Ghosts of Customs…
Past
CHIEF to CDS
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Single Trade Window
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Customs simplification measures
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Present
Future
CHIEF to CDS
The Customs Declaration Service (CDS) has been fully functional for UK import declarations since October 2022, and following further delays, CDS is now scheduled to be introduced for export declarations by the end of March 2024.
A group of “high-volume declarants” have been supported by HMRC in migrating to CDS for exports towards the end of this year, and the second phase of the transition will see all remaining businesses transition to use of CDS.
CHIEF, the long-standing predecessor to CDS, will start to be decommissioned next year once trader migration is fully complete. CDS requires more data elements to be inputted, and often in a different format, when compared to CHIEF. Traders (and their customs agents) should familiarise themselves with the new requirements to ensure minimal disruption to customs processes.
Single Trade Window
The Single Trade Window (STW) is a new service being introduced by the UK Government in 2024. Forming part of the BTOM, the STW is being designed to act as a single platform for traders to interact with for customs matters, including the submission of import and export reporting requirements.
Once fully operational, the STW will also facilitate and streamline the application process for customs special procedures and other authorisations. As it stands, traders may find themselves interacting with multiple different online platforms to submit their customs information. By removing unnecessary duplication of data submission via the STW, the idea is that traders will not waste time submitting data which already exists elsewhere on government systems.
As of November 2023, the latest news is that following user testing the STW should be available for public use during 2024, and will continue being developed in the background ahead of its full implementation.
If you would like to be involved in user testing or research relating to the Single Trade Window, further detail on how to do this is available on Gov.UK.
Customs simplification measures
The UK and EU introduced restrictions on imports of iron and steel goods from Russia on 30 September 2023. From this date, UK and EU importers of sanctioned iron and steel goods (that have been processed in a third country) must provide evidence that the inputs used did not originate in Russia.
From an evidential perspective, the EU has stated that a Mill Test Certificate may be accepted as evidence of origin, but evidence can also be established via other means. Specific EU member states have published further guidance in this respect e.g. supplier declarations and exclusions in sales contracts may be acceptable for French and German customs authorities. The provision of guidance is not mandated on UK import but may be required upon request. It is important that businesses identify which goods are impacted and obtain the required information from suppliers to ensure that appropriate evidence of origin is held.
From a customs declaration perspective, the EU have stated that code Y824 should be declared, which informs Customs that sufficient evidence is held to prove that the goods do not contain prohibited Russian inputs. Declaration coding requirements from a UK perspective have not yet been mandated.
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Ghosts of Customs…
Past
UK and EU Sanctions on Russia
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CBAM
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Border Target Operating Model
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Present
Future
UK and EU Sanctions on Russia
The UK and EU introduced restrictions on imports of iron and steel goods from Russia on 30 September 2023. From this date, UK and EU importers of sanctioned iron and steel goods (that have been processed in a third country) must provide evidence that the inputs used did not originate in Russia.
From an evidential perspective, the EU has stated that a Mill Test Certificate may be accepted as evidence of origin, but evidence can also be established via other means. Specific EU member states have published further guidance in this respect e.g. supplier declarations and exclusions in sales contracts may be acceptable for French and German customs authorities. The provision of guidance is not mandated on UK import but may be required upon request. It is important that businesses identify which goods are impacted and obtain the required information from suppliers to ensure that appropriate evidence of origin is held.
From a customs declaration perspective, the EU have stated that code Y824 should be declared, which informs Customs that sufficient evidence is held to prove that the goods do not contain prohibited Russian inputs. Declaration coding requirements from a UK perspective have not yet been mandated.
CBAM
The EU Carbon Border Adjustment Mechanism (CBAM) came into force on 1 October 2023. CBAM was introduced as part of the EU green deal, with the aim of levelling the playing field between EU importers and EU producers in respect of carbon pricing. From 2026, EU importers will have to buy certificates that will correspond to the carbon price that would have been paid if the goods were produced in the EU.
There will be a phased implementation of CBAM – a transitional phase will run until 31 December 2025, before the mechanism becomes fully operational in 2026. The sectors which fall within the scope of CBAM include the following: iron and steel, aluminium, cement, fertilisers, hydrogen and electricity. However, it is intended that CBAM will account for all sectors covered by the EU Emission Trading System (ETS) by 2030.
While there are no financial obligations during the transitional phase of CBAM, EU importers will have reporting obligations i.e. submission of a quarterly report to the EU commission covering details of the goods imported and the corresponding emissions. Once CBAM becomes fully operational on 1 January 2026, EU importers will have to gain an authorisation to import CBAM goods, annual declarations will have to be completed and CBAM certificates will have to be purchased.
The UK Government consulted on the introduction of CBAM in the UK earlier this year and there is speculation that this will come into force in 2026.
