BREXIT IMPORT GUIDE

Report prepared by : Robert Hardy

Email : robert.hardy@oakland-international.com

Telephone : 07487 256 543

Version : 2.6 – updated January 2019

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INTRODUCTION

The purpose of this document is to look at the main areas of concern related to Brexit and cross-

border trade, particularly imports. We have spent almost two years talking to companies, large and

small, about the challenges and opportunities that Brexit brings. Despite the political seesawing

and the back and forth of negotiations, our message has not changed. UK import clearances can be

smooth, trade can be largely unaffected and companies can continue to thrive.

This document deals with the following topics:-

UK / EU future relationship No deal

Customs formalities Customs simplifications

Freight flows WTO tariffs

UK import duty rates Customs Union

UK import VAT Export VAT process

WHICH DEAL OR NO DEAL?

The options have distilled in to four main contenders:-

Customs Union No Deal

Canada++ (CETA) Norway (EEA)

NO DEAL is still a distinct possibility with negotiations hanging in the balance. The Irish Backstop has

the potential to de-rail the process and, even if further agreement is reached with EU, it still has to

get through UK Parliament.

The Institute for Government ran a number of scenarios and all but one resulted in NO DEAL. HMRC

border teams are currently planning for an abrupt exit at 11pm on the 29th March 2019 (which

incidentally is a Friday). Sensible businesses are doing the same.

A summary of the various future options is as follows:-

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A Canada style deal would appear to be the most suitable long-term solution with an

implementation period until the end of 2020 (at least). It is hoped this would create sufficient time

for a more suitable Irish border solution to be found, relying heavily on technology and smart border

principles. Bear in mind that trade negotiations have not even started yet.

CUSTOMS UNION

There is frequent mention of the UK remaining in the Customs Union and this being a possible

‘solution’ to Brexit. It is true that whilst remaining in a Customs Union will aid UK-EU-UK trade it

actually hinders UK’s negotiations with the rest of the world. The UK would have to apply the EU

import tariff to goods from a 3rd country but would have no say as to what those tariffs are. This

could leave the UK powerless in striking trade deals with the rest of the world as they would be

unable to negotiate the import duty rate in order to achieve a reciprocal deal on UK exports.

This graph shows the EU and non-EU

trade flows for the UK. The significant

growth in the last 7 years is in imports

from EU and UK exports to non-EU.

Staying in a Customs Union would

protect the EU import column and put

significant risk on the non-EU exports

column.

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The need for Customs formalities would still exist. In fact, ironically, there is potential for additional

documentation in the shape of the A.UK movement certificate. Turkey is in a Customs Union with

the EU, as is Switzerland, and both require import, export and transit documentation. The Turkish

border with Bulgaria (Customs Union to EU border) is far from frictionless.

WTO TARIFFS

There is often reference to ‘the WTO tariff’ and the need to classify goods in order to calculate the

worst case scenario. This only applies to UK-EU trade as UK would be treated as a 3rd country and,

in the absence of a Free Trade Agreement (FTA), the EU ERGA OMNES rates of duty would apply.

These EU imports rates can be viewed here:

https://intertradeireland.com/brexit/tariff-checker/

However, this is not the case with imports in to UK from EU

(assuming goods are of EU origin). There is no such thing as ‘the

WTO tariff’. There are 164 members of the WTO and each has

their own set of tariffs applied to imports in to their country.

The UK tariff has not yet been published although WTO schedules

have been lodged. The initial schedules are a carbon copy of the

current EU ones (even using € instead of £). The UK WTO

schedules are available here : https://www.mybrexit.uk/downloads

Dominic Raab’s technical notices confirmed that the UK will apply its own WTO MFN rates which

may be different to those used by the EU. He also confirmed that the UK trade tariff will be issued

soon and, once available, UK importers should no longer use the current [EU] version.

Incidentally the technical notices also stated that VAT Postponed Accounting would be re-introduced

(for all imports) avoiding the need to pay VAT at the point of importation. Bear in mind that VAT

reverse charge will no longer apply, exports would be zero rated and import VAT paid (or accounted

for) on arrival in the destination country. INTRASTAT declarations will no longer be required.

