The UK Spring Statement 2018 confirmed the £1.5bn departmental allocation programs that will assist with the UK's Brexit planning. This will also continue the UK government's consultation plans which will inform how businesses may consider preparing for the UK's withdrawal from the European Union ("EU").
Union Customs Code (“UCC”)
Recent changes to the Union Customs Code, conceived and set in motion, long before Brexit may hold some of the clues as to how businesses can begin to use the existing customs regimes to their benefit, especially as the digitisation of customs is high on the UK’s agenda and surely has one of the most important and, potentially, far-reaching impacts. Continued development and investment in this digitisation will be an important part of the UK’s Brexit planning solutions.
Doubly so, as recent international trade figures released by HM Revenue & Customs (‘‘HMRC’’) show an overall trend towards the narrowing of the trade gap with non-EU exports rising against non-EU imports. This may indicate that UK firms are seeking more and more non-EU markets for their goods.
Authorised Economic Operator (‘‘AEO’’) certification
However, much has also been written about AEO certification or ‘trusted trader status’ and its potential to solve the need for frictionless movement, not just in the EU, but further afield. But UK firms have not ‘stampeded’ to the door of this regime in the anticipated numbers. Only approximately 0.3% of UK firms that regularly import and export have signed up for this regime and of those, the majority are bigger firms, who can meet the compliance structures that have to be in place.
True, one size does not fit all and AEO is not the ‘silver bullet’ that will insulate UK firms against the uncertainty of change in their changing markets within the international trade arena. HMRC were recently allocated additional resources to staff the various customs regimes and, no doubt, AEO is an important facet in HMRC’s mind.
Perhaps the key here is extra investment (or at least work on understanding the low application levels) to increase the tangible benefits of becoming an AEO that may then yield a better take-up. However, AEO is only one of the measures that businesses can consider in conjunction with other worthwhile regimes, such as Binding Tariff Information, Binding Origin Information and the recently announced consultation for a potential Binding Customs Valuation Information.
Optimistically, the EU indicated in late 2017 that it may be willing to recognize such regimes beyond withdrawal and transition. As such, these regimes give a degree of certainty, over unexpected and unfavourable rulings by the EU on existing goods and their exporters as to the classification and the rules of origin of their products.
Customs declaration system
Secondly, the new Customs Declaration System replacing CHIEF—which is now 25 years old—has been developed to encompass not just the processing of standard entries for import and export data, it will also include oversight over a number of the various customs regimes such as AEO, Inward Processing and Temporary Admission. It is little wonder that HMRC are struggling to draw together the different digital customs platforms into one system.
Moreover, perhaps instead of fixating on March 2019, HMRC and Her Majesty’s Government should be looking forward and making bold moves (and bold investments) to prepare for, and solve, customs solutions and problems in the 2030s, 2040s and beyond. Innovative ideas (and some a definite nod to the past) such as different places of clearance, inward clearance depots, reduced documentary and physical interdiction at the expense of increased guarantees, a streamlining of the various regimes, digital tracking and ‘smart’ marking of loads, are all potential avenues to explore and should form part of the consultation process.
The welcome development of the Registered Exporter (“REX”) system to monitor preferences from around the world is a good initiative and helps to streamline customs processes, but HMRC need to explore more ways to safeguard and speed up the movement of goods away from the traditional and seek greater integration of these systems.
Recent HMRC figures around an approximate £1.86bn shortfall accountable to excise duty fraud demonstrates the danger of unequal taxation regimes within a customs union. Hence, more work needs to be done to overhaul the regimes surrounding the movement of certain types of high-risk goods, the authorization regimes and front-end compliance methods surrounding them before the final withdrawal date and beyond, if the UK is to remain efficient at collecting the correct amounts of tax, eliminating fraud and remaining competitive.
For more information, please contact Simon Sutcliffe
Reproduced with permission from Daily Tax Report International (Mar 13, 2018). Copyright 2018 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com