New customs rules came into force on 1 January 2021, which change the way that movement of goods from and to the UK are reported. The new Border Operating Model provides guidance on specific reporting requirements for various transaction scenarios and should be considered carefully when importing and exporting goods to and from the UK.
The new customs rules provide that any businesses wishing to import and export from and to the UK will be required to be established to submit customs declarations, both in the UK and the EU. This requirement is similar to other customs jurisdictions around the world and is meant to ensure local customs authorities have the power to approach businesses and request a review of customs documentation and conduct customs audits.
From a customs perspective, it is important to distinguish between the following three parties for import and export transactions:
- Consignor (or Sender/Exporter of the goods)
- Consignee (or Recipient/Owner of the goods)
- Declarant (or Importer of Record)
The Consignor (or Exporter) is the business responsible for shipping the goods from the UK to the EU. Usually, the consignor is required to file an export declaration in the UK goods being shipped to the EU. The export declaration provides important details about the transaction, including the shipping terms (or incoterms) and the commodity codes.
The Consignee is the party who is taking ownership of the goods once they are cleared for free circulation in the EU. They are considered the legal owner for customs purposes. The agreed incoterms can determine who acts as the Consignee, which is usually based on the decision between the Consignor or the Consignee as to who should be responsible for paying any import duties and VAT. In case of a business to consumer (B2C) transaction, the Consignee can be a private individual to whom goods are delivered. If a business is importing its own goods for storage, later distribution, or internal use, then the importer and exporter will be the same entity and therefore, by definition, it must be the Consignee.
In order to be recorded as the Consignee, a business must have an EU EORI number. From a VAT compliance perspective, if the Consignee is subsequently making taxable transactions in the EU member state of import, they are legally obligated to register for VAT in that country. The EORI and VAT number should be linked, and the details provided to the freight carrier or customs agent so that they can be submitted with the customs documentation.
The third ‘party’ to the transaction is the Declarant (also known as Importer of Record). Naming the Declarant is a customs obligation and is independent of VAT compliance considerations. The Declarant is the person ‘responsible’ for the import documentation and must ensure the goods are legitimate, correctly valued and declared upon import. This includes being liable for a potential customs debt, accuracy of the information given in the declaration and the authenticity of the documents presented.
The requirements and criteria for who is permitted to act as the Declarant differs across different customs territories. In many cases, the Consignee will also act as the Declarant (or instruct an intermediary to act as Declarant). However, there are circumstances where this is not possible. For example, a non-established business acting as the Consignee in an import transaction to the EU is not able to act as the Declarant at the same time and must appoint a representative to act in this regard. When a third-party Declarant is required, the Consignee will have to engage the services of a representative to act on its behalf. Often the carrier or logistics agent will be able to act as Declarant, but some won’t be able to offer this service.
Practical implications on the new customs border arrangements
The new customs legislation will mean change for many UK businesses importing goods into the EU that do not have a business establishment there. The below sets out a recommendation for how UK businesses should approach the new legislation to continue importing goods into the EU efficiently.
- Discuss with the EU-based customer if they can act as the consignee of the transaction. A review of the agreed incoterms can disclose who acts as the consignee and the Declarant for the import transaction. An EU VAT and EORI registration might not be required for the UK-based supplier if the EU-based customer acts as the consignee.
- Appoint a customs agent to act as the declarant under indirect representation, who can file customs declarations on behalf of the consignee. Freight carriers might be able to act as Declarants under indirect representation as well. It should be noted that at this stage it might be difficult to find a customs agent who can act as a Declarant under indirect representation. Suppliers and customers should be warned and encouraged to discuss this with their freight carrier as early as possible.
- A further option could be to appoint an EU-established group company to act as either the consignee and/or the Declarant on behalf of the UK supplier to file customs declarations. The EU group company would require an extensive power of attorney, hold and allow access to import records, have a degree of control over the goods disposal and present them for inspection to the customs authorities. They will be contractually responsible to deal with the EU customs authorities.
- Establish a branch or EU subsidiary company to act as the consignee and/or the Declarant to import goods from the UK. We can support businesses with establishing a business in the EU.
For points 2-4 above we recommend applying for an EU VAT and EORI registration in advance of the import transaction. The EORI registration will be linked to the place of business in the UK and according to current legislation it will not be possible to use the EORI to act as the declarant of the import transaction.