We have developed a simple (FREE) tool to assist you in classifying your UK imported goods, which

can be found here : https://www.mybrexit.uk/downloads See TTC UK import tariff aid.

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WHAT DUTY RATE WILL THE UK APPLY?

UK income from duty today is £3bn per annum (average 1.6% of non-EU import value). However

80% of that income goes to Brussels, 20% is retained to fund the infrastructure required to collect

the duty due. It is not possible to have a free circulation model unless the money is in the centre of

the circle; Brussels in this case. So, the UK income from duty today is net nil.

It would be a waste of resources to calculate the likely UK import tariffs at

this time. Indeed, it is an impossible task until the UK formally publish their

tariff.

Whether or not tariffs apply has no bearing on the need for Customs formalities. Zero duty may be

available but there will be a need to prove eligibility and that requires a Customs declaration.

To further validate our argument that multiple WTO tariffs exist (163 to be precise, the UK one is not

ready yet!). We took a standard Customs tariff heading (car parts) and compared the min and max

WTO duty rates in various countries, including the EU.

CUSTOMS TARIFF 8708 70.. Min Duty Max Duty

Argentina 14% 18%

Australia - 5%

China 6% 10%

European Union 3% 4.5%

Israel - 6%

Japan - -

Korea (Republic of) 8% 8%

Mexico - 5%

USA - 2.5%

UK (post Brexit) Perhaps nil Probably this one

It is estimated that, should UK employ current EU ERGA OMNES rates, it would generate £14bn in

import duty revenue, per year. Bear in mind that EU ERGA OMNES rates are higher on the type of

products produced in the EU (to protect that production from 3rd party imports). Would UK really

adopt a duty rate of €188/100kilos on parmesan cheese? Or 9.6% on Evian bottled water?

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CUSTOMS FORMALITIES

According to Carol O’Keefe of the Irish Revenue Commissioners, no matter which arrangement is

finally decided upon Customs formalities would be required.

How and where those formalities take place is a matter for ongoing discussion. Recognising the

potential need to suddenly process large quantities of entries, CHIEF has been temporarily

upgraded. CDS (the new UK Customs Declaration Service) is being implemented and is intended to

accommodate the new UCC (Union Customs Code) requirements as well as the increased volume of

declarations (up from 55 million to 255 million and with 145,000+ UK traders exposed to Customs

formalities for the first time). We estimate that 350,000 traders across Europe will be exposed to

Customs formalities for the first time as a result of UK leaving the EU.

To avoid friction at the border, Customs and the trade need import clearance processes to be (a)

simplified and (b) audit based where possible. Tools exist today to make this possible but many

traders are unaware of their existence or importance. More than 95% of entries are capable of

instant clearance and our underlying objective is to make sure you are regularly in this green lane.

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CUSTOMS SIMPLIFICATIONS

Amongst the simplifications and components available to lessen the impact are:-

AEO (Trusted Trader) status, for example, offers a number of benefits, not least:-

Faster transit at the border Fewer physical Customs examinations

Preferential treatment by Customs Easier access to Customs simplifications

70% reduction in bonds and guarantees (including deferment account)

CFSP (Customs Freight Simplified Procedures) and CBW (Customs bonded warehousing) can be used

for most Customs regimes including home use, end use, excise goods, OPR and IPR transactions.

Very few restrictions apply. The benefit of these procedures is that the final clearance can, largely,

be disconnected from the physical movement of the goods and therefore avoid potential delays en-

route. Just-in-time supply chains are not founded on speed but rather on predictability.

ETSF (External Temporary Storage Facility) is suitable in some cases as it provides the ability for

Temporary Storage under Customs control. ETSF is typically suited to a port or inland clearance

facility. ETSF also offers the ability to obtain Authorised Consignor/Consignee status meaning that

transit documents can be authenticated (or finalised) at your premises. This may be extended to

Trusted Trader status.

The final Customs process employed will largely depend on whether or not tariffs apply. AEO status

and CFSP authorisation are suitable with or without tariffs. Customs Warehousing is only really

effective if imports attract a positive rate of duty since this allows the tax point to be shifted to

warehouse exit rather than point of import arrival.

