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You may have heard about the changes taking place on 1st May 2016 with the arrival of the Union Customs Code. You may also have heard the term Authorized Economic Operator being used in the same conversation and naturally, you may then be wondering, what do these terms mean – and how will they affect our business?
As you can imagine, we have been monitoring the developments closely, have attended a dedicated UCC/AEO seminar and have since had written and verbal discussions with one of the leading Customs officers in the UCC team here in the UK.
As you can imagine, we have been monitoring the developments closely, have attended a dedicated UCC/AEO seminar and have since had written and verbal discussions with one of the leading Customs officers in the UCC team here in the UK.
It’s fair to say that Customs have not been very forthcoming with information on exactly how importers/exporters (referred to as traders by HMRC) will be affected and in fact, the officer we communicated with advised us that they are still to release more detailed guidance on 31st March 2016 (only 1 month prior to the launch date of the UCC!). To be fair to HMRC, the finer points of the UCC were only ratified in late 2015 which prevented them releasing more details.
Firstly, I should explain in more detail what both of the above terms mean.
Union Customs Code
Since the 1990s, within the EU, we have operated under the Community Customs Code, however after almost 10 years of discussion and a failure to agree on the Modernised Customs Code (MCC), the UCC was ratified in 2013 and will bring about the following changes from 1st May 2016:-
Firstly, I should explain in more detail what both of the above terms mean.
Union Customs Code
Since the 1990s, within the EU, we have operated under the Community Customs Code, however after almost 10 years of discussion and a failure to agree on the Modernised Customs Code (MCC), the UCC was ratified in 2013 and will bring about the following changes from 1st May 2016:-
- More streamlined Customs legislation and procedures
- Greater legal certainty and uniformity to businesses
- Increased clarity for customs officials throughout the EU
- Simplification of Customs rules and procedures to facilitate more efficient customs transactions in line with modern-day needs
- Complete the move by Customs to a paperless and fully electronic environment
- Reinforce swifter customs procedures for compliant and trustworthy economic operators (Authorised Economic Operators)
Authorized Economic Operator
AEO is an internationally recognised quality mark which was introduced by the European Commission in 2008 and indicates that a business operates within a secure supply chain and that their internal controls and procedures are efficient and compliant. The Union Customs Code, as you can imagine, is a pretty detailed piece of legislation, and some would say (quite justifiably) that it is quite daunting and confusing, however what most customers really want to know is, should I be concerned about it, and do I need to do anything? Each customer’s situation is different of course but I will try to summarise the situation for the majority of importers below.
Importers
If you are a typical UK importer and you import the goods into Free Circulation – that is, you pay the import duty & VAT when the goods are cleared and either retain the goods within the UK, or you sell them on to UK or EU customers, then you are unlikely to be affected by the UCC unless you operate your own Customs deferment account, where you defer any duties payable at the time of clearance and reimburse Customs once per month.
If you do, the UCC introduces the concept of financial guarantees for most actual and potential Customs debts in the form of the new Customs Comprehensive Guarantee (CCG)- however, as long as you do not make any changes to your deferment account (for example, making changes to the deferment account limit or the bank which guarantees the deferment account, the deferment account won’t be reassessed under the new terms and so you should not be affected.
If you operate any other Customs procedures such as Inward Processing, End Use, Outward Processing, Customs Warehousing, Temporary Admissions or claim 0% Preferential Import Duty, then the new Customs Comprehensive Guarantees will be required.
Let me just put something into context here, as many customers will be feeling a lot of pressure to now become an AEO. With AEO, there are 3 levels of certification, AEOC, AEOS and AEOF however there are presently only 399 AEOs in the UK, as the take up over the past few years has been very poor. Given that almost 50% of these are freight forwarders and there are 220,000 registered UK importers it is clear that the benefits of AEO have not been seen as worthwhile when compared to the time and effort involved in applying and maintaining AEO status. HMRC are also unlikely to be able to even process applications should large numbers of importers/exporters feel they must act however they have seen a rise in applications in the last 3 months.
If you do, the UCC introduces the concept of financial guarantees for most actual and potential Customs debts in the form of the new Customs Comprehensive Guarantee (CCG)- however, as long as you do not make any changes to your deferment account (for example, making changes to the deferment account limit or the bank which guarantees the deferment account, the deferment account won’t be reassessed under the new terms and so you should not be affected.
If you operate any other Customs procedures such as Inward Processing, End Use, Outward Processing, Customs Warehousing, Temporary Admissions or claim 0% Preferential Import Duty, then the new Customs Comprehensive Guarantees will be required.
