On 13 July, the UK Government published its "Border Operating Model" ("BOM") which explains how the UK Government will operate controls on the import and export of goods between Great Britain1 and the EU from 1 January 2021. Certain procedures in the BOM, called the "Core Model", will affect all movements of goods between Great Britain and the EU. Other requirements will only apply to specific categories of goods. The BOM also distinguishes between requirements for certain "Controlled Goods" as listed in Annex C of the BOM, such as excise goods, controlled drugs and firearms, and non-controlled goods which are referred to as "Standard Goods".
Import procedures will be introduced in three phases between 1 January and 1 July 2021, whereas export procedures will (broadly speaking) be introduced all at once on 1 January 2021. This article summarises the key points of these phases and explores the practical issues that British businesses ought to consider in preparation.
STAGE 1 – from 1 January 2021: relates to all goods under the Core Model:
- Customs declarations: Traders importing Standard Goods can either submit a standard customs declaration or use "deferred declarations", whereby an importer makes an entry in their own commercial record at the point of the goods' entry into Great Britain (called an "entry into declarant's records", "EIDR"), and then submits a supplementary declaration to HMRC within six months. Traders importing Controlled Goods must submit a standard customs declaration, or use simplified declaration procedures if authorised to do so (see below). Tariffs will be calculated according to the UK Global Tariff2, which will take effect from 1 January 2021.
- Safety & Security ("S&S") Declarations: Under the World Customs Organisation’s SAFE framework, S&S import and export declarations provide advanced data on consignments to customs authorities for risk analysis. Import declarations (entry summary declarations) will not be required in Stage 1.
- Intrastat: VAT-registered businesses currently required to submit monthly Intrastat arrivals declarations must continue to do so.
- Goods Vehicle Movement Service: GVMS is a new IT-system that supports "pre-lodgement" of declarations ahead of goods arriving at the border. Initially it will be introduced only for transit movements (see below).
- Additional requirements: There will be additional requirements for a range of specific goods, including (among others): sanitary and phytosanitary ("SPS") controls on animal products, fish, shellfish and their products, live animals and plants and plant products; excise goods; and certain goods subject to international conventions and commitments, such as rough diamonds.
A number of procedures will be available to facilitate imports, including:
- Transit: Traders will be able to move goods into British customs territory under the Common Transit Convention ("CTC"). The CTC enables the transit of goods through the EU, EFTA countries, Turkey, North Macedonia and Serbia. It is proposed that the office of transit process will be completed digitally using GVMS. Traders can become registered as "authorised consignees" so that transit movements can end at their premises.
- Simplified Declarations: Traders moving Controlled Goods may be able to use simplified declarations to reduce process requirements at the border (this requires authorisation). Declarations can be made either by way of an EIDR or a simplified frontier declaration (which requires less information than a full declaration), with additional information submitted to HMRC via a supplementary declaration at a later date.
- Authorised Economic Operator Status: Traders can apply for AEO status for moving goods between Great Britain and the EU. This provides quicker access to simplified customs procedures and, in certain circumstances, the right to fast-track shipments through certain customs and S&S procedures.
STAGE 2 – from 1 April 2021: at this stage there will be no changes to the Core Model, but additional requirements will be placed on certain goods subject to SPS controls.
STAGE 3 – from 1 July 2021:
- Customs Declarations: Full import declarations will be required for all goods. However simplified declaration procedures are available, which involve a simplified customs declaration or alternatively an EIDR, followed by a supplementary declaration at a later date. Imported goods will be subject to either (depending on the border location operator's choice) the "temporary storage model", where goods can be stored up to 90 days before being declared to customs, or (as noted above) the new "pre-lodgement model" supported by GVMS, where a customs declaration is submitted in advance of boarding on the EU side and processed en route.
- Safety & Security (S&S) Declarations: Carriers will be required to provide entry summary declarations.
- GVMS: GVMS will be in place for all imports, exports and transit movements at border locations that have introduced it.
- Additional requirements: Additional requirements will be introduced for certain goods subject to SPS controls.
In addition the import facilitations mentioned above, traders will also be able to use customs special procedures to suspend, reduce or claim relief on the payment of customs duties and VAT under certain conditions. These include customs warehousing, inward and outward processing, temporary admission (for traders established outside the UK importing goods for specific uses) and authorised use (for goods put to a prescribed end use).
Export procedures will be introduced all at once on 1 January 2021:
- Customs Declarations: British businesses sending goods from Great Britain will have to complete an export declaration.
- Safety & Security (S&S): Carriers will be required to provide S&S pre-arrival information by way of either a single export declaration that combines customs and S&S data, or a standalone exit summary declaration.
- Additional requirements: There will be additional requirements for a range of specific goods. For example, a licence will be required to export controlled dual-use items to the EU; a new Open General Export Licence has been created for this purpose.
A number of procedures will be available to facilitate exports, including:
- Transit: Exporters may be able to use the CTC to facilitate their export. For this purpose they will need to understand the office of transit process for the custom territory their goods are entering after leaving Great Britain. Businesses can become registered as "authorised consignors", which allows them to commence transit movements from their own premises, rather than taking them to a government office of departure.
- Customs Supervised Exports (CSE) and Designated Export Places (DEP): business premises can be authorised to consolidate and clear goods inland prior to their removal to the point of departure, instead of re-presenting the goods at the UK border.
- Simplified Export Declaration: Exporters can be authorised to make a simplified export declaration, or an EIDR, followed by a supplementary export declaration. An exit summary declaration may or may not be required, depending on circumstances.
Key takeaways for businesses
British businesses trading with the EU should carefully assess how the BOM will affect their operations. This includes businesses that are reliant on EU-based supply chains, such as supermarkets and the automotive industry, and those that are not familiar with trade outside the EU. Some of the key points for consideration are as follows:
- Trading basics: Traders will need to have an Economic Operator Registration and Identification (EORI) number in order to import from or export to the EU. They will need to know the commodity code, customs value and origin of their goods. Exporters should additionally consider whether they need a UK export licence, and also customs requirements on the EU side, including import declarations, tariffs and licences.
- Customs intermediaries: The customs process is complex and businesses commonly use intermediates such as customs agents. Traders who do not use intermediaries will need to have access to the relevant HMRC systems to submit customs documentation.
- VAT: Traders will need to consider how they account and pay for VAT on goods imported from the EU, which will be levied at the same rate as goods from the rest of the world. The rules for accounting for VAT are different rules for VAT-registered and non VAT-registered traders.
- Deferred Duty Accounts: Traders should consider applying for a DDA, which enables customs charges including customs duty, excise duty and import VAT to be paid monthly through Direct Debit. A trader must currently obtain a Combined Customs Guarantee in order to use a DDA, but new rules will allow most traders to use duty deferment without one.
- Facilitation procedures: Traders should consider whether they can use any of the available import/export facilitations procedures. Some of these require authorisation by HMRC, such as regular use of customs special procedures.
- Existing contracts: The imposition of new and revised tariffs, combined with the increase in paperwork and checks at the border, will inevitably increase the cost to many businesses and affect lead times. Businesses should consider how their existing contracts, including the selection of Incoterms rules, will be affected by the BOM.
2 The UK Global Tariff is available at: https://www.gov.uk/guidance/uk-tariffs-from-1-january-2021