Strong & Herd.

Frequently asked questions

FAQS

In this section, you will find answers to many frequently asked questions about International Trade.

Import

A. According to UK Customs, the following seven processes may come under a duty relief regime, but remember you must understand the duty relief procedure fully as entitlement is generally dependent on certain conditions being met and the procedure followed. For further information use Volume 1 of the Tariff or the Trade Tariff on GOV.UK.

  • Re-imported goods either re-imported unaltered or after process abroad (Notices 236 and 235);
  • Temporary admission (Notice 3001+ https://www.gov.uk/guidance/temporary-admission)
  • Reliefs for goods for specified descriptions or goods imported or used in specified circumstances, eg charities, rejected imports, etc;
  • Goods relieved of customs duty unconditionally, including education, scientific and cultural materials;
  • Goods relieved from Customs duty and VAT, eg documents, printed matter, advertising material
  • Goods imported for process and re-export or release for free circulation (Notice 3001)
  • End Use Relief on certain named goods (Notice 3001)

Under the UK/EC import duty relief schemes any EORI registered company (formerly known as the VAT number) can apply for Inward processing relief (IPR) at the time of arrival of the goods under the simplified procedure (called Authorisation by Customs Declaration) covered by CPC 51.00.001 and Economic Code ECO02 for repair (but the goods must not be replaced). This suspends both duty and VAT on condition that a customs guarantee is in place to cover the amount, otherwise the amount must be paid and reclaimed later. The maximum usage of this system is 3 times in a 12 month period or £500k of goods value whichever is reached first. The application request is made on the C88/SAD import entry in Box 44. This gives 6 months for the repair and on export a Bill of Discharge BOD3 must be sent to the National Import Reliefs Unit (NIRU) in Belfast showing the export entry number under CPC 31.51.000.

Yes, you are quite right. A new Open General Import Licence (OGIL) was issued 4th December 2017. The new OGIL revoked the previous OGIL, dated 1 May 2009. It has been further updated to reflect changes in control regimes, specifically; A ban on the import of bump stocks for firearms.

You can find the full version on the DIT or GOV websites or via this link - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/664447/Notice_to_Importers_2897_-_New_Open_General_Import_Licence_dated_4_December_2017.pdf

Export

No. Your intention is to export the goods out of the EU, and you must therefore complete normal indirect export formalities for shipment of the goods from the UK to India. This means completing an Export Accompanying Document (EAD) as the partial export entry in the UK and this must accompany goods to Rotterdam. It will be used there by the Dutch authorities to complete the export entry outside the EC. You should ensure the EAD has been completed within 15 days of opening by using the Europa MRN transit database http://ec.europa.eu/taxation_customs/dds2/ecs/ecs_home.jsp?Lang=en

NB: Goods being imported into the UK from outside the territory of the EU may legally be cleared at the first EU port of call (often Rotterdam bound for the UK). The onward journey to the UK could be reported under Intrastat; however, it is preferable that the appropriate import documentation is used to cover the whole journey from the extra-EU country (e.g. India) to the UK, including transhipment in the original port of arrival in the EU. In the case where Rotterdam is the port of transhipment, the goods were never intended to be imported into Holland and clearance there, with an onward Intrastat movement to the UK, can skew Dutch trade statistics.

Several freight forwarders and the Arab-British Chamber of Commerce have been reminding exporters to the Gulf Cooperation Council (GCC) Countries from EU Member States that it is necessary that the actual name of the Country of Origin is written on the goods. The phrase European Community (EC) should be supplemented by the name of the actual member state. This is said to apply to: Bahrain, Kuwait, Oman, Qatar and the UAE, as well as Saudi Arabia.

To answer your first question first, you cannot change the origin of goods by repacking. For goods to change origin you must do more than handling, they must undergo a process that is substantial enough to change the product, components or raw materials imported and add value. Origin rules (note: we do not mean preference, nothing to do with filling in EUR1 Forms) are governed by the Department for International Trade (formerly the DTI or BIS) but you can receive guidance from most Chambers of Commerce.

The second question is answered simply with a yes. You can issue an EC Certificate of Origin (CofO) even if the goods are not EC Origin. To expand on this, the EC in the title of the form means this form, in the same style, is used in all the member states of the EU – it does not mean that goods mentioned on it must be of EC origin. To apply for a certificate of origin you must present the completed EC CofO with your shipping invoice and, because you are not the manufacturer and the origin is not UK, you must provide evidence of USA origin. This can either be a copy of the purchase order, the original supplier’s invoice or, in some cases Chambers will accept a statement from the manufacturer confirming origin.

The Export Accompanying Document (EAD) replaced the Single Administrative Document (SAD) Copy 3 (Travelling Copy – sometimes called an EX1 Form) from 1st July 2009 as a computer security declaration which is electronically forwarded to the EC export customs point. The EAD is also a document generated when the NES export declaration is made to UK Customs for indirect exports, ie goods travelling by road across the EC to a non-EC destination – in your case Switzerland.

Under FCA terms the seller is responsible for export customs clearance so this was your responsibility though we would have expected the freight forwarder to make the declaration at the departure point from the UK and bill you for the service. A copy of the EAD physically travels with the goods but it is an electronic system so the reference number for this document (the MRN -Movement Reference Number) is automatically transmitted to customs at the office of exit from the EC. The office of exit must electronically endorse the EAD as exported but if you neglect to complete the export declaration at the time the goods leave the UK, Customs has the power to insist the goods are returned to the UK and the declaration completed before the goods are moved again.

My guess on how it was resolved is that your customer declared it as an export started in France, probably using their own French VAT/EORI registration number – this is not correct and if UK Customs found out you will be in trouble. Also, I would image you will not get official evidence of export for this shipment so make sure you get the CMR Note back signed as received by your Swiss customer or you will have trouble proving you could VAT Zero-rate the shipment.