Let me just put something into context here, as many customers will be feeling a lot of pressure to now become an AEO. With AEO, there are 3 levels of certification, AEOC, AEOS and AEOF however there are presently only 399 AEOs in the UK, as the take up over the past few years has been very poor. Given that almost 50% of these are freight forwarders and there are 220,000 registered UK importers it is clear that the benefits of AEO have not been seen as worthwhile when compared to the time and effort involved in applying and maintaining AEO status. HMRC are also unlikely to be able to even process applications should large numbers of importers/exporters feel they must act however they have seen a rise in applications in the last 3 months.
Exporters
You will notice that I haven’t covered exporters in this summary and this is because, generally speaking, there is much less interest by HMRC generally in exports (as there’s less revenue/duty/VAT attached to exports, and in turn a lesser need for CCGs) and therefore the UCC is likely to have a limited impact on exports. Should you be a user of Inward Processing, then by default, you would be affected as an importer as you would process goods and then re-export and be covered as an importer in this article.
You will notice that I haven’t covered exporters in this summary and this is because, generally speaking, there is much less interest by HMRC generally in exports (as there’s less revenue/duty/VAT attached to exports, and in turn a lesser need for CCGs) and therefore the UCC is likely to have a limited impact on exports. Should you be a user of Inward Processing, then by default, you would be affected as an importer as you would process goods and then re-export and be covered as an importer in this article.
So to summarise, for the majority of importers.
1. Importing goods to Home Use and do not have their own deferment account
Unless HMRC interfere with clearances for non-AEO companies (which is highly unlikely given that 99.9% of UK importers/exporters are non AEO status), they should see no change to the way their imports are processed however if they use Straightforward Consultancy (SCL) services for Customs compliance, this will be a great asset should they decide to opt for AEO status, as HMRC will want to see evidence of a proper process of Customs compliance, preferably for 3 years
2. Importing goods to Home Use and have their own deferment account
Again, unless HMRC interfere with clearances for non-AEO companies, they should see no change to the way their imports are processed however if they make any changes to their deferment guarantee, they will need to set up a Customs Comprehensive Guarantee (CCG). If they use Straightforward Consultancy (SCL) services for Customs compliance, this will be a great asset should they decide to opt for AEO status, as HMRC will want to see evidence of a proper process of Customs compliance, preferably for 3 years. Customs are also saying that if a customer becomes an AEO, they will benefit from a 70% reduction in the guarantee amount.
nb - If you operate SIVA (Simplified Import VAT Accounting), where you use this system to reduce the amount of the guarantee you have lodged with HMRC (just to cover the duty) then you can continue to use SIVA in its current guise until your term expires.
3. Importing goods to other Customs regimes, such as Inward Processing, End Use, Outward Processing, Customs Warehousing, Temporary Admissions or claim 0% Preferential Import Duty
The arrival of the UCC will definitely affect you, as the new Customs Comprehensive Guarantees will be required and for example, if you already have an IP Undertaking which is due to expire after 1st May 2016, then this will be valid until expiry unless you make any changes to it.
I hope that this has been useful and gives you a pretty concise overview on what is happening with the Union Customs Code, and more importantly, how it may affect you. Of course, this is a concise summary and reflects our personal opinion of the changes and far more detail sits within the Customs notices and, we hope, within the update on 31st March. I also attach a link to the last official update from HMRC in October 2015.
Please do contact me if you require any guidance or clarification.
Please follow me on Twitter @AndyCliffSCL, visit our website www.straightforwardconsultancy.co.uk and our blog http://straightforwardconsultancy.blogspot.co.uk/
Andy Cliff is an industry professional who launched his own logistics consultancy, Straightforward Consultancy Ltd (SCL) after a 30 year career in international logistics, working for companies such as DB Schenker, Kuehne & Nagel and DHL Global Forwarding in operational, sales and management roles. 
Andy felt that in an increasingly complex and confusing world of logistics, small-medium sized UK importers and exporters needed a company alongside them which could help them to reduce costs, lessen their workload and provide expert advice and support day-to-day.
Andy is part of the judging panel for the 2016 Global Freight Awards, his second year in this prestigious role. The awards recognize quality, innovation and performance in the field of international logistics.
Andy is part of the judging panel for the 2016 Global Freight Awards, his second year in this prestigious role. The awards recognize quality, innovation and performance in the field of international logistics.
