Every export and import consignment has the element of risk, together with the type of Representation that has been used. Customs debts include duty, VAT and Anti-Dumping Duties that may be applicable at the time of import and export due to any errors or omissions. Has Representation been considered within your supply chain? Why? you might ask. This is because Representation determines who is responsible for any customs debts due to errors, be it the agent, importer or exporter.
 
Why would Representation be important?
 
Representation means that an agent, customs broker, or freight forwarder is representing you for customs purposes at the time of import or export. HMRC also uses the term 'liable' which indicates who would be responsible for any customs debts, should there be any errors and omissions within your import or export entry. This can be a real concern for businesses and needs to be a part of your compliance process. Remember, it is always the importers' or exporters' responsibility to ensure that the correct customs clearance information is passed onto the agent, customs broker or freight forwarder. How can they complete a customs entry on your behalf if they have not been instructed to do so with your clearance instructions? This could lead to disputes as to who has to pay for any duties arising from errors, and this is the main focus on Representation.
 
Types of Representation
 
There are three types of Representation, the first being Self-Representation. This is where you are completing your own customs entries on your own software, so you are representing yourself. The next two types of Representation focus on a second party completing the customs entries for you. These are known as 'Direct' and 'Indirect' Representation. But, why are these important?....
 
Indirect Representation is the default Representation type between the parties and it means that both parties are jointly and severally liable for any customs debts. This means that, should there be any customs debts due to errors or omissions (on the customs entry), both parties would be liable for the customs debts, be it the agent, importer or exporter. If an agent delegates the task of making a customs declaration to a sub-agent, then the sub-agent and the importer or exporter will both be liable for any customs debt. If the sub-agent is an employee of the agent, the agent may also be liable in this case, so careful consideration is needed.
 
Direct Representation focuses on the agent or freight forwarder acting solely on the importers' or exporters' behalf. Thereby meaning that any debts that may be due, again from any errors or omissions, will be the sole responsibility of the importer or exporter. This is the preferred Representation type used by agents and freight forwarders, and you can see why this is the case because it means that the agents and freight forwarders are not liable for any customs debts due to errors and omissions. They are simply following the importers' or exporters' instructions for clearance.
 
However, Direct Representation does also have its' own risks for the agents and freight forwarders, because if the agent makes a deliberate or unreasonable error, then the agent may become jointly and severally liable for the customs debts due. There is also another risk with Direct Representation, involving a sub-agent. If a sub-agent has been delegated with the task of completing the import or export customs entry, then the agreement between the agent or freight forwarder must make allowances for this. This can quite often not be the case within any Direct Representation letter between the parties, so it is important to ensure that, if a sub-agent is employed, then it should be made clear within the agreement. If it is not within the Direct Representation agreement, then the sub-agent will not be empowered to directly represent the importer or exporter and they will be considered to be acting on their own behalf, and they will be fully liable for any customs debt that arises.
 
As you can see, both Indirect and Direct Representation have their own risks to both the agent and the importer or exporter. In order for an agent to act in a Direct capacity on behalf of the importer or exporter, then the agent must have a Direct Representation letter signed by the importer or exporter. The agent should not arrange for an import or export entry to be completed under Direct Representation, unless they have written authority to do so.
 
You may have come across an agent asking to you to complete a Direct Representation letter. Hopefully, you can now see why they have requested this.
 
How do I know which Representation type my agent has used?
 
This can be found within the customs entry itself, so always ensure that you receive a copy of the customs entry from your agent. SAD Box 14 within your CHIEF customs entry is the declarant information field that is completed and this is where it will state which Representation type has been used. Together with the declarant's name and address, it will also state the declarant's EORI number, and next to the EORI number you will see either a 2 or a 3:
 

2. Means Direct Representation type has been declared.

3. Means Indirect Representation type has been declared.

 
Note that Self-Representation is declared by selecting Representation type 1.
 
Always make sure that the agent has a copy of your clearance instructions, and check that the customs entry has been completed correctly. If the agent has not followed your instructions and the entry has been cleared incorrectly (possibly leading to customs debts), then the Representation type will be used by HMRC in any compliance action.
 
Make sure this is a part of your compliance procedure to check which Representation type has been used, remembering the rules above, and who is responsible for the customs debts if they occur.

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