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Importing goods into the UK – all you need to know

Logistics unlocked

Recently I wrote a post  Buying from Europe? Import changes made it a whole lot more complicated and costlier! I found that complicated to get my head round and that was just for consumers! When it came to importing for businesses it was even more complicated! So I asked Lisa Grove to write a guest post!

Questions about importing charges

The last year has certainly brought its challenges. Brexit has raised many questions in the retail arena. Where the free trade agreement ended, a plethora of questions began. How do I import into the UK? What do I need? What are my legal responsibilities as an importer of goods?

I’d say these are the most frequent questions I’ve been asked in the last six months. Unfortunately, there isn’t a one size fits all answer to this. Obviously, what commodity you are looking to import or export, along with the anticipated volume of product, will be major factors. If you haven’t already, I recommend starting with the government’s Check, Change, Go. While this was part of their prepare for Brexit campaign, it will give you a good indication of where to begin.

So, what do you need?

An EORI

An EORI is an Economic Operator Registration and Identification Number. Essentially, it’s a digital reference ID that is unique to your business for tracking and registering customs information. You will, however, need EORI in place whether you are VAT registered or not. It is very simple to apply for, takes less than 72 hours to come through and is free to get, so don’t let anyone try and charge you!

Incoterms: What are they and what do they mean to your business?

INCOTERMS or International Commercial Terms are a set of pre-defined trade codes, compiled by the International Chamber of Commerce (ICC). They are used as a basis for sales contracts, and clearly establish the ‘point of delivery’ within a contract. This avoids any confusion or misunderstanding for both buyer and seller. The responsibilities and costs associated with shipping globally are clearly defined within the terms.

If you were shipping goods from the EU prior to Brexit, then you’ll need to review your INCOTERMS and re-confirm them with your suppliers. The guidance is currently that DDP is switched to DAP and EXW is switched to FCA. If you’re not sure about the responsibilities of each, then hopefully the diagram below will help.

What’s an HTS?

Home Theatre System? Alas, no. HTS is the Harmonised Tariff System. In plain English, it’s a 10-digit commodity code that classifies your products.

You can search for your HTS code on the HMRC website. There is a search function, however, I warn you it’s not a simple as it sounds. If you’re searching for a ‘dress’, you’ll need to know if it’s women’s or girls? What’s it made from? Is it knitted or woven? You need to be able to drill down to the very detail of the product, to ensure that you correctly classify your goods, and ultimately pay the correct rates of duty & VAT.

It’s worth noting that the first six digits of the HTS code are internationally recognised. So, you may find that the supplier includes the HTS code on their paperwork. Don’t assume that it is correct, but it will give you the right area to look in as a starting point.

Making a declaration to HMRC

Customs declarations will need to be made on all import and export movements. You can complete

the declaration yourself or use a forwarder or broker. You are responsible for the declarations, even if you have a forwarder or agent doing this for you. It is best to provide them with instructions rather than leave them to do their own thing. If they make a mistake, and you have not issued any instruction, you are fully liable for those errors.

What about duty & VAT?

From a retail and business point of view, you need to factor in the potential duty and VAT. There are six different methods for calculating import duty & VAT. However, method one is the most common, and I’ve detailed how you can calculate what you should expect to pay:-

Value of Goods: £1125

 

Cost to Ship: £150*

* Even if there is no cost to you because your terms are pre-paid, if the freight is not show in the build up of the value of goods or the invoice not clearly marked, then an amount will be declared on the customs declaration. I’ve given a rough estimate would of £150 for this ‘order’.

 

Insurance: £3.18**

**Again you might not be paying this charge, but the industry standard calculation is 0.25% of the Cost of Goods + The cost of Shipping (£1125+£150 x 0.25% = £3.18)

VAT Adjustment Fee: £100***

 

*** This also isn’t a payable fee as such, but it makes up part of the dutiable value. This amount will vary depending on the mode of shipping (sea, air, rail etc), and the volume weight of the consignment. For the purpose of this calculation, I have used the airfreight rate, which is: 40p per chargeable kilo or a minimum amount of £100, whichever is the greater. The VAT Adjustment represents the UK proportion of the freight charges (Import clearance, handling, delivery etc), regardless of if they cost more or less than £100.

