The majority of companies that import and export fall in to it through necessity or opportunity but it’s rarely planned strategically. Perhaps your UK supplier of raw materials or components significantly increased their prices so you had to look for cheaper alternatives abroad. Maybe you were contacted by a potential customer or distributor for your products in an export market and decided to give it a go. This perfectly natural but the consequence is that your import / export processes probably developed over time in a reactive way and so may not be efficient, cost-effective or customs compliant. Our audit of how you’re trading internationally is guaranteed to improve your systems and save you time and money which is why it’s one of our most popular services. You can find more details of what’s involved and costs here

Even the most experienced importers and exporters get stuck on a problem they’ve never come across before occasionally. You might have been charged import duty when you weren’t expecting it or asked to provide documents that have never been needed before. Perhaps your customer is asking you to use a different HS code than usual and you want some advice. Questions about things like Incoterms and Letters of Credit are also common. We offer several services designed to solve your import / export problems that vary according to the complexity of the issue. Most of the time our 30 minute Customs Health Check service is sufficient to get to the root cause of the problem and you’ll receive written, easy to follow instructions on what to do after the Zoom meeting. Our clients agree it’s excellent value and gives them peace of mind to know they have our expertise to fall back on when required.

Commodity codes, also known as HS codes after the Harmonised System, tell everyone involved in the movement of goods what they are, what duties should be paid, whether rules of origin are applicable and which ones, if they should have a licence etc. If incorrect commodity codes are used customs declarations may be refused which causes delays and additional costs as well as reputational damage. When importing or exporting goods, it’s very important to check the tariff of both countries as there can be important variations once you get past the first 6 digits that you need to be aware of. The first 6 digits are always the same regardless of whether you’re importing, exporting and the customs territories involved. 2 more digits are added for exporting. An additional 2 digits are used for importing. It can go up to 14 digits when importing products that attract additional measures such as excise and anti-dumping duty. The 5 basic steps to follow when classifying goods are;

• identify the goods
• identify/locate areas, namely, the sections and chapters, within the Nomenclature where the goods may be covered
• identify and select appropriate headings within these areas
• classify the goods at heading level, taking account of any relevant legal notes
• classify the goods at subheading level, taking account of any relevant subheading notes.

HMRC has tried to simplify the process for traders by putting the UK tariff online and adding useful information about duty, restrictions and rules of origin.

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Are you one of the SMEs that are successfully importing and exporting by learning what you need to know as you go along? The international part of the business isn’t big enough to warrant employing someone full-time and you know enough to get by without too many problems. But you suspect you’re not doing things as well as you could. Perhaps you could reduce your duty liability by utilising inward or outward processing? Are you accounting for VAT in the best way to minimise the impact on your cash flow? Is there a free trade agreement that would make your products very affordable in that market if you started exporting there? For an affordable monthly retainer you can benefit from this kind of strategic expertise that will significantly improve how you trade internationally. And you get the peace of mind of knowing that if an unexpected problem arises, the best solution for you is only a phone call away.

The method you use to pay customs fees depends on how the goods have been brought into the country. If it is something you bought from an ecommerce website that is delivered to you by a Fast Parcel Operator (FPO), such as FedEx or DHL, they will contact you for payment of any customs fees that are due before they deliver it. You will also have to pay the import VAT which will 20% in the UK. If you are a business that is importing raw materials or components on a regular basis it may be worth working with a customs broker or freight forwarder. They will complete the import declaration for you and pay the import duty and VAT on your behalf using their Deferment Account. You will be invoiced for the duty and VAT + a percentage of the value. If you import very frequently you should consider setting up your own Duty Deferment Account to eliminate the costs of using the customs broker / freight forwarder’s. You will need to set up a guarantee to cover the value of the import duty and VAT you will be liable for each month. To reduce the impact on your cash flow it is recommended to set up Postponed VAT Accounting (PVA).

The amount of customs duty you will have to pay when you import goods into the USA depends on the product and its commodity code. It’s very important to get the commodity code right because it will tell you what percentage of the value of the goods is due as import duty. If you get it wrong you could pay too much or too little duty which may result in your goods being seized and having to pay fines. If you don’t know the commodity code for your product (also known as the HS code in the UK) you can look it up in the UK tariff UK Integrated Online Tariff: Look up commodity codes, duty and VAT rates – GOV.UK (trade-tariff.service.gov.uk) Once you’re sure you’ve got the correct code you can select the USA (US) in the Countries field and the Export tab to see what the import duty to the US will be. It will also tell you if there are any licensing requirements or restrictions on exporting that product to that customs territory. It is considered best practice to double check the commodity code (also known as the HTS code in the US) in the tariff of the country you’re exporting to as sometimes there are local variations. Harmonized Tariff Schedule Search (usitc.gov)

Depending on what you bought and where you bought it from it’s possible that import duty is payable. You can check by visiting UK Integrated Online Tariff: Look up commodity codes, duty and VAT rates – GOV.UK (trade-tariff.service.gov.uk) and entering the 8 or 10 digit commodity code. However, if you are importing something from the EU it’s unlikely that duty would be due because of the UK/EU Trade and Cooperation Agreement. Nevertheless, many FPOs (Fast Parcel Operators e.g. TNT or UPS) have been invoicing people and companies for import duty when they shouldn’t have been. The International Trade Consultancy has successfully reclaimed incorrect import duty from all the FPOs so give us a call if this is something you want help with.