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In most cases we recommend CFSP with optional AEOC as together these offer cost effective

benefits to both supply chain and finance. A brief summary of each element is contained at the back

of this report.

With the right

approvals and

simplifications,

process flows

can be as shown

here.

The vast majority of the 55 million entries currently processed are done so using CFSP. Companies

such as UPS, Amazon, ASOS, Procter & Gamble and others currently use Customs simplifications

extensively. Simplified Frontier Declarations normally clear instantly and as such your vehicle can

pass through the port un-impeded. The final Customs declaration being done later (after delivery in

most cases).

We recently released a video explaining how EU/UK freight movements might look. Follow this link

to view https://www.mybrexit.uk/no-deal-scenario

We released a further short video detailing who needs to do what for both imports and exports and

in a simplified environment compared to a standard one. Simplifications appear essential if you

want to keep the supply chain moving. The video can be viewed here:

https://www.mybrexit.uk/process-flow

WHICH SOLUTION IS BEST FOR YOU?

The UK Customs approvals and simplifications that best fit your business will depend on the role you

play in the process, we have drawn up the following table to highlight what is available and what

process is the most appropriate in each case:-

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If, for example, you are an EU producer supplying UK retail you may well be the importer under

consignment stock rules. This would require you to register for VAT in the UK under the NETP (Non

Established Taxable Person) rules. You do not need a UK company. For our explainer video please

follow this link : https://www.mybrexit.uk/eu-producer-supplying-uk-retailer

BARE MINIMUM

The absolute minimum requirement is for a UK EORI number. Once you have this we can at least

perform import Customs clearance for you. It would be on a port clearance basis which would not

be our preferred option. We would rather use Customs simplifications in order to avoid potential

delays or congestion at the port. If you do not currently have a UK EORI number you should apply

for one now : https://www.gov.uk/eori . It is quick, easy and FREE. You normally receive your EORI

number within two days (providing you already have a UK VAT number).

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USING CUSTOMS SIMPLIFICATIONS

The most efficient way to negotiate the import Customs process is with simplifications which are

designed to ‘divorce’ the clearance process from the physical movement of the goods and thus avoid

unnecessary delays.

CFSP only requires a simplified frontier (border) declaration with the promise to submit a full

declaration later, by the 4th working day of the following month. This means that your [EU] imports

can move pretty much as they do today, with Customs formalities being completed after the event.

A little like INTRASTAT today and we never hear of supply chains disrupted by the need to complete

INTRASTAT declarations!

CFSP is seen by many (including Customs) as the best way to avoid congestion at the UK border.

Access to CFSP is under-written by a Deferment Account (DAN). If you fail to submit the final

Customs entry your deferment account will be debited using the full rate of duty for the goods

declared on the initial frontier declaration.

To obtain a DAN you must provide security which is generally calculated as follows:-

(One month duty and VAT liability x 2) x 100%

This security takes the form of a CCG (Customs Comprehensive Guarantee) and the application form

(CCG1) automatically calculates the level of bond required depending on the type of application.

IS AEO (AUTHORISED ECONOMIC OPERATOR) STATUS REQUIRED?

You do NOT require AEO status to obtain a DAN or access to CFSP – but it is easier (and cheaper) if

you are AEOC approved. It is not urgent at this stage.

AEOC status will mean that the bond calculation is reduced by 70%. However, AEO applications (C

and S) are arriving thick and fast at Customs and many will not be in place by 29th March. Do not

start with AEO.

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The best NO DEAL sequence is:-

We normally apply for a small bond level on CCG (approx. £10K in most cases). This gives a DAN of

£5K and, more importantly, gives you access to the tools that will be used to avoid congestion at the

border. We lodge the AEOC application soon after although we expect this to be delayed. Once

AEOC comes through you can either reduce your bond (for the same DAN level) or keep the bond

the same and automatically increase your DAN level by 333% without additional security required.

THE UK IMPORT PROCESS

The process will depend on whether or not you have EORI or CFSP. Before there can be a UK import

there must be an export (from somewhere). We would urge you to read our Brexit Export Guide to

understand the process relationship between the two. In simple terms, the exporter will issue an

export declaration which will also create an EXS (Exit Summary Declaration). The export declaration

is required to discharge the exporters VAT liability as they will be zero rating their export

(remember, reverse charge and INTRASTAT will no longer apply). Depending on the INCOTERMS

this will leave you with the import formalities to take care of.