Border Target Operating Model
The Border Target Operating Model (BTOM) will be implemented from 31 January 2024. The BTOM is a new import model published by the UK Government, setting out the strategy to enhance border security whilst also reducing the administrative and financial burden on UK businesses.
The first measure being introduced at the end of January will be health certificates, which will apply to the import of medium-risk animal products, plants, plant products and high-risk food and feed of non-animal origin from the EU. Following this, on 30 April 2024, risk-based physical checks will also start to take place.
Businesses should be familiar with the requirements for importing Sanitary and Phytosanitary (SPS) goods into the UK, which are being introduced next year. If any of the goods that you import are covered by these controls, a clear process should be in place to address your obligations as an importer. Other parties within your supply chain, such as EU exporters and customs intermediaries, should also be consulted to ensure that they are able to comply with the requirements and ensure smooth customs clearance.
Ghosts of Customs…
Past
Brexit three years on
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DCTS
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Windsor Framework
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Brexit three years on
DCTS
The introduction of a customs border between the UK and the EU in 2021 has created a plethora of challenges for many businesses and has instigated the re-evaluation of supply chains and operating models.
Notably, 1 January 2024 marks the three-year anniversary of the UK’s withdrawal from the EU, presenting businesses with the opportunity to reflect on the trading operations in the post-Brexit landscape for the previous three years. Reviewing customs declaration data can help businesses to understand their duty exposure and identify risk and opportunities for duty savings. As many businesses were still adapting to the new changes in 2021, this may have resulted in missed opportunities to secure duty savings.
We have also seen increased customs audit activity from HMRC recently and recognise that customs compliance audits can cover up to three years of historical import activity. There will therefore be great benefit in reviewing the declaration data for the three-year post-Brexit period to identify risks of non-compliance and duty-saving opportunities. Noting that a retrospective preferential duty reclaim can be made up to three years after the date of importation, the three-year window begins to expire for goods imported in early 2021, so it is important that businesses identify imports in which preference could have been claimed and submit reclaims as soon as possible.
We have seen increased implementation of customs special procedures to alleviate the duty payable position post-Brexit, which has helped to avoid unnecessary and burdensome re-structuring of supply chains.
The Developing Countries Trading Scheme (DCTS) came into effect on 19 June 2023, replacing the previous Generalised Scheme of Preferences (GSP). Similar to UK GSP, DCTS will grant unilateral tariff preferences (non-reciprocal) to developing countries. Hallmark provisions of the scheme include reduced tariffs and simplified rules of origin requirements.
Countries in the general / enhanced framework benefit from full or partial removal of duties on two thirds of tariff lines, whereas Least Developing Countries (LDCs) benefit from duty-free quota-free access for all products except arms and ammunition. Under DCTS, there are more generous cumulation rules as LDCs can now source inputs from 95 countries and export goods on a preferential basis, subject to the rules of origin being met. In comparison, there were only two regional groups in which cumulation was permitted under GSP.
In terms of evidence requirements, the Form A certificate remains the same, but the wording of the origin declaration must make reference to DCTS, as opposed to GSP. A transitional period will run until 31 December 2023, which will allow businesses to continue using UK GSP origin documents. While the grace period allows businesses to prepare for DCTS, it is important to liaise with relevant suppliers to ensure that DCTS compliant proofs of origin can be obtained from 1 January 2024.
Notably, Vietnam and Samoa no longer feature as beneficiary countries under DCTS and it is therefore important to review alternative trade agreements to secure tariff preference. It may also be possible to reclaim customs duty, where it is identified that alternative agreements offered more favourable trading terms than GSP.
Windsor Framework
Noting that Northern Ireland remains part of the UK customs territory but is also effectively within the EU Single Market for the movement of goods, there are various complexities that arise from a trade perspective. The UK and EU agreed the Windsor Framework earlier this year, building on the Northern Ireland Protocol, in order to attempt to enhance the smooth flow of trade within the UK internal market. There will be a gradual implementation of the Framework in order to ensure that businesses have time to adapt to the new policies.
A key feature of the Framework is the distinction made between ‘red lane’ and ‘green lane’ movements of goods between Great Britain and Northern Ireland. If goods are destined for Northern Ireland, this will constitute a ‘green lane’ movement, and as such, will not be subject to unnecessary checks, customs duties or certification requirements. If there is a possibility or a certainty that goods will move into the EU Common Market i.e. Republic of Ireland or other EU Member States, this will constitute a ‘red lane’ movement as the goods will be considered ‘at risk’ and subject to checks and controls. To make use of the ’green lane’, authorisation for the new UK Internal Market Scheme (UKIMS) is required.
A second key feature of the Framework is the Duty Reimbursement Scheme. This applies to goods in which duty upon import into NI was paid as a result of being deemed ‘at risk’ at the time but were then not sold or used in the EU. As such, traders may be entitled to a full repayment of duty on the basis that necessary evidence can be provided that the goods were sold or used within NI or exported outside of the UK or the EU.
Present
Future