As you are aware, a Carnet (French for book of tickets) is for temporary movement of goods only. If anything goes wrong then it will cause some problems. Our advice is to notify the issuing Chamber of Commerce in the UK as soon as possible so they can guide you through the cancellation procedure.

Cancellation of a Carnet has to be negotiated with customs in the overseas country where the goods are to remain. The temporary import entry that has been made against the carnet voucher needs to be amended to a permanent import with full payment of import duties and taxes.

You will need assistance from your new Malaysian client to succeed. On payment of full duty/tax a "Duty receipt docket" should be issue by Malaysian Customs along with a stamped declaration of import. The re-export voucher of the carnet will not be irrelevant but ask Malaysian customs to duly stamped and endorse it as “cancelled/ duties paid”. The carnet should then be returned to the UK and submitted to the issuing chamber with a letter of explanation.

You could be charged a fine or penalised in some way for this “mis-use”, eg the chamber may refuse to grant further carnet to the company or hold on to your guarantee for the full 33 months.

Legalised means the document in question must be stamped by the Embassy of the overseas country. This is standard practice for countries in the Arab League, like Saudi, but generally only is only requested for invoices and certificates of origin. You can get your contract legalised by sending it through the Chamber of Commerce for endorsement or by using a Consular Service. There will be a legalisation fee chargeable.

The “importer of record” is a legal status giving responsibilities under US law to the party named on the import declaration. Normally this party is resident in the USA and has placed power of attorney (POA) with a US customs broker to make declaration on their behalf.

A company not resident in the USA can also give power of attorney to a US customs broker. If you have done this your company is the “importer of record” but the customs broker (forwarder) is the Principal Party in Interest – in other words they are the resident party who would receive any queries/ fines from US Customs.

If you have never signed a power of attorney (POA) then one of the following might have happened:

You are using a fast parcel operator, e.g. Fedex/UPS/DHL and because the goods are below their accepted threshold they are acting as the broker under their own rights to make the customs declarations or; Although you are paying the customs duty and tax into the USA when the declaration is submitted to US customs the broker is using another company’s POA and IRS (Inland Revenue Service reference) – perhaps your customer’s. This would make the customer the “importer of record” with charges billed back to the UK.

I’m afraid you may have to contact the customs broker in the US to find out what they are doing. You have probably grasped the fact that the “importer of record” has the legal responsibility for the import consignment which would include compliance with the USA chemical regulations. Hope this gives you something to work on.

The term ‘Single Transport Contract’ applies to certain ‘Indirect Exports’ that are covered by a ‘Through Bill of Lading’ for maritime exports or a ‘Through Air Waybill’ for airfreight exports. Although your goods sail from Antwerp and under ECS you should really be providing the shipping line with an Export Accompanying Document (EAD), if they issue you with a through Bill of Lading showing Tilbury as the place of receipt/loading, your goods are classified as an ‘Indirect Export’ under ‘Single Transport Contract’. In these circumstances, if you claim ‘Single Transport Contract’ on your export documents you do not need to provide an EAD. But you must be sure that your goods are indeed genuinely under a Single Transport Contract.

If you are making your own Customs declarations, you should input Additional Information (AI) code STC99 in Box 44 of the SAD. If you leave it up to your agent or the carrier, you should ensure that they input this information on the declaration. HMRC have issued Customs Information Paper (09) 33 which deals specifically with the concept of the Single Transport Contract. You can download it at www.hmrc.gov.uk.

It is possible that the tariff number you quote on your invoice does not correspond to codes used in Brazil. Although Brazil use the same basis for their tariff (Harmonised System) and will have the same first 4-digits in their tariff they do not use exactly the same 8 digits as the EC. If Brazilian Customs cannot relate the code you quote to their regulations this could delay import and potentially lead to problems and increased duty charges being levied. It is not a legal requirement to have the tariff number on the invoice at export so remove it, but ensure you still notify the freight forwarder in writing of the correct code so they can complete the export declaration correctly. This situation may apply to other countries outside the EC. You can view most countries’ tariff codes and duty rates by accessing the EU Market Access Database web-site (http://mkaccdb.eu.int); it is not on the worldwide web as access is restricted to EC companies only.

I would guess that your customer is exporting the faulty items or disposing of scrap items under a procedure similar to our Outward Processing Relief (OPR), the use of which will probably save them both import duty (if applicable) and GST costs. To control OPR they would have to have sight of the returned or replacement shipments and ensure they were correctly logged with Customs on arrival. This is only a guess – why don’t you ask them for a full explanation. In the meantime you could look at the very useful Singapore Customs website which does explain their Customs procedures (select from the home page “Traders”). Also, why not consider changing your delivery term for repairs/replacement to DAP arrival point and putting the onus on your customer’s company to get the goods through Customs therefore preventing you from being blamed for delays.

