In this “How to …” article we will review the key elements and processes needed to make an import customs declaration. Even if you do not now or in the future intend to prepare and submit customs declarations direct to HM Revenue & Customs (HMRC) all businesses involved in importing goods must know what is required or freight will be delayed and companies can incur unnecessary costs.
Why is it important?
Goods entering the UK from countries based outside the European Union (EU) have always needed import customs declarations so why highlight this now? Well, the UK is leaving the EU and all goods, including those boxes moving from France, Poland, Italy, etc, won’t get into the UK unless the correct customs import declaration is completed. According to some sources, as the EU countries are our biggest supply markets, this will increase the number of declarations required from around 50 million today to over 200 million from 1st January 2021. If you already trade with the EU member states, then your company may be completing monthly Intrastat – Intra-Community Trade Statistics – report to HMRC. Though for imports only a small percentage of companies, with an EU trade of over £1.5 million have to do these returns, some of the details needed on the customs declaration are the same. And it is “movement”, so you need these declarations even if you are returning goods, receiving them temporarily, whether arriving as cargo, driven into the country or hand carried. The potential impact on UK business procedures is great – so get ready now and understand what is needed on these declarations, even if someone else will submit them on your behalf.
But what is it?
A customs declaration, also known as a customs entry, is a legal declaration made by the importer/ receiver of the goods – known as the consignee – to HM Revenue & Customs. The declaration is used to create trade statistics, but it is also used to verify key pieces of information, especially to establish if the goods can legally be imported and the amount of customs duty and tax that has to be paid. As this is a legal declaration there are official fines and penalties if incorrect information is submitted and if a company by intent or ignorance makes illegal statements there could be criminal charges. Many importing companies rely on their logistics company to create the declaration but the legal responsibility for the accuracy of the declaration always remains with the importer. A company buying under Delivered Duties Paid (DDP) Terms may incorrectly believe they are not the consignee of goods for customs purpose, 99% of times this is wrong. The consignee on the import declaration has to be registered in the UK and it is very difficult for overseas companies to do this. So, rather than delay the shipment, by default the logistics company will name the UK business as the official importer. In the UK an import customs declaration is made to HMRC via a computer main system known as CHIEF (Customs Handling of Import Export Freight) and many ports/ airport are inventory linked to the warehouse system controlling the release of goods. CHIEF is being replaced by a new UK computer system known as the Customs Declaration Service (CDS) but the process will remain the same.
How to …
To make a customs declaration the consignors must be registered with HMRC. This registration is separate from any VAT registration you may hold, and it is known as the Economic Operator Registered Identification (EORI) number. An EORI is needed even if your company does not need to be registered for VAT but for imports companies are recommended to have a VAT registration or they will not be able to off-set the 20% VAT due on most goods. If your company does not have an EORI you will not be able to receive goods from the EU after December 2020. Also, any additional company completing the declaration on behalf of the consignee – ie the freight forwarder, logistics company – must also have an EORI.
To make a customs declaration you must be linked to the CHIEF software that is a complicated (and old) system and access is via specifically authorised software interfaces that must also hold “badges” to operate at the ports and airports. The badges are expensive to obtain but are an essential part of UK security system for cargo arriving from overseas. Companies completing import declarations must purchase the software and pay for each transaction – that is why there is a charge for doing customs entries passed back to the importing company or onto the customer if they are contracted to pay this fee. In the UK a Safety and Security declaration must be received at the arrival point prior to an import entry being made to ensure the goods are safe to receive.
The consignee may decide to self-declare in which case they must ensure they have the following information available prior to the departure of the goods. Many importers will use 3rd party declarant, eg a freight forwarder, chamber of commerce, but as it is still the consignee’s legal statement the consignee must provide clear instructions for the freight company to follow. Details include
- Description of goods
- The commodity code (tariff number)
- Quantity of goods and number and type of packages, eg carton, box, pallet
- Value of goods (any currency can be declared)
- Cost of freight and insurance
- Always nett weight, occasionally the gross weight
- If the goods require an import licence or permit and the licence/permit if required
- Name of the consignor (company that has sent the goods) and country of supplier
- Why the goods are being moved, eg permanent import, temporary, return – this is entered onto the system as a Customs Procedure Code (CPC)
- Supporting documentation such as the shipping invoice, preferential trade statements and transport document
A unique reference number is generated by the freight carrier and, at most ports/airport, added to the inventory system. Before a customs computer declaration can be made the freight must be “claimed” using this reference number. The numbers are needed to tie the physical goods up with the electronic declaration. If the goods cannot be identified against a customs entry, then there will be a delay. If you do complete your own import declarations you must also hold badges to access the inventory systems and claim freight, often it is easier and cheaper to employ a logistic company to undertake this activity but they require full details.
If the declaration is correctly linked to the freight and the freight is seen to have physically arrived into the UK CHIEF will calculate the duties and taxes and the customs entry will be circulated to key government departments and organisation to see if any of them want to physical inspect the goods before they enter the UK. If the physical inspection takes longer than 24 hours to undertake the consignee will be subject to any storage costs that are incurred.
The consignee must obtain a copy (electronic copies are fine) to check the correct information has been declared to customs but also as official evidence of export for VAT purposes. If errors have been made on the declaration you can make amendments, but may have to pay additional duty if, for example, the value is declared incorrectly. The official evidence of import should be tied to your commercial paperwork and records must be retained for a minimum of 6 years. It is a recommended practice to maintain a register of import shipments covering all the key details separate from your normal warehousing and accounting software.
HMRC have extended a grant operated by PwC to assist companies in obtaining training on what is needed for customs declarations, you must register with PwC prior to booking the training but, while the fund lasts, many companies are receiving a grant covering 100% of the training costs for both e-learning, virtual classroom, public events and in-house bespoke training. The grant is also available for companies looking to do customs declarations themselves, rather than pay freight forwarders, to fund both the IT system needed and some staff costs. https://www.customsintermediarygrant.co.uk/. It is important that you are prepared for customs declarations as one thing is certain we will need to do them, trade agreement or no trade agreement with the EU from 1st January 2021 – don’t be the one who’s freight is stuck in customs.