deemed to be in free circulation within the EC.

11.  Samples and under declarations of value
Bringing in goods as samples and declaring a nominal value is a system which should only be used when obtaining samples.  A sample is a single (or at most two) representation of the goods that will eventually be supplied.  Trying to avoid paying the right duty/taxes by mis-declaring the goods as samples is an unlawful act.  Also, it is bad practice (and equally unlawful) to under declare the value of the goods in order to reduce the taxes paid.  However tempting it might appear, don’t do it.

12.  Import and/or Transshipment licences
Certain goods will require import and/or transshipment licences.  These need to be obtained before the goods are shipped.  The list of goods changes regularly, so if in doubt, please contact either HM Revenue and Customs or the ECO (Export Control Organisation) -websites are www.businesslink.gov.uk/exportcontrol or www.bis.gov.uk/exportcontrol- or look up the information on the SPIRE website (www.spire.bis.gov.uk).  SPIRE is the web-based portal for licence applications, rating enquiries and OGL (Open General Licences) registrations.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training.  She is based in the United Kingdom.  If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com or check out other international trade articles on the Point to Point Export Services website at www.point-point.com

 

Comments are closed.