EORI ONLY : a full Customs entry (48 data fields) needs to be pre-lodged so that the vehicle can be

allowed to board the ferry/train en-route to the UK. No pre-lodgement : no loading. The entry will

be routed in one of three ways :

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Route 1 – indicates that your goods have been selected for a documentary check and you

must furnish Customs with all relevant documents, before your goods can be cleared.

Route 2 – indicates that your goods have been selected for a documentary check and a

physical examination. Customs will check to ensure that the goods declared on the import

declaration correspond to the actual goods. Significant potential for delay here.

Route 6 – indicates that your goods have been cleared on the basis of the import declaration

received. Good to proceed.

The vast majority will achieve route 6 status but this is not guaranteed.

CFSP APPROVAL : a simplified Customs entry (10 data fields) needs to be pre-lodged so that the

vehicle can be allowed to board the ferry/train en-route to the UK. No pre-lodgement : no loading.

The simplified entry will nearly always achieve route 6. We then have up until the 4th working day

of the next month to present the full entry. You can do what you like with the goods in the

meantime.

DATA FLOW

The flow of data is probably the most important element in post Brexit trade. Even in the most

basic cross border movement four things need to happen:-

Export declaration

Exit summary declaration (EXS)

Entry summary declaration (ENS)

Import declaration

We have not yet spoken of the ENS (Entry Summary Declaration) as we have, so far, concentrated on

the import declaration. An overview of ENS is included further in this guide.

It is likely that one or all of these formalities will be completed by a 3rd party agent (such as Oakland

Invicta) acting on behalf of either the exporter, the carrier, the importer or all three. Data flow is

therefore essential and can be broken down as follows:-

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HEADER INFORMATION (PRE RECORDED) TRANSACTIONAL INFORMATION

Consignor name and address

Consignor EORI number

CFSP approval number

Deferment approval number

Authorisation to represent

C1207N deferment

List of regular consignees & EORI’s

Incoterms per consignee

CIF* additions/deductions

List of product codes with, for each:-

Tariff number

Country of origin

Trailer number

Intended export route (eg Calais/Dover)

ETA at UK point of arrival

Type of import (home use, IPR etc)

Consignee

Confirm incoterms for this consignment

Export invoice currency

List of product codes with, for each:-

Packages (no. and type)

Weight (gross and net)

Value

The items shown in GREEN are only required if

you have CFSP approval or your own DAN.

*CIF is the value for duty. This is the value up

to UK arrival. For DDP we deduct freight costs

after arrival and for Ex Works we add the

freight costs up to point of UK arrival.

The items shown in GREEN are ONLY required

in an EORI only port clearance. For CFSP we do

not require the items in GREEN until after the

goods have been delivered.

The transactional information shown above is largely what was required by the exporter to create

their initial export declaration. This data needs to be transferred to your Customs agent without

delay so that the ENS and import entry can be pre-lodged.

You will see that CFSP has more requirements in the set-up phase but far fewer in the transactional

stage. This is precisely why we favour CFSP and would urge you to seriously consider this aspect.

ENS – ENTRY SUMMARY DECLARATION

EVERY border crossing requires an EXIT and an ENTRY, whether that be UKEU or EUUK. This is

in addition to any formal Customs import or export entries.

When an export declaration is done it automatically creates the EXIT Safety & Security Declaration

(EXS). Therefore, providing export declarations are prepared, as they should be, then you can safely

disregard the EXIT declaration.

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Not so with imports. Reason is that import entries can be done AFTER the border crossing whereas

exports cannot. So, for imports a declaration is required, even if the eventual destination of the

cargo is outside the territory of the border about to be crossed.

It is mandatory for carriers to provide Customs authorities with advance information for goods being

brought into that Customs territory.

Customs are very likely to stop a vehicle that does NOT have an ENS message pre-lodged.

The ENS message must be submitted 2 hours before arrival at the named border (not the point of

exit but the point of entry). For Eurotunnel this may be relaxed to one hour as the point-to-point

transit is quicker.