Duty Rate = 12% (For the purpose of this declaration, we’ve established this dress is cotton, from China and is a woman’s)

VAT Rate = 20%

Duty is calculated: Value of Goods + Shipping costs + Insurance + VAT Adjustment Fee x 12% Duty

£1125 + £150 + £3.18 + £100 = £1378.18 x 12% = £165.38

VAT is calculated: Value of Goods + Shipping costs + Insurance + VAT Adjustment Fee + Duty outlaid x 20%

£1125 + £150 + £3.18 + £100 + £165.38 = £1543.56 x 20% = £308.71

Duty Payable = £165.38

VAT Payable = £308.71

 

You can of course ask your courier/haulier/forwarder for advice and further info, but please remember that it’s your responsibility as an importer/exporter to be compliant. Their advice is just that, and unfortunately in this country there is no such thing as a licenced broker, so that guidance can vary greatly at times.

How can I prepare my business

If you’re not yet importing or exporting, but are planning to do so, then there are some actions that you can take now;

  1. Apply for a GB EORI number (If you’ve already got one, then you’re ahead of the game here!)
  2. Source a Customs Intermediary – either a customs agent, Freight Forwarder or broker. If you know anyone who already purchases from overseas, then start by asking for their recommendation. Suppliers may also nominate a forwarder, but if you’re paying the freight, then you need to specify.
  3. Prepare resources for entry instructions – Know your goods, classify them and ascertain their HTS code. You’ll also need to know the country of origin – don’t assume it’s the same as the country you’re purchasing from.
  4. Monitor changes and updates to trade agreements related to your business or products.

What if I have a higher volume of shipments?

  1. Consider applying for a Duty Deferment Account (DDA): When you are importing goods regularly it can be beneficial to have a duty deferment account (DDA). This enables customs charges, including customs duty, excise duty, and import VAT to be paid once a month through Direct Debit, instead of being paid on individual consignments.
  2. You can also investigate if a SIVA Deferment account might be beneficial (Simplified Import VAT Accounting). This works on a similar basis to a Duty Deferment Account, but only enables payment of VAT on account. You will need to have your customs and VAT records in order, for the last 3 years. It is still possible to apply if you have been VAT registered for less than three years, but you will be subject to more stringent credit reference checks.

Please don’t panic or be overwhelmed by the terminology here. These are both just options, and realistically, they will only be beneficial if you are shipping large volumes of stock, frequently.

In Summary

I wish I could give you a magic wand or at the very least a failsafe list of actions to ensure you have everything covered. Sadly, there are just too many variables and specifics – not to mention my wand broke years ago

The best advice I can give you as business owners, is to work through the action points above, do your research and ensure that you are as prepared as you can be.

Try not to feel overwhelmed. Work out a list that is applicable (or potentially) to your supply chain. Then break it down into manageable chunks. Start with Check, Change, Go, then apply for your EORI, if you haven’t already. Prioritise the rest by urgency and time to implement.

About the Author

Lisa is a Virtual Assistant (VA) and runs Above & Beyond Admin. She’s qualified in International Trade and Service and worked as a global account manager for a large logistics company.

She has extensive experience in logistics, both as a VA and as an account manager. Lisa has co-ordinated end to end logistics solutions for many blue-chip companies, including those in the Military, Aerospace and Retail sectors. She was awarded Runner Up BIFA Young Freight Forwarder of the Year, UKACC Customer Service Agent of the Year and the YRC President’s Award Winner.

If you struggle with organisation or time management, then you might like to download her FREE Essential Digital Toolkit to help manage your task list.

