The duty liability is discharged if the goods are re-exported outside of the UK or entered into another Customs procedure, such as Inward Processing. Should the goods be released to Home-Use (domestic use), then the duty and other charges become payable at this time.

Who can have a Customs Warehouse?
Logistics operators, freight forwarders, Customs agents, etc., typically operate Public Warehouses (Type R). 

Importers who use these facilities are referred to as ‘Depositors’. The Warehouse authorisation holder is known as the ‘Warehouse Keeper’. 

Private Warehouses (Type U) are operated by an individual trader, who acts as both Depositor and authorised Warehouse Keeper for the storage facility; they do not need to own the goods but must be the Depositor. 

HMRC must authorise Customs Warehouses, and the authorisation criteria are set out in the regulations and HMRC Guidance. However, it is essential to understand that the economic conditions to operate a Customs Warehouse must be met, as this is a mandatory requirement when making the application. 

Example of a Private Warehouse
Goods arrive from Company A, which is situated outside the UK. Company B is a subsidiary of company A and has a Customs Warehouse authorisation. The goods are entered into the Customs Warehouse procedure with company B named the Importer of Record. The goods are stored until Company B wishes to discharge them into their Inward Processing authorisation. Fiscal ownership remains with Company A, however, the Customs Warehouse authorisation responsibilities lie with Company B. 

Allowable operations within a Customs Warehouse
While Customs Warehousing is for storing goods, some minor handling operations may be allowed while goods are in the Customs Warehouse. These are called 'Usual Forms of Handling' and are set out in the UK legislation.
There are 22 Usual Forms of Handling, ranging from simple cleaning operations to taking samples and stocktaking. The most common ones are packing, unpacking, changing packaging, changing labels, altering marks and seal, etc. 

Making a Customs Warehouse application
The Customs Warehouse application form is the SP2, and there are 22 sections to the application. This was followed up with a Self-Assessment questionnaire that had to be completed and sent as part of the application, but due to changes within the Customs Warehousing policy team, the SAQ is now no longer required. However, this document assists the visiting officer with answers to the audit questions, so I would always recommend that the SAQ be completed. 

Along with the application, it is advised that correct processes and procedures are completed and submitted as part of the application process. 

When making the application, it should be noted that it is HMRC's policy to send an auditing officer to the site to check the applicant's suitability before making a decision. 

This enables the visiting officer to make the assessment using your application, SAQ, supporting processes and procedures to check that they are being used correctly.
HMRC will examine the premises, the accounting procedures, and the stock control systems, as well as any security issues. HMRC have 60 days from applying to either issue an authorisation, or if the visiting officer is not comfortable with what they are being presented with, to then extend the 60 days to enable more information to be submitted to them. 

Issues that may be examined during the audit are as follows: 

• The applicant can demonstrate an economic need for Customs Warehousing and that the Warehouse will be used primarily for storing goods. 
• A verifiable and accurate stock control and accounting system is in place. 
• Any usual forms of handling intended to be carried out are set out in the records. 
• Official supervision and checks can be affected without the need for an administrative system, which is out of proportion to the economic need involved. 
• The applicant can fulfil the obligations arising from the storage of goods covered by the Customs Warehousing procedure and comply with the approval conditions governing the Authorisation. 
• The intended premises are suitable concerning security, access arrangements, health and safety, and storage facilities. 
• If the application includes goods that may present a danger or are likely to spoil other goods, or require special storage facilities, the premises must be equipped to receive such goods. 

Economic Need
The trader must provide sufficient evidence of economic need at the time of application, and this evidence must be assessed as to the necessity for Customs Warehousing facilities. 

An example of evidence of economic need may be contractual arrangements between the applicant and their customers or potential customers. 

Also, your competitors may already be offering Customs Warehouse facilities to potential new customers and therefore undercut your prices, making your business less competitive, so there is a need for you, the applicant, to offer this service and to remain competitive within the marketplace. 

Guarantees
Since the UK left the EU on 1st January 2021, there is no longer a requirement for a Customs comprehensive guarantee to operate a Customs Warehouse, unless HMRC deems your company to be a payment risk to them, then in this case, they could request a guarantee to be in place before they issue the Customs Warehouse authorisation. 