Export Strategy

I think that at the point of deciding whether to enter a market, there are three main questions to consider:

i. Are there any legal or other barriers that make this market either impossible or not worth considering right now? It saves an awful lot of time and effort if we can get to a firm ‘no’ or ‘not yet’ quickly. For less experienced exporters, the most effective strategy is to concentrate on the markets that look like giving the quickest and most reliable return. So as well as discounting anywhere that may be inaccessible through export controls or local import restrictions, always aim to identify the obvious factors that are going to make it too expensive or difficult. This might include language issues, or technical/cultural norms and standards. Another typical knock-out factor is the extent of competition in the market. Very strong, dominant competitors are often the biggest barrier of all to smaller exporters.

ii. Having decided not to rule the market out, my next question would be ‘how’? This is going to involve finding out how my products are distributed in the target country, where people buy them, how the sector operates and any special factors that might need me to vary the product, the packaging or the mode of delivery. This is often a question of identifying the end point, such as the physical point of sale where I would need my product to be and working back from there. This can be the most detailed question of all. This stage of researching the market means looking at what target customers actually do, as well as understanding the competition and any legal, cultural or technical questions. Seeking answers to the question of ‘how’ will help to answer the third question…

iii. Who? Most typically, this is about the sort of representation (if any) I will be looking for. For many exporting companies, this may be almost a given, and is unlikely to vary between markets. Some types of products, such as low value consumer goods are often most effectively introduced to the market via distributors, people who buy the products themselves and re-sell them to retailers or other outlets. For other products, for example high value, bespoke capital items, the most effective representation might be a commission agent. It’s helpful to bear in mind that there are no absolute rules about the sort of route to market, in fact for smaller companies this is often a question of who can we find who is sufficiently interested and motivated to take the product on. Personally, I would never rule out a potential representative just because their method of working didn’t necessarily fit my preconceived ideas. But I’d urge caution on this. The choice of local representative is invariably the biggest single success factor in any international market.

This is an excellent question, because it acknowledges something that small businesses sometimes overlook, that pricing is a valuable strategic tool, and that we actually have some degree of choice in how we set our prices.

Determining strategy always has to be preceded by identifying objectives. We can’t decide how we’re going to do something until we know what it is we are trying to do, can we? And our decisions about pricing should always reflect what we are hoping to achieve.

Although it’s an unfashionable thing to say, and will probably be frowned upon by marketing professionals, I would always start by looking at my costs. There’s no point in developing new business at home or abroad unless it’s going to make me some money. At least, that’s how we operate! Costs can sometimes mount up in exporting, and it’s important to take care that we cover any additional costs in servicing export customers, so that we can be sure of the price level below which we should not go. Export sales potentially involve a number of costs that don’t really apply in our own country. These include freight (which also covers clearance, documentation and insurance), packaging, which is often quite different when delivering products abroad, cost of converting foreign payments to the home currency and the knock on cost of slower payments if applicable and the risk of currency fluctuations. Care needs to be taken on all of these aspects and more. Understanding how they affect our bottom line makes the difference between being successful exporters and busy fools.

So the ‘true’ cost of an export sale, including the lowest margin that is sensible to the business model, can be seen as the ‘bottom line’. We shouldn’t usually go any lower than this, although we may well go much higher. This is where the strategy comes in. The most obvious question when deciding pricing strategy is “what does everyone else do?” Taking a look at competitors’ prices should give an idea of what buyers expect to pay, and this should have a bearing on the price levels chosen. Unfortunately, this is not always as easy as it sounds. Even if competitors have been kind enough to publish their prices on their website or in a catalogue, these may not be the ‘true’ prices, just as the asking prices of houses or second-hand cars that we see in newspapers are not necessarily going to bear much relation to the ultimate selling price. In lots of sectors, exporters need to maintain a flexible approach to pricing, and trust their sales team or representatives to negotiate a sensible price.

If the strategy is to market the product as superior to alternatives, then it would be usual for the price to reflect that. Alternatively, if the strategy is to offer a low-cost alternative to the current offering, then the ultimate price will need to be sufficiently low to entice buyers. There are a number of recognised pricing strategies that an exporter can adopt, and a separate article from Tutor2u explains some of the most popular ones. Adopting the ‘right’ strategy requires a thorough understanding of the local market and a clear setting of objectives.

Customs

Yes. It has been mandatory to submit Intrastat data electronically since1/4/2012. You can submit data via the Internet on line or off line (using the CSV system) or via Electronic Data Interchange (EDI). It is suggested that any business submitting more than a few lines of data uses the CSV, off line option

Intrastat data must now be submitted to HMRC by the 21st day of the month following the month in which the trade occurred. This means that data for June 2017 must reach HMRC by 21 July 2017 at the latest. Remember that this means that where 21st falls on a non-working day, the data must reach HMRC on the last working day before the 21st of the month

Yes. You should submit corrected data via the on line system, as described in paragraph 6.3 of the Intrastat General Guide (Notice 60 – version 2016). Use the on line amendment form at https://www.uktradeinfo.com/Intrastat/ElectronicSubmission/OnlineAmendments/Pages/OnlineAmendmentsForm.aspx

Remember that you can only submit Intrastat data and make amendments electronically, paper forms were discontinued on 1/4/2012.

NB: You only need to submit a correction if the value of the error exceeds the thresholds shown in paragraph 6.3 of Notice 60.

Net mass must be declared whenever a supplementary unit (e.g. no. of pieces, cubic metres etc.) is not required. It may seem a pointless exercise, but don’t forget that for some commodities, net mass is a far more relevant measure than value. Value can depend on commercial pressures and can fluctuate wildly, whereas the weight of goods generally remains constant.

NB Very rarely do goods travel without some form of ‘weight note’. After all, a truck driver will want to know if his rear axle will take the weight of the load and a pilot will be keen to be sure he can take off! Someone in your organisation will have the information. If you’re responsible for the Intrastat SD, you need to ensure that a line of communication is set up so that information about weight and any other specific measure (e.g. no. of pairs) for every consignment reaches you.

No. If you are dispatching a series of consignments which make up a complete item (i.e. one that can be classified under a single commodity code) you should only submit a declaration for the month the last consignment was shipped, using the commodity code for the finished item and its total value. This procedure does not apply to the component parts of industrial plant (see Notice 60 paragraph 20.2 for guidance on industrial plant).

NB: The value of any service element in the contract, e.g. installation charges, should be excluded if it is separately identified.

