For many companies, customs regulations are seen as a necessary evil and a subject which can cause concern and alarm.
In the 2014 International Trade Survey, undertaken by the Institute of Export & International Trade in conjunction with Trade & Export Finance Ltd (TAEFL), around 7% of businesses identified “taxation and tariffs” as a factor which might prevent them from exporting or developing overseas markets; a further 14% identified “Compliance with overseas regulations” as a factor.
Complying with customs regulations, UK and overseas, is of course a necessity, and one which requires care and attention. Providing inaccurate information, incorrect customs tariff codes or Customs Procedure Codes (CPC) on export or import entries can result in delays to goods, as well as customs queries or inspections, which can have adverse consequences.
Paying too much customs duty when importing will affect a trader’s cash flow and affect the onward sales price of goods; while underpaying import duty can result in the above mentioned customs inspections, which in turn can lead to penalties, fines or even legal action.
The customs tariff can offer legitimate opportunities for companies to optimise their import duties, through effective use of customs valuation rules, and by identifying accurate, but more favourable tariff codes and duty rates (such as when dealing with different products which are imported as “sets”). Favourable and advantageous tariff codes can be confirmed by HM Revenue & Customs (HMRC) or other customs authorities, and “locked in”, through Binding Tariff Information rulings, which provide definitive confirmation of the code for a period of up to six years, allowing use of the corresponding duty rate.
Companies who export or import components or process materials in different countries in- and outside the EU may be able to take advantage of customs procedures such as Inward Processing Relief (IPR) or Outward Processing Relief (OPR), which allow import duty to be deferred, suspended or reduced under specific circumstances. Effective use of customs warehouses, also known as “Bonded warehouses”, can allow goods to be placed into storage on arrival without payment of import duty or VAT.
The key to deriving positive benefits from customs procedures is knowledge; a solid all-round understanding of the Customs environment and procedures can transform a “cause for concern” into a “cause for celebration”, while a positive and proactive relationship with H M Revenue & customs can bring further direct and indirect benefits for a company.