If you’re looking for assistance with classifying your goods, preparing customs declaration instructions, or want to talk through what’s specifically required for your business, then  you can find out more about her logistics unlocked service here.

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What will happen to consumer rights after Brexit?

Brexit and EU consumer law

As of today Brexit is still a mess! No final decisions have been made about anything.

The future of EU consumer law in the UK

EU law continues to apply until the UK leaves the EU. When the UK does leave, the European Union (Withdrawal) Act 2018 comes into force which is the repealing of the European Communities Act 1972. It allows for the Parliamentary approval of the withdrawal agreement being negotiated between the Government and the European Union.

The UK will retain existing EU law. The laws made over the last 40 years whilst the UK was an EU member will remain in place, unless the Government decides to change any of them.

Many of the EU directives regarding consumer rights are actually enshrined in UK law. So, most will remain the same unless/until they are updated, repealed or changed by Parliament.

Consumer Rights (Payment Surcharges) Regulations 2012

The Government has said that in the case of a no-deal Brexit the cost of credit and debit card payments for transactions between the UK and EU are likely to increase.

credit card, phone car and aeroplane

Package Travel and Linked Travel Arrangements 2018

If there is a no-deal Brexit, EU traders selling these arrangements in or to consumers in the UK will be required to comply with the insolvency protection requirements, as above, so you will still be financially protected if the company goes bust.

If the organiser is not based in the UK, or does not direct its business to the UK, this may not be the case. Request very clear information regarding insolvency protection before booking. You won’t be covered by these regulations but you may be covered by insolvency protection arrangements in the EU member state.

Consumer laws covering purchases in the EU

If there is a no-deal Brexit consumers will not be able to use the Online Dispute Resolution (ODR) platform provided by the European Commission. You may not be able to use the UK-based alternative dispute resolution (ADR) organisations for cross border disputes as they will no longer be required to act in cross-border disputes.

If there is a no-deal Brexit you will still be able to return items purchased from an EU retailer. You will still be buying items under the law in the seller’s country. However, it may be more difficult to return items and you may have to go that country if you want to take the matter to court.

If you incur problems after the exit date this will also apply.

If there is a deal there should be no change.

Consumer safety and the EU

If there is a no-deal Brexit the UK will instantly stop being part of the EU agencies and regulatory bodies that are responsible for undertaking safety assessments, such as the European Food Safety Authority (EFSA). Therefore UK bodies would have to take on this responsibility to ensure consumer safety. UK consumers will still be able to monitor EU consumer product recalls via the Rapid Exchange of Information System (RAPEX) website. Alerts issued by RAPEX provide information about dangerous products and steps being taken to prevent or restrict marketing.

Flights

If there is a no-deal Brexit there could well be disruption to flights around the time the UK actually leaves the EU. This is because the UK would not be part of the European Common Aviation Area and bilateral agreements need to be made.

At the point of writing it is not clear if a flight disruption would be considered as an “extraordinary” circumstance for the purposes of EU 261. I suspect it will be a matter to be fought in court. You should still get a refund but you may not get the compensation, consequential losses or admin fees. Check with your travel insurer as to whether your flight would be covered by Brexit issues.

If you have missed a connecting train due to the cancellation or delay, you can claim a refund for the unused part of the journey should you not go on a later train or have to use an alternative form of transport. You could consider claiming for consequential losses, as above.

Roaming charges

If there is a deal the Government has said that free roaming will remain guaranteed for the implementation period. (This should apply until the end of December 2020 at least. This may be extended until December 2022 for a variety of reasons, but both sides need to agree). Future arrangements after this date will depend on the details of the deal.

If there is a no-deal Brexit, at the point of going to print the Government has proposed a statutory instrument to prepare for changes to mobile roaming arrangements. If it is approved, it will remove the obligation for mobile providers to offer free roaming in the EU. The proposed new law retains the current global data cap on mobile roaming of £45 per monthly billing period and would also legislate to ensure the current alerts issued at 80% and 100% data usage continue.