No. You must use the special commodity code 9930 2700. This code is mandatory for all fuel supplied for the operation of vessels and aircraft (i.e. excluding cargo), whatever the type of fuel, if it would normally have been classified under chapter 27. There is no requirement to report the receipt of a supply of fuel in the Member State of registration of the vessel or aircraft, so using a code from chapter 27 will mean that there is no ‘mirror’ statistic in the receiving Member State and cause an imbalance in overall EU trade figures. Such imbalances are known as asymmetries. Supplies to UK registered vessels or aircraft are treated as domestic supplies and excluded from Intrastat.

NB Special codes apply to most goods

Yes Totally!! But… remember, whilst technology specialists may be able to describe goods in their terms, the classification of goods for import and export follows fairly precise rules in the UK Integrated Tariff. Whilst taking the advice of technologists, you should always consult the chapter and section notes in the Tariff and any of the number of guides to assist in classifying particular types of goods. Ultimately, the Harmonised System (HS) Explanatory Notes should be consulted. If you are still uncertain, get in touch with the Tariff Classification Team via E-Mail – classification.enquiries@hmrc.gsi.gov.uk

I’m afraid you can’t issue an EUR preference document unless the goods are physically in an EC member state. This is because of the “direct transport” rule. The EUR1 Form would, if you could issue it, allow the Mexican’s to import the goods at a lower customs duty rate. If they ask for a NAFTA (North America Free Trade Agreement) Certificate instead – you can’t do this either because the NAFTA rules says the goods must be manufactured in USA, Canada or Mexico. I’m afraid they are stuck with importing it as a standard supply and pay the customs duties and taxes. If this is a lot of money then you could consider shipping the units to the UK first and then sending them to Mexico.

We understand that HM Revenue & Customs received notification from the Lebanese Customs authorities, saying they will NOT accept EUR1 certificates with the electronically reproduced stamps and signatures. This has been circulated, we understand, to Chambers of Commerce, so they should only be manually stamping and signing EUR1 Forms for Lebanon. We have been told that there are some other countries not currently accepting EUR1 Forms with electronic signatures. They are: Mexico, Switzerland, Israel, Egypt and Croatia. EC Customs are working on this with their counterparts in the receiving countries as the goal is to have 100% electronic stamping. UK Chambers of Commerce should always have live information as updates occur. EUR1 can be reprinted with non-electronic signature to replace if necessary. As of 1st January 2018 list of countries not accepting electronic version is: Egypt, Israel, Mexico, Switzerland and Croatia.

Yes!! Any import with incorrect value shown on the senders’ paperwork can be amended. You must make a written declaration of correct value on your letterhead to HMRC via the freight forwarder. You must be able to justify the change in value. This is important for both higher and lower values. You can use IPR as you mentioned to suspend the duty/vat, but only the correct amount of duty/vat based upon the correct value of landed goods. Another alternative would be Returned Goods Relief (RGR) if items were exported in the last 3 years and have returned unchanged, other than them not working

Willis Hawley (congressman from Oregon) and Reed Smoot (senator from Utah) were responsible for the Tariff Act of 1930 which some economists believe helped to make the 1930’s depression what it was. The Act increased nearly 900 American Import Duties in a display of American protectionism

The introduction of the Economic Operators Registration and Identification number (EORI) on 1st July 2009 is only relevant for customs declaration made on exports going outside the EC and imports arriving from countries outside the EC. EORI’s impact on Intrastat declarations is basically – NIL. Businesses issued with EORI numbers who are required to submit Intrastat Declarations must continue to use their 9-digit UK VAT registration number. Businesses who submit via branches will still be able to use the 3-digit branch identifier (Trader Unique Reference Number – TURNs) that they currently use.

With regard to EORI, the EC European Commission has provided online access to enable traders to validate EORI numbers, search information on EORI Sharing Authorities and search for information on EORI Registering Authorities . Also they have introduced a new on-line e-training course on EORI (Economic Operators Registration and Information number) available free of charge.

You are right about the potential benefits of being authorised to use “Self Assessment” which will become available when the EC’s Union Customs Code comes in fully (1st May 2016). This simplification relates to when a company would be expected to pay customs duties and VAT incurred on imports of goods from outside the EC. It will permit the company to bring goods into the EC without a financial declaration at import (though a customs declaration will still be required for security purposes). The amount of duty/VAT to be paid will then be submitted by the importer to HM Revenue & Customs on a monthly declaration, similar to the way VAT returns currently work. The payment of duty and VAT will be then be made periodically either monthly or quarterly as approved. It is expected that this simplification will only be available to businesses after 1 January 2020 that are approved under the Authorised Economic Operator (AEO) scheme. For more information on what you need to become AEO approved download Notice 117 from HMRC website. There are still issues to be agreed on this simplification and the actual implementing provisions (which will explain how to use this procedure) are not yet in place.

They are very different indeed. Arm’s length trading is an expression used in relation to the GATT Valuation rules. It is used as an expression in section 30.1 of Customs notice 252 which is the section that explains how to demonstrate that you do not get a reduced price on the goods you are valuing for customs purposes at import if you are related (in the business sense) to the party who has consigned the goods to you from overseas. ‘Distance selling’ on the other hand is a term used to describe supplies of goods from one Member State to a person in another Member State where:

  • The customer is not registered for VAT and
  • The supplier is responsible for delivery of the goods

The recipients of distance sales will mainly be private individuals. The rules are intended to transfer the place of supply to the Member State in which the customer receives the goods. The rules are intended to combat distortion of trade and unfair competition because of the lack of harmonization of VAT rates across the EC

AEO & Supply Chain Security

Authorised Economic Operator Status is a customs status and "quality" badge introduced in the whole of the European Community in 2008. It allows any company involved in the international supply chain to apply for accreditation by their customs authorities. The accreditation will be an internationally recognised “kite mark” confirming that the company has met specific high standards in supply chain security, financial stability and/or compliance with customs procedures.