Freeports are special areas in the UK’s borders where different economic regulations apply. In England, they’re centred around one or more air, rail, or sea port, but can extend up to 45km beyond the port. A Freeport customs site (also known as a ‘free zone’) is a secure, enclosed customs zone where some normal tax and customs rules don’t apply. Freeports need at least one customs site in order to be considered operational. Authorised businesses can import certain goods to a Freeport customs site with simplified customs documentation, and without paying tariffs. A customs site can’t be used as a first point of presentation of goods brought into the UK. Authorised businesses operating inside the Freeport customs site can store or manufacture goods, using imported goods. By doing this, they can add value before exporting them again and, where certain conditions are met, they won’t need to pay import duties. Where goods are declared to free circulation (home use) in the UK, relevant duties must be paid before they are released from the customs site. Domestic goods can also be held in a customs site and used in any processing activity. Each Freeport will have up to three designated tax sites. Tax sites are independent and separately authorised from Freeport customs sites, but they can cover the same area of land. Eligible businesses in Freeport tax sites can benefit from a range of tax incentives. This includes enhanced capital allowances, relief from Stamp Duty Land Tax and employer National Insurance contributions for new employees. Eligible new businesses moving into a Freeport tax site, and some existing businesses that expand, will also benefit from full business rates relief.

The best EU country for a UK manufacturer to hold stock in would depend on various factors such as the nature of the products, target market, shipping and logistics costs, taxes, and regulations. However, some popular choices among UK manufacturers include:

Ireland: Ireland has a favourable tax system and a strategic location that allows for easy access to the rest of the EU. It also has a strong logistics infrastructure and a skilled workforce.

Netherlands: The Netherlands is a hub for international trade and logistics, with world-class ports and airports. It also has a favourable tax regime and a business-friendly environment.

Germany: Germany is the largest economy in Europe and has a well-developed logistics infrastructure. It also has a skilled workforce and a favourable tax system.

Belgium: Belgium is strategically located at the centre of Europe and has excellent transport links to the rest of the EU. It also has a favourable tax system and a highly educated workforce.

Ultimately, the best EU country for a UK manufacturer to hold stock in would depend on the specific needs and goals of the business. It’s important to conduct thorough research and consider all relevant factors before making a decision.

It is also worth looking into grants that are available for companies looking to invest in the EU as there is often funding that can be accessed by businesses who will be contributing to the economy and creating or securing jobs.

A third-party logistics provider (3PL) can help manage and ship your inventory, providing various benefits and drawbacks. Here are some pros and cons to consider:

Pros:

• Expertise: 3PLs have expertise in logistics, warehousing, and transportation. They can provide valuable insights into streamlining your supply chain and help you manage your inventory efficiently.
• Cost savings: Outsourcing logistics can often be more cost-effective than managing it in-house. 3PLs have established relationships with carriers and can negotiate better rates on your behalf.
• Scalability: 3PLs can scale their services according to your business needs, whether you need more or less space, labour, or transportation.
• Focus on core business: Outsourcing logistics frees up time and resources for businesses to focus on their core competencies, such as product development or marketing.
• Improved customer service: 3PLs can offer faster delivery times, improved order accuracy, and better tracking information, resulting in better customer satisfaction.

Cons:

• Loss of control: Outsourcing logistics means giving up some control over the management of your inventory. You will need to trust the 3PL to handle your products correctly.
• Communication issues: There may be communication issues between your business and the 3PL, especially if they are in a different location or time zone.
• Limited flexibility: Some 3PLs may have strict policies and procedures that limit the flexibility of your supply chain. It is important to find a 3PL that can work with your specific needs.
• Cost: While outsourcing logistics can save money in the long run, it does come with upfront costs, such as implementation fees and ongoing management fees.
• Dependence on a third party: Outsourcing logistics means relying on a third-party provider to manage your inventory, and any issues that arise with the 3PL can impact your business.

Overall, outsourcing logistics to a 3PL can provide many benefits, but it is important to carefully evaluate the advantages and disadvantages before making a decision. You should also take the time to evaluate which 3PL is the best fit for your products and customers especially if you are in specialist sectors such as pharmaceuticals or food and drink.

The valuation will need to reflect the incoterms that have been agreed between the exporter and the importer. For instance, if the exporter or supplier is shipping under DAP where they would take responsibility for arranging transport, the values they declare need to include freight costs and other fees associated with this. In the odd case where a supplier ships on DDP terms, they will also need to arrange the import declaration into the destination country.

