Have you, like Napoleon, always dreamt of conquering the UK, but Brexit has stopped you dead in your tracks? Unlike the Emperor, go for it and cross the Channel… but Be Prepared!
In the past we would arrive in London from France at Waterloo Station. And true to their sense of humour it seemed the British would take pleasure to remind us French, with every train announcement.
General de Gaulle used to say, speaking about Europe: the English will always have “one foot in and one foot out”… Well guess what?!! The English now have one foot out and just a toe in! But for those who are persistent and are not afraid to work on customs and tax issues, it is still possible to profit from it.
Let’s start from the beginning:
- The United Kingdom has now left the European Customs Union (as you probably now). So, despite the agreement concluded (more about that in a moment), the United Kingdom has become a third country to the EU and is therefore treated, from a customs and duties point of view, like any other third country.
- This means the end of free movement of goods and therefore:
- Customs formalities must be completed (in the EU and the UK);
- Fees: payment of customs duties and import VAT;
- Risks: new standards, return of customs controls, blockages and
In the light of this, you might be forgiven thinking like the Emperor: “That’s far too complicated”!
But, in France where suspenders, Champagne and driving on the right side of the road were invented this is not going to stop us in our tracks. If it’s more complicated, there will be less competition and more demand: in the following few lines, we’ll explain how Napoleon and his people will overcome Brexit.
Here are the steps to follow to import your products to the UK, and recommendations for every step so that it goes as smoothly as possible:
- Customs formalities to complete: keep calm and delegate!
- Customs registration (for both export and import) – simple and fast online application;
- Mandatory customs declaration: to be filed with EU customs on export and with HMRC on import into the UK. The services of a Registered customs representative (RDE) may be hired to do this (you will just have to establish a specific contract and pay for the service);
- Plan for a possible delay for the checking of the declarations. There shouldn’t be a hold-up at the border as the declarations can be filed in advance (control of the documents);
- Roles and responsibilities to be conferred: it is down to negotiation (more or less…)!
- To be an exporter/importer: for this you must be established in the territory concerned (EU/GB) – it is generally recommended that each party (seller or buyer) takes action in their own country. Make sure you are aware of the Incoterms;
- An exporter/importer, is ALWAYS responsible even if the services of a representative have been called upon;
- Be very mindful of what you declare: customs risks can go up to a penalty of 3 times the value of the goods and the recovery period is 5 years!
- Key Facts:
- Each commodity has its own customs code, and each code has its applicable customs duty rate: the correct rate must be determined to pay the correct amount. Be aware that the codes may vary between exporting to the EU and importing to the UK.
- Identifying the origin of the product, i.e. country of production: this will have an impact on the amount of customs duty (see the optimization section).
- Declaring the correct customs value, i.e. the transaction value with the appropriate adjustments (add transport costs, royalties, mould costs, etc.).
- Controlling the VAT flow: to recover it
- Only the importer can recover the VAT paid on importation but it’s not that simple: in the United Kingdom, the importer must be the owner of the goods at the time of importation (i.e. the holder of the title of ownership or the ability to act as an owner);
- Reverse charge of import VAT: on request;
- Above all, recover all the export declarations with the ECS exit status. Otherwise there might be a risk of the VAT exemption being called into question (and at 20% of the value of the goods, it stings…). Indeed, if you invoice excluding tax, you will have to prove the actual exit of the goods from the territory…
- Mastering the new applicable standards to avoid jail!
- Bye bye EC and welcome UKCA -> the advantage, an extended tolerance period in 2023;
- Have the contact details of a responsible local importer for the authorities;
- Master the numerous regulations: food regulations, products subject to excise duty, dual-use goods, products of animal origin, cosmetics, sanitary and phytosanitary controls, etc.
Are you starting to have cold sweats? Do not worry! We will also give you the means to optimize your flows.
So how to reduce costs?
➡Think about preferential origin! The EU and the UK have concluded a free trade agreement. Thus, products originating in the EU (i.e. in their entirety or having undergone sufficient processing in the EU) are exempt from customs duties on importation into the United Kingdom and vice versa.
➡Think about special exemptions! The UK has adopted the same special tax system as the EU. Thus, you can suspend the duties and taxes due on importation into the UK if:
- Your goods only go through Great Britain (transit) or are stored before being re-exported (bonded warehouse): taxation is then suspended!
- Your goods are temporarily imported without undergoing any modification (temporary admission) or to be transformed (inward processing): taxation is suspended!
- Your goods come back after being exported (returns regime): taxation is suspended!
And how to reduce delays?
- Transit! The UK has joined the Common Transit Convention.
- The Goods Vehicle Movement Service – GVMS! The GVMS is a British government IT platform for transporting goods to the UK customs territory thanks to the smart border;
- AEO status: the status of Authorized Economic Operator is the holy grail of customs. With this status, you will become the customs authorities’ best friend, with expedited customs clearance.
We really hope that this will reassure you! Because honestly, it would be a shame to give up doing business with our best enemies just because they’ve decided to divorce.
And keep in mind that, for the consumers that we all are, the customs and tax impacts of Brexit do not only apply to businesses: individuals are also concerned. Beware of on line orders and when returning from France with crates of wine…
Armed with all this good advice, you are ready for all your operations with the United Kingdom.
Develop, export, sell…we will take care of the rest. Watch out, England, here we come!
Tiphaine Bernard
Lawyer
tiphaine.bernard@lh-lf.com
Stanislas Roquebert
Partner Lawyer
stanislas.roquebert@lh-lf.com
LightHouse LHLF – Lawyers, entrepreneurs, fun!