This is a difficult question to answer generally. Firstly it depends on your role in the international supply chain and how your company views the benefits of having this form of accreditation. It seems likely that companies may have pressure brought on them to become AEO approved by other members of the supply chain, for the transportation industry, forwarders, carriers, warehouse operators, etc or international players, overseas customers, suppliers and so on. It is important to consider whether not being AEO approved will be perceived as a negative by your trading partners and if this would affect your business. The only way to start is to set out a formal planning committee or discussion group (involving all relevant departments) within your business assessing the pro’s and con’s for your on-going business. This should involving contacting key customers to find out their view and trying to find out what your competitors are doing. If you decide to go ahead with the application you will then need to allocate time and a budget and (in some instances) be prepared to make changes to your current business practices.

There is an application form and Self-Assessment Questionnaire (SAQ) on GOV.UK website but before you get to that stage you need to do internal checks on your current processes and procedures. We recommend you do not submit your application until satisfied that your company is compliant. HMRC and a number of consultancy and accountancy companies are able to assist in this self-audit process if required. The first step is to obtain the AEO questionnaire (SAQ) available on GOV.UK website or you can contact the Customs helpline on 0845 0109000 for a copy. You then need to go through each of the sections and review your current level of compliance. The documents you need are Customs Notice 117, Applications Form C117, C117 completion notes, AEO Questionnaire Form C118 and C118 completion notes.

No, currently the security and customs simplifications covered by the AEO status are only relevant to businesses trading with countries outside the EC.

Yes, AEO is available in two categories: 1. Security and Safety and 2. Customs Simplifications. We can’t advise which is type would be the “best” to apply for because it depends on what line of business you are in and what your business perceives as the benefits of being AEO approved. Customs in the UK are recommending that companies apply for a joint certificate rather than apply for one now and then have to go through the pain of re-applying if they decide they need the other at a later date. See a later question on the differences between the types.

There is definitely a link between the Security and Safety side of AEO approval and the procedures and compliance levels needed to be granted Aviation Security approval but AEO in total goes further. If your company is already an approved shipper or forwarder under the Aviation Security procedure then you will already meet some of the criteria required for AEO approval.

Though this differs depending on which type of AEO approval you apply for (Security and Safety/ Customs Simplifications or both) the questionnaire and subsequent audit covers the following areas:

  • the nature of your business, including all site locations;
  • the names of people responsible for controlling the supply chain
  • a guide to the volume and type of international (non-EC) business
  • information on your customs procedures, internal control systems and record keeping for customs purposes
  • statement about your compliance record with customs, eg non-compliances, procedure for notifying customs of errors
  • full financial information (anyone who has been through Sarbannes-Oxley will have no problem with this section) including internal audit procedures, accounting systems, record keeping, etc.
  • financial and solvency status check
  • physical security of the premises and procedure on-site to maintain security
  • physical movement and storage of goods, including procedure check
  • information on checks you make on your suppliers
  • employment and recruitment policies and procedures and the use of external services, eg cleaning companies, security guards, etc.

Yes, applying for AEO approval will take time and involve internal resources but Customs will be looking at the size of each business and adjusting the level of work accordingly. A Mutual Recognition Agreement (MRA) came into force in 2012 between the EC and USA which means that the customs authorities in both of these markets will recognise the security status of companies approved under AEO in the EC and CT-PAT in the USA - this means there are genuine advantages when trading with the USA in becoming AEO approved. If concerned about the amount of time it will take up contact the AEO Team at aeoteam@hmrc.gsi.gov.uk. If you already have some ISO approvals, are financially stable, have customs procedures and have review safety and security issues relating to your business then it should be a painless exercise to apply for AEO.

There is a slight misunderstanding here. If you did apply before your compliance procedures met the AEO standards then you will get your application returned or frozen, not refused and told to do more work. Don’t be in this situation – sort out your internal compliance and suitability first. The 3 year delay before re-applying is correct but only if you have your AEO authorisation revoked

The course you referred to was probably our one day course ‘Authorised Economic Operator’ which focuses on supply chain security. Two of the three agencies you refer to have changed in some way since the course you attended was held. The Home Office formed the UK Border Agency in April 2008 with the aim of bringing together the work previously carried out by the Border and Immigration Agency, Customs detection work at the border from HM Revenue & Customs and UK Visa services from the FCO (Foreign & Commonwealth Office. On October 2nd 2006 Special Branch (SO12) and Anti-Terrorist Branch (SO13) of the Metropolitan Police Service were restructured to form the new Counter Terrorism Command (SO15)

The Home Office signed a contract in November 2007 with ‘Trusted Borders’ a consortium of companies led by Raytheon Systems Ltd. to develop and implement the nation’s ‘e-borders’ project, an advanced border control and security programme. These and other changes indicate the seriousness with which government and regulatory authorities view the terrorist threat which is summarized as follows:-

  • Terrorists
  • Oganised crime gangs
  • Smuggling
  • The spread of animal diseases (Bio-terrorism)
  • Counterfeit goods

Revision of the EC Community Customs Code and particularly its Security element have produced major efforts within the Community amongst the various agencies in harmonizing procedures and such phrases as ‘Strengthening our borders’ ‘Securing our borders’ and ‘Managing our borders’ are commonplace. Many of the target plan points of the UK Border Agency relate to Immigration, asylum decisions, foreign nationals identity cards, Iris recognition immigration system etc. but Pre departure messaging and pre-arrival messaging for goods in the supply chain connecting us to countries outside the EC are forecast to come into play in the near future, although technical and complex IT challenges have still to be met. The UK Border Agency web site is www.ukba.homeoffice.gov.uk

We understand the positions of the speakers - they are both sincere, no doubt. The debate could go on and on but what about this for an idea: by allowing you customers to choose the service providers you dilute your spending power on freight and freight forwarding, why not have a “tendering exercise” in which you total up your potential spend on these services calculated as if you were trading totally on DDU (Delivered Duty Unpaid – now DAP) terms, get competitive quotes from a short list of forwarders and carriers and then potentially find you can offer a price to you overseas clients that will reinforce your market position and reduce unit costs all round. Your Logistics manager and the Sales manager would both be satisfied. Worth a try? Otherwise just rate the forwarder and if they are OK then allow them to keep the business.