What is the Customs Warehouse?
A Customs Warehouse is a defined location or premises authorised by HMRC for storing non-UK goods. It can be a:

• Building 
• Silo 
• Compound 
• Storage tank 
• A yard outside of the main building 
• Anywhere where the goods can be securely stored and accounted for

Goods that can and cannot be stored in a Customs Warehouse:

Below is a small list of goods that can be entered into the CW: 

• Non-UK goods that you have been authorised to enter the Customs Warehouse as part of your CW application. 
• You cannot enter goods you have not named within your authorisation, so you must seek approval from HMRC to add new commodity codes to your authorisation. 
•  Liable to Customs duties and VAT whether or not eligible for Preference 
•  Liable to Customs duties and Excise duties 
•  For which the supporting documents are not available at the time of import. 

Previously imported to a special procedure, e.g., IP (Inward Processing)
Not liable to full duty but liable to VAT. 

Below is a small list of goods that cannot be entered into the CW:

• Meat and meat products before veterinary check and import licence 
• Some prohibited and restricted goods before authorisation and import licence. 
• UK Home-Use products 
• Goods do not require delays in Customs duty and tax payments. 
• Goods are liable to excise duties, unless the Customs Warehouse is also authorised as an Excise Warehouse or the excise duty is paid before the goods are entered into the Customs Warehouse. 

Can I store Home-Use goods alongside Customs Warehouse goods?
The simple answer is Yes. This is called Co-Storage, enabling you to use your space within a Customs Warehouse fully. However, you must be able to identify the duty status of goods within your Warehouse. 

Discharge of goods from the Customs Warehouse procedure
Any of the following may discharge goods: 

• Release for Home-Use; 
• Re-export outside the EUK 
• Entry to another special procedure, such as Inward Processing 
• Entry to another Warehouse Keeper’s authorisation 

What are the benefits of having a Customs Warehouse? 

• Improved cash flow 
• Delay paying import duty and VAT on your stock of goods. 
• Delay in having Customs treatment applied to goods 
• Only pay duty when you have to 
• Goods can stay within the CW for years without time limits. 
• Ability to re-export or scrap goods without payment of duty 
• Document problems 
• Time to wait for documents, such as import licences / Preference certificates 
• Improved knowledge of requirement 
• Discharge / support to another procedure / regime 

What are the costs involved with having a Customs Warehouse? 

• You may need to introduce new or enhanced stock control systems, e.g., Duty Management System. 
• Additional responsibilities / personnel 
• May need to implement new procedures, e.g., SCDP 
• Premises need to be designated and secure to include more secure fencing, enhancing entry into the Warehouse and office areas, like new locks, swipe card access or pin code locks. 
• You may need to install or upgrade your CCTV security. 
• May need to put up financial security, i.e., Guarantee 

Managing your Inventory
When managing your stock within the Customs Warehouse, you need to have sound inventory management systems in place to identify where Customs Warehouse stock is stored clearly. If there are discrepancies, then you would need to notify HMRC before you make any stock adjustments. 

From the start, it is essential to understand that the amount of time you have from the moment your Customs declaration is made to HMRC, to the goods being delivered and entered into your inventory, must be, at most, five working days. 

If any discrepancies are found, then from the day the goods are entered correctly into the inventory, you have 14 days to resolve any differences. So, for example, if you have 1000 boxes declared on the Customs entry and only 990 turn up at your site, you cannot resolve the discrepancy within 14 days. You must formally advise HMRC of this discrepancy before adjusting your stock records. 

Summary
When operating a Customs Warehouse, it is essential to remember the following:

• Manage your inventory properly 
• Only allow authorised processes and handling operations within your authorisation. 
• Comply with the receipt and release conditions of your authorisation. 
• Understand the ways to receive your goods in the Customs Warehouse. 
• Understand the conditions that apply if you have discrepancies, and do not make stock adjustments.

If you are interested in discovering the advantages of customs warehousing and how it can benefit your business, we are here to assist you. Don't hesitate to reach out to us at enquiries@strongandherd.co.uk. Our dedicated team is ready to provide the practical support and guidance you need.