Customs will use the information contained in the ENS message to identify whether or not they need

to control the vehicle on arrival.

The data required on the ENTRY SAFETY & SECURITY (ENS) includes:

Declarant

Valid EORI number

Name and address details

Reference no

Carrier Haulier (accompanied)

Ferry operator (unaccompanied)

Goods

Total packages and weight

Type of packages

Marks & numbers

Routing

Place of loading

Route to border (which countries passed)

Border ENTRY point (name of port for example)

ETA time and date

Vehicle Vehicle identification number

Trailer seal if applicable

Import information

Importer EORI number

Description of goods

Tariff numbers involved

It is not clear, at this stage, as to what level of consolidation will be allowed for groupage trailers. It

would make sense that the consolidator details are shown as the importer but this is not yet agreed.

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ARE THERE ANY OTHER THINGS TO CONSIDER?

Customs processes can be as complex or simple as you want them to be. Whilst we have covered the

basics there are other aspects that you need to consider and plan for:-

FOOD LABELLING

According to EU DIRECTIVE 2000/13/EC the name and [local] address of the manufacturer, seller or

distributor MUST appear on food labelling. Post Brexit this means an address in EU for UK export

food and similarly a UK address for EU import food. We have legal entities in UK and EU and can

provide local contact information for food labelling post Brexit. Similarly we have contract packing

facilities in Redditch, Corby and Dublin and can apply replacement labels should you require.

RULES OF ORIGIN

The duty rate applicable to imported goods is defined by the tariff classification AND the origin of

the goods. Deciding the origin of a product is complex but as a rule of thumb consider that 60% of

the value decides its origin. There is no hard and fast rule and it may be worth obtaining a BOI

(Binding Origin Information) ruling to avoid doubt, complication or retrospective duty demands.

We have a wealth of experience in this field and are certified by WCO (World

Customs Organisation) in respect of rules of origin.

WHAT IS INWARD PROCESSING RELIEF (IPR)?

Inward processing is a customs procedure which allows goods to be temporarily imported in order to

undergo processing or repair. You can claim full or partial relief from import duty for these goods.

Inward processing may be particularly useful when considering the integrated EU/UK/EU supply

chains that exist today. Inward processing may be useful in moving goods across borders without

duty becoming payable.

IMPORT LICENCING

Check the Customs tariff to see if a licence is required. The following licences are those commonly

required for imports:

military equipment, firearms, ammunition, explosives and related goods

dual-use goods (a wide range of civil goods that can have a military application)

goods that may be for use in connection with chemical, biological or nuclear weapons

goods being exported to countries that have UN, EU or OSCE sanctions against them

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HELP & SUPPORT

Oakland Invicta has first-hand working knowledge of Customs regulations and how to employ them

to maximum effect. The Oakland Invicta team includes certified advisors to HMRC, Institute for

Government, InterTradeIreland, BordBia and others. The Operations Director of Oakland Invicta, a

registered international trade expert with the EU Commission, successfully developed the largest

24hour Customs clearance station in the UK, based at the Port of Dover.

This expertise and experience is available to you and able to quickly decipher the fast-moving Brexit

negotiations and nuances. Oakland Invicta take care of the various elements as well as being by

your side throughout and beyond the transition from full EU membership to post Brexit trade.

Oakland Invicta fees are shown below:-

A1 AEOC : Customs Simplifications approval £3,500.00

A2 AEOS : Safety & Security approval £3,500.00

A3 AEOF : Full approval (both elements) £6,000.00

A4 BTI : Binding Tariff application (per tariff item) £50.00

A5 BOI : Binding Origin application (per tariff item) £100.00

A6 Customs Comprehensive Guarantee application £250.00

I1 UK VAT registration and EORI application £350.00

I2 Customs Freight Simplified Procedure (CFSP) application £2,000.00

I3 External Temporary Storage Facility (ETSF) application £2,000.00

I4 Customs Bonded Warehouse (CBW) application £2,000.00

I5 Import Customs training per delegate day (min 4) £250.00

A7 Consultancy day rate, excluding travel £600.00

We are known to a number of funding providers and it may be possible to secure up to €5,000

support funding for the services we provide:-

Up to £2,000 funding available under the start-to-plan scheme : CLICK HERE

Up to €5,000 funding available under the Be Prepared scheme : CLICK HERE

Up to £1,050 per employee for training : CLICK HERE

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We hope this Brexit Import Guide gives you a better understanding of import procedures and the

confidence that you will have an expert guiding hand through the entire process should you so wish.