Finance

An IBAN is the International Bank Account Number used as an international bank identifier for client accounts. It is to secure smooth payment and prompt processing of foreign payments by banks overseas. It is not unusual for overseas customers to request this number. If you do not know your IBAN speak to you finance team or contact your bank.

Generally letters of credit are paid by the bank at sight of compliant documents. A usance credit is not paid at sight but either against acceptance of a bill of exchange payable at a future date to be calculated, eg 30 days from bill of lading date or by a deferred payment term within the letter of credit, eg 45 days from invoice date. Be careful to establish a payment date that is calculable and indisputable, you can even put a specific payment date (eg 4 August 2009), so you are not in dispute with your customer or bank over when payment is due. If you agree to a usance credit you can always negotiate early payment with the bank but they will take a negotiation fee. If you have never dealt with a letter of credit before, ensure you get someone to help you understand how important it is to present documents that are 100% accurate.

A. There are, inevitably, occasions when despite all an importer’s efforts to ensure that a letter of credit is workable and despite all the beneficiary’s efforts to comply with its requirements, documents are presented which the banks feel are not in conformity with their terms. Sometimes the reasons given may appear trivial but the banks involved in a letter of credit are in an unenviable position in such circumstances. If your bank (the issuing bank) receives a fax, email or telex message from another bank responsible for payment under the credit your bank is likely to contact you by telephone or fax advising of the discrepancies and asking you for a decision, ie will you accept the discrepancies. Of course your decision will depend on what the discrepancies are. If they are deemed irrelevant you should be completely safe in authorising the bank to ignore them. If they appear important then refuse to accept the discrepancies without further details – if you are not comfortable with the errors you can refuse acceptance, this will of course mean goods will arrive in the UK without paperwork, leading to potential delays and storage charges. You could talk to the bank about accepting the discrepancies “under reserve”, which means the paperwork is forwarded to you, the beneficiary is paid but if you have serious problems or concerns then the “under reserve” option permits the bank to recover the money from the beneficiary. Ensure that this guarantee or reserve is extended to the issuing bank and yourself and is not just applicable to the bank outlaying payment. Alternatively, the seller could take the risk of acceptance by instructing the bank to “send the documents forward on collection”. This actually means that the beneficiary has opted to set aside the letter of credit. With the letter of credit closed the only obligation left for the importer is to settle any outstanding bank charges. Paperwork will arrive in the UK and you will be asked to accept the errors or not; payment is not made to the beneficiary until so instructed by the importer.

In international trade, it is very common for overseas buyers to insist on the issuance of a bond or guarantee in their favour as a means of securing the terms of a contract and / or covering the obligations assumed by the seller. The Bond or Guarantee provides the buyer with an element of financial security in the event of failure of the seller to meet their obligations under the contract, thus effectively financially compensating the buyer. Common types of bond or guarantee include:

  • Tender Guarantees (or ‘Bid Bonds)
  • Advance Payment Guarantees
  • Performance Bonds
  • Warranty or Maintenance Guarantees

It is more beneficial to the seller if they arrange for the bond or guarantee to be issued directly to the beneficiary by the UK bank subject to English or Scottish Law. The wording will thus include a clear expiry date following which any claims received will be considered ‘null and void’ and / or the bond / guarantee will have no further effect. It is often the case however, that the national law of certain countries determine that bonds or guarantees must be issued by a local bank and be subject to the law of the country concerned. In this case, the seller’s bank will provide a counter-indemnity to the local bank (which may be the beneficiary’s own bank), instructing them to issue the bond or guarantee in the form required. In some countries, the provision of local law may override a specified date of termination referred to within the bond or guarantee, in which case beneficiaries may be able to claim long after expiry. For this reason, UK banks are very cautious in releasing sellers from liability until they have received a firm confirmation from the overseas bank that the beneficiary has either returned the guarantee for cancellation or has indicated that the seller has fulfilled all obligations and may therefore be released from their liability. Until such a confirmation has been received, the bank will continue to record the value of a bond or guarantee within the seller’s facilities and will also continue to levy the periodic charge (usually quarterly). Sellers are therefore advised to track the status of all bonds and guarantees issued subject to overseas law and press the beneficiary for return or confirmation to the bank as soon as possible after expiry.

VAT

Changes to EC VAT accounting came into force on the 1st January 2010 – though we have mentioned this before, it is important that anyone involved in intra-EC trading understands the implication of the changes as some adjustments to systems and some planning will be required. 2010 is a bit of a misnomer as well, as that heralds but the start of a number of changes ranging over about four years. Key areas are:

1.      Introduction of an electronic Vat refund scheme replacing the current EC 8th Directive procedure

2.      Monthly rather than quarterly filing of EC Sales Lists for goods and halving the time allowed for their submission

3.      Switching the place of supply rules for many services

4.      Extending the scope of the Reverse charge for services supplied to and received from outside the UK

5.      The introduction of quarterly EC Sales Lists for services subject to Reverse Charge

These changes in 2010 mark the start of a five year rolling programme of EC VAT simplifications. We have an interesting Business Review covering the changes in a bit more detail which we are happy to email free of charge to anyone wishing to receive some more information. Send your request to info@strongandherd.co.uk.