This means they will have to do the full balance of valuation, as this incoterm puts that responsibility on the supplier.

These costs can significantly increase the cost of a product once the transport costs, insurance, import duty and VAT are taken into account. VAT-registered companies can, of course, reclaim the VAT but it will still have an impact on cash flow.

If organisations make use of freight forwarders or agents, they may well not be aware of what they are being charged, so it can be a wake-up call for those who haven’t fully understood this. It’s also worth pointing out that the cost of transport can vary hugely – sometimes to the point of making the deal uneconomical – so it’s important that any importer fully understands what they will be paying, and that exporters can provide this information.

The value declared on an import should never be zero. Even if goods have been bought as samples so wouldn’t have a commercial value, they would still need a customs value assigned to them, based on the actual correct value.

This might be very cheap, such as the cost of a few tile samples, but it needs to be accurate. There are customs procedure codes which can be used to waive the duty and VAT on those items. But you cannot just put an arbitrary £1 or €1 value, either.

Often businesses will use freight forwarders or customs brokers to help with this, as they are experienced in what’s required to conduct valuations. Accountants may also be able to advise businesses on this, particularly around VAT.

A recent innovation here is postponed VAT accounting, where organisations can put the amounts they have received and owe on their VAT return, bypassing the need to pay the amount and then reclaim it. This should help from a cash flow perspective.

If you would benefit from a comprehensive review of your importing and exporting practices including valuations to ensure you are always customs compliance visit our pricing page

It’s important to be clear on this before you purchase any imported product, as part of the standard due diligence process. That may mean an email to your supplier asking them to confirm that those goods originate from that particular country.

If you make a mistake and it turns out that any goods come from a different country that’s not part of a trade agreement, you’ll need to contact HMRC to correct this and pay any extra duty that might be due. If it’s been going on over a number of years and HMRC spots it, rather than you informing then, that could potentially lead to fines as well as having to pay any amount due.

Yes, in the example above, if the goods originated from Morocco rather than China, the UK has a separate trade agreement in place. You may have assumed it would be a third-party, standard duty rate but you would actually be able to get zero per cent duty as a result of the agreement. So it can go both ways.

There are two terms to be familiar with here. One is ‘originating’, which means coming from the country you’re trying to trade with, and ‘non-originating’, which refers to a third country. Rules around this vary, but, for example, in the UK/EU trade agreement up to 15 per cent of a product can be non-originating and the item as a whole still count as originating from the EU. Other trade agreements may focus on the value of a particular element.

The most important thing is that any code must be correct, and accurate for the goods you are exporting or importing. Anyone intentionally using a particular code to attract a lower duty rate is committing fraud. There are thousands of commodity codes but choosing one is not as daunting as it sounds as it follows a logical process. This can be done through the government’s Trade Tariff tool.

For exports, remember that you only need an 8 digit code, rather than the full 10-digit code required for imports.

It’s important, too, to ensure you pick the code that you think is right; just because a supplier or customer has used a particular code doesn’t mean you have to follow. The intended use of an item can sometimes give rise to different codes too, and this can differ between supplier and customer. Codes will most often be based on finished products rather than any sub-components, although there are also codes for part-finished items such as a car engine.

Anyone not clear about which code they should be choosing can get in touch with HMRC to obtain an Advance Tariff Ruling. This will ask for very detailed information and HMRC will then come back with a code. This then becomes binding, and will provide a cast-iron defence if the business is ever audited, as long as all information given was correct.

It is possible, too, to get advice from consultants or freight forwarders, but they will only be able to recommend the use of a particular code, with the ultimate responsibility still resting with the exporter or importer.

Yes, a lot of people don’t do this, and more probably should. HMRC has expressed a clear intent to move towards an auditing system and away from border checks, so they will want to see people having audit trails, and part of that is having confirmation that the code is correct. Certainly, for any new code you use it’s worth checking, and it’s a free service that can give peace of mind.

Codes are updated once a year. This goes back to the structure of the code; a full code is 10 digits, and the first six form part of the Harmonised System code. These six digits are updated at World Customs Organisation level, around the end of December or start of January each year.

If a code doesn’t work when you or your broker are submitting a customs entry, it will be rejected and that might indicate that a code has changed. When codes change, they generally stay similar to the old one, so it’s likely that you’ll be able to enter the first six digits and identify the new one.

If I was to get an order from overseas, I would look to confirm the contract and, as part of that,do the classification. This is because this will determine any duty and VAT rates (or the equivalent taxes in the destination country), so you’ll need to work out how much it is going to cost you to fulfil the order. It should certainly be done before you ship any goods.

Another thing to bear in mind, depending on the country or product, is the possibility of sanctions, and again this will be determined by the commodity codes. If you’re dealing with a country under sanctions, you will have to confirm the commodity code first so you can use this to apply for an export licence.

Following this, you will need your commodity code for the export customs declaration, which is where all of your prior work will come together and allow you to ship the goods out of the UK.