We have also published a Brexit Export Guide and would urge you to consult that document also.

We urge you to visit www.mybrexit.uk/engage to view our latest blogs, which include Brexit

updates, policy statements and process flows and we also recommend that you and follow:

https://www.linkedin.com/in/robhardyfr8/ as regular updates are posted on this page.

You might like to know that we do not stop once the approvals and processes are in place, we can

handle Customs declarations for you as well as Safety & Security declarations. We have access to all

UK port systems and are in the process of establishing the same in Ireland.

We look forward to the prospect of working with you.

All the best

Robert Hardy

Commercial Director

Useful links :-

To obtain a UK EORI number : https://www.gov.uk/eori

NO DEAL importing guide : https://bit.ly/2RJBHWg

NO DEAL exporting guide : https://bit.ly/2qFdOE4

Authorised Economic Operator (AEO) : https://bit.ly/21zbHzT

Customs Freight Simplified Procedures (CFSP) : https://bit.ly/1XMy2WY

Customs Warehousing : https://www.gov.uk/guidance/customs-warehousing

External Temporary Storage Facility (ETSF) : https://bit.ly/22ofxXE

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SUMMARY OF BENEFITS (relevant to each recommended component)

AEO

Authorised Economic

Operator

CFSP

Customs Freight Simplified

Procedures

CBW

Customs Bonded

Warehousing

ETSF

External Temporary

Storage Facility

1. Faster transit at the

border

2. Fewer physical Customs

examinations

3. Preferential treatment

by Customs

4. 70% reduction in bonds

and guarantees required

5. Access to SIVA for import

VAT (further reduces

security required for

deferment account)

6. Easier access to Customs

simplified procedures

(such as CFSP, CBW,

ETSF)

7. AEOC (Customs status is

sufficient in most cases)

Can be upgraded to

AEOS once settled

1. Simplified entry at the

port/frontier

2. High probability of

instant clearance

3. Final entry not required

until end of month

4. Good can be unloaded

and handled as today,

with Customs entry

following later

5. Converts Customs

formalities from

transactional

(truck/load) to audit

based (month end

admin)

6. CFSP can be used with or

without the CBW

components

7. A bond (monetary) is

required but this is

reduced by AEOC status

(see point 4 in AEO

column)

1. Simplified entry at the

port/frontier

2. High probability of

instant clearance

3. Goods can be delivered

directly to your

warehouse and

unloaded as normal. No

additional Customs entry

is required at this stage

4. Duty and VAT is NOT

payable until goods

leave the warehouse

5. No time restrictions for

period of storage

without final entry

6. Goods are only cleared

when they leave the

warehouse (recommend

CFSP entry so included in

monthly return of

imports/exports)

7. Goods can be entered to

home use, transit

(Ireland), re-export etc –

no need to decide until

sold/ordered

1. Vehicle is in transit to

ETSF and by-passes port

processes

2. ETSF is same status as

‘inland port’ and

effectively shifts the

frontier to your

nominated [approved]

premises

3. Particularly useful for

Port Health controls as

these can be located at

ETSF (subject to

confirmation from your

local Environmental

Health Officer)

4. Goods must be entered

within 90 days of arrival

at ETSF (can be entered

to CFSP or divert to

CBW)

5. Customs takes place at

ETSF location and no

requirement for frontier

entry (providing goods

are consigned to ETSF

on travelling transit

documents)

TRUSTED TRADER STATUS

REDUCED FEES

EASIER CUSTOMS

ADDITIONAL TIME

MORE FLEXIBILITY

CUSTOMS SUSPENDED

FULL FLEXIBILITY

SIMILAR STATUS AS PORT

Please note : we are able to process your CFSP and/or CBW returns on a bureau basis until

you are ready or able to handle in-house. We can also handle frontier declarations.