If you are looking for import duty rates then you should access the Integrated Tariff in either paper form, the CD-Rom, HMRC website or the Europa website TARIC. You will need the commodity code (also know as tariff classification number) for the goods to do this. Other taxes can be found in a website recently launched by the European Commission - 'Taxes in Europe'. This on-line database provides information on the main taxes in force in the Member States. As with the TARIC, access is free for all users. The system contains information on around 500 taxes, as provided to the European Commission by the national authorities, including all main taxes in revenue terms (eg personal income taxes, corporate income taxes, VAT, excise duties), the main social security contributions but does not cover customs duties and tariff issues. The link is: http://ec.europa.eu/taxation_customs/taxation/gen_info/info_docs/tax_inventory/index_en.htm

Dangerous Goods

ADR regulations are the movement of hazardous goods by road, which in the EC have been in existence since 1957, last amended 1 January 2017. CMR is the transport document for road freight – It is now widely used but is a very good idea for evidence of export purposes and track/trace.

Yes, it appears to be the case that from 1/1/2010 training for sea freight is mandatory. Although there is nothing in the code which implies people should sit a question paper, competence needs to be confirmed. The information was in Amendment 34-08 sent out by the IMDG. It implies that training is mandatory and that it must be recorded in case the "competent authority" audits a company's training records.

In the three most used dangerous goods regulations (ADR/IMDG/IATA) there are provisions for sending materials in small quantities (LQ). If you are able to send goods in small quantities then there are some exemptions within the Dangerous Goods rules. Note, these are only exemptions within those rules, not completely from the rules.

Detailed information can be found in ADR Chapter 3.4, IMDG Chapter 3.4 and IATA Chapter 2.7

The main criteria revolve around the size of the inner packaging which contains the material and then the overall gross weight of the outer package.  Smaller quantities of Packing Groups II and III material can usually be sent by LQ, but not all hazardous classes can utilize these exemptions. Materials that can’t include; Class 1 explosives, (except small arms ammunition), Class 6.2 Infectious substances, and Class 7 Radioactives. 

In all regulations UN certified packages are not required, but packages still need to meet general packaging standards, and combination packages must be used. For ADR (road) and IMDG (sea), the UN Number, Proper Shipping Name and hazard class labels are also not required.  However reference to the regulations is required as there may be variations due to the nature of the product. 

Label for Road and SeaLabel for road and sea 

http://www.strongandherd.co.uk/images/images/air%281%29.JPGLabel for air freight

For road and sea, the inner packaging size can range up to 5 kg/ltrs, but the outer package must not be more than 30 kgs gross.  For items on shrink-wrapped trays, such as aerosols, this maximum package size reduces to 20 kgs gross. 

Air transport has differing overall package sizes depending on material.

A simple road/sea example would be; if the LQ provision said the maximum allowable weight per inner packaging was 5 kg, then you could place 5 x 5 kg inners, inside the outer package, allowing 5 kg for the weight of packaging material.  Equally you could place 25 x 1 kg/ltr inners within the outer package. A larger inner packaging (above 5kg/ltr) takes you out of the LQ exemption. 

For sea and air freight a Dangerous Goods Note is still required to accompany the shipment even though it is being forwarded under the LQ provisions. The note must contain information about the use of the LQ provision. 

For road, vehicles over 12t gross, carrying more than 8t of LQ packages, LQ placards are required front and rear, and have tunnel restrictions. Under LQ, vehicles still require fire-fighting equipment. By sea, vehicles and containers must display the LQ placards, as per normal IMDG requirements.

Excepted quantities” are very similar to “Limited quantities” but the maximum inner and outer packages are smaller.  Because the dangerous goods are packed in small containers and the outer package weight is limited there are some exemptions from the rules. 

The excepted quantity provision is now available in ADR (Chapter 3.5), IMDG (Chapter 3.5) and IATA (Chapter 2.6).  Packing Groups II and III can usually be sent by EQ and combination packages must be used.  Not all hazardous classes can utilize these exemptions, typical examples being Class 1 (explosives), Class 6.2 (Infectious substances), and Class 7 (Radioactives). 

Excepted quantities must meet the maximum inner packaging weight, which ranges from 30 – 1 ml/gram depending on the product.  Maximum outer packaging range from 1000 – 300 mls/grams, again, depending on the product. 

Each product in the dangerous goods list is given a code E0-E5.  E0 is not permitted as an excepted quantity.  E1 allows an inner package size of 30mls/grams and outer 1000mls/grams, whilst E5 is 1ml/gram and 300ml/gram respectively.    Where different codes are packaged together the total quantity of the outer package should be limited to the most restrictive code in the package. 

Although UN certified packaging is not required there are some prescribed rules laid down which relate to the construction of the inner and outers.  These specify type of material allowed for inner and outer, closure of each inner packages should be held securely in place by positive means (wire, tape etc).  Receptacle with a neck with moulded screw threads should have a leak proof threaded type cap, closures should be resistant to the contents.   

Inner packagings should be placed in an intermediate packaging with cushioning material to ensure, under normal conditions of carriage, nothing breaks or leaks. 

Outer packagings should be strong and rigid, such as wooden, fibreboard or other equally strong materials.  In the chapters mentioned above a number of tests are laid down which should be carried out internally to ensure compliance. 

The completed package should be large enough to ensure that there is enough space to apply all necessary markings.  The excepted quantity label is shown below.

http://www.strongandherd.co.uk/images/images/haz.JPG

Class number is required on label and name of consignor or consignee if not shown elsewhere on the package.   Maximum number of packages in a vehicle or container shall not exceed 1000. 

