Wednesday, 6 February 2019

Finally, a ray of hope from HMRC for EU importers post-BREXIT

For months, many of us in the logistics world have been watching the twists and turns of Westminster politics, and becoming increasingly concerned about potential chaos at ports like Dover who handle the lion's share of shipments being transported from the EU, over 7000 vehicles per day (see below). Many of us have probably been shouting at the TV over BREXIT, because we really don't think the government or politicians have a clue about how things work (and therefore aren't best qualified to talk about solutions to things like a post-No Deal scenario).

I went to a very well-attended BREXIT presentation at a major forwarder in November who gave the audience the low down - queues around Dover could reach 80 miles - yes 80 miles, so that's clearly a catastrophe as it wouldn't just delay deliveries of incoming shipments, it'd block the regional road infrastructure in the process, no wonder the troops are on standby. Yes, we saw the 88 trucks doing the exercise around Ramsgate for the Transport Minister, Chris Grayling recently but for most of us in logistics, it seemed like window dressing to show the UK was ready for "no deal", and it wasn't at all convincing.

Of course, we're in the single market for another 50 days and today, it's a slick operation and the key thing is that the most trucks flow through cursory checks at Dover in 2 minutes, so that's great. And if you're an importer, you'll take delivery of your shipment from Europe a couple of days after that, so everyone's happy.

One thing the media and government seem to have failed to realize is that many of the incoming vehicles are operated by so called "groupage operators", which means that a truck may contain 40-60 shipments for various UK customers and in a no-deal scenario, that would mean that each and every shipment would need to be Customs cleared as each shipment would be treated just like a shipment from the USA or China and so import duty and VAT would need to be paid.

Interestingly, we have customers ourselves who import from the EU, where the goods have been held by their Asian supplier in a Customs bonded warehouse in the Netherlands. These goods have what's known as T1 status (they're not in Free Circulation within the EU) and so a Customs entry is completed for that shipment and duty and VAT is paid in the country of destination, but it delays the shipment by a day or so.

Now imagine what would happen if every shipment had to be cleared....if just 25% of the 7000 vehicles are groupage trailers, then we're talking almost 93,000 Customs entries per day, and because we've been in the Single Market since 1993, there aren't enough qualified Customs brokers at road freight operators or Customs officers to cope with this workload.

Clearly, HMRC knew it was going to be a potential car crash on 30-Mar. And so, finally, a ray of hope appeared yesterday in the form of a pretty low-key announcement from HMRC (who would of course be concerned about the thousands of new Customs declarations required should we leave the EU on 29-Mar in a No-Deal scenario) although they claim to have written to all of 145,000 companies who import from the EU.

Here's the thing, HMRC have recognised that a No Deal scenario would cause chaos and so they have announced a new regime called "Transitional Simplified Procedures" and what it basically does, is take away the need for clearances at ports like Dover so shipments can continue to flow freely, and they'll place the onus on importers to pay any duties and VAT the month after arrival. They'll need to set up a direct debit to do this, sounds like a simpler version of a Customs deferment account to me. How it'll work operationally isn't clear because of course, the freight forwarders will need to know who is and who isn't approved for the Transitional Simplified Procedures when one of their trucks arrives at Dover but this will hopefully be worked out in the next 50 about last minute!

So here's what I recommend that you do.     

Step 1

Check first that you have an EORI number (Economic Operator Registration & Identification). If you're an established small-mid sized business, you will have a VAT number, and the EORI is just an extension of that. So your VAT number may be 123456789 but your EORI number would be GB123456789000. To confirm if you have an EORI, enter the longer sequence into the EU database as one string using the below link and it will tell you if that EORI is valid. You will see that I have entered an erroneous VAT number GB123456789000 and the result shows invalid. If it's valid, then you can apply for the Transitional Simplified Procedures, go to step 2. If not, you need to apply for an EORI number, and this will be worthwhile even if you don't apply for TSP as I am seeing several road freight operators asking clients for this info in the last month so get ahead of the curve. In section 3 below, I will provide instructions below on how to get an EORI number.

 Step 2 

Apply for Transitional Simplified Procedures. This is a new regime, fresh out of the box and the website only opens tomorrow, Thursday 7th February so I can't tell you much more than to check this link from Thursday onwards and get your application in.

Step 3
1.      So you don't have an EORI number? Don't panic, but don't hang around as many companies will start realizing the implications in a week or two as the fear factor ramps up. Here's the link to apply for an EORI number.

We're keeping a very close eye on BREXIT developments as you can imagine so I'm sure there'll be more we can share over the next few weeks, and hopefully we won't go over a Cliff edge pardon the pun!

One last thing, we are carrying out this process for all of our existing customers, even though we don't focus on EU road traffic and tend to be far more involved in air and ocean traffic to/from Asia or North America - it's best to be prepared I always think, especially right now.
If you need any more guidance or support, just drop me a line, I'll try to help.

Kind Regards

Andy Cliff

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