If a document such as a Bill of Lading, AWB or CMR/CIM consignment note accompanies the shipment, at least one of these should include the statement “Dangerous Goods in Excepted Quantities” and indicate number of packages. 

Tunnel category codes relate to road journeys and revolve around the restrictions placed on the carriage of vehicles carrying dangerous goods through tunnels.  Information on these can be found in ADR Volume I, Chapter 1.9 which covers the general provisions and Table A (Dangerous Goods List), Column 15 which indicates the code against UN numbers.  ADR Volume II, Chapter 8.6 gives information on tunnel signs and restrictions on the whole load. 

Restrictions placed on a tunnel depend on its characteristics, risk assessment including availability and suitability of alternative routes and modes and traffic management considerations.  The same tunnel may be assigned to more than one tunnel category depending on the hours of the day, or day of the week. 

The Competent Authorities have categorized tunnels based on the assumption that there are 3 major dangers which could cause serious danger to people and/or the tunnel structure.  These are explosions, release of toxic gas or volatile toxic liquid and fire. 

There are 5 tunnel categories -  

A:   No restrictions for the transport of dangerous goods;

B:   Restriction for dangerous goods which may lead to a very large explosion;

C:  Restriction for dangerous goods which may lead to a very large explosion, a large explosion or a large toxic release;

D:  Restriction for dangerous goods which may lead to a very large explosion, to a large explosion, to a large toxic release or a large fire;

E:   Restriction for all dangerous goods other than UN Nos. 2919, 3291, 3331, 3359 and 3373. 

No code in Column 15 of the Dangerous Goods List, no restriction.  If any of the other 4 codes are shown then it advises a transport company that those materials cannot be transported through any tunnel showing that code. 

In ADR/IMDG and IATA they are referred to as follows:

“High consequence dangerous goods are those which have the potential for misuse in a terrorist incident and which may, as a result, produce serious consequences such as mass casualties or mass destruction”. 

Information on this classification can be found in ADR, Chapter 1.10.5 (Table), IATA, Chapter 1.6.3.3 and IMDG, Chapter 1.4.3.

The current list, which can vary between the above regulations, consists of some products in Class 1 (Explosives), Class 2 (Gases), Class 3 (Flammable Liquids), Classes 4.1, 4.2, 4.3 (flammable solids, spontaneously combustible and dangerous when wet), Class 5.1 (Oxidising liquids), Class 6.1 (Toxic substances), Class 6.2 Infectious substances of Category A), Class 7, (Radioactive material) and Class 8 (Corrosive substances).  Where there is a Packing Group these tend to be of Packing Group I (Maximum danger). 

Carriers, consignors and other participants (see ADR 1.4.2 and 1.4.3) have to ensure that a security plan is in place.  This plan should cover the following:

  1. Specific responsibilities allocated to competent and qualified personnel;
  2. Records must be kept of dangerous goods involved;
  3. Review of current procedures and assessment of security risk;
  4. Clear statement of measures that are to be taken to reduce security risks;
  5. Procedures for reporting and dealing with security risks and breaches
  6. Procedures for evaluation and testing security plans;
  7. Measures to ensure the physical security of transport information
  8. Measures to ensure that information relating to the transport operation contained in the plan is limited to those who need to have it. 

A dangerous goods note is usually completed by a consignor who has personnel qualified within the company to complete this document.  The “DGN” as it is usually called contains all the hazardous information required by the haulier/shipping line/air freight forwarder to be able to transport the consignment in a safe manner. 

A DGN is required for air and sea freight irrespective of whether the consignment is classed as limited quantities or fully regulated. 

Road freight is slightly different in that a DGN is not required for limited quantities, but a Vehicle Packing Certificate is required if the consignment is a full load and the road journey precedes a sea journey.   

Information required on the DGN includes –

  1. UN Number
  2. Proper Shipping Name together with the technical name if an N.O.S entry (not otherwise specified)
  3. Class
  4. Packing group when relevant
  5. Number and description of the packages
  6. Total quantity of each item of dangerous goods bearing a different UN number, proper shipping name, packing group
  7. Name and address of consignor
  8. Name and address of consignee
  9. Tunnel restriction code (unless it is known beforehand that carriage will not be through a tunnel with restrictions.

Example of a permitted dangerous goods description is

 “UN 1193 Ethyl Methyl Ketone, 3, II, (D/E)."

Reference should always be made to the regulations as the information required varies for some items and Classes of dangerous goods. 

 

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Dangerous goods which fall outside of limited quantities usually have to be packed in special packages known as “UN certified packaging”.   This certification implies that the packages have been tested to withstand a variety of conditions to ensure if damaged they will maintain their integrity. 

There is a variety of different tests depending on the type of packaging and we will concentrate on combination (inner and outer) and single packaging which are less than 400 kgs nett.  The three common tests are leak proof (for liquids), stack and drop.  Some packaging is also pressure tested. 

Packages which have been successfully tested will have a code embossed on them.  Typical example is -     UN/4G/X11/S/08GB/VL0582

 

UN                  UN certification mark

4G                   Type of box (fibreboard)

X11                 Packing group and nett mass

S                      Intended for solids or inner package

08                    Year of manufacture

GB                  Country of manufacture

VL0582           Supplier identification

 

There are codes for different types of packaging and the Packing Group (where relevant) of the material to which the packaging has been tested is X, Y and Z, X being PGI, Y, PGII, Z, PGIII.  

UN certified packages can be reconditioned and will show in the code the year of reconditioning, the letter “R” and if retested for leakproofness the letter “L”.  

Packaging Instructions are given in the dangerous goods list in the relevant mode regulation.  The instruction will advise what type of packaging can be used against the UN number and weight allowed depending on packing group.       

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