Preparation for EU exporters

There are new processes coming in on both sides of the Channel as a result of these new rules. The moment the EU supplier’s goods move over the EU border – whether it’s heading to Northern Ireland or Britain – they will be required to provide additional certificates and documents, as set out in the Border Target Operating Model. If the goods are landing in Northern Ireland there will also be a mandatory full inspection.

From a UK importer perspective, you will need to ensure your EU supplier has an established point of contact with the animal or plant health department in their own country. For UK exporters this would be DEFRA or APHA, for example; EU countries will have their own equivalents which the EU suppliers will need to contact.

For products of animal origin, the EU supplier will also need to establish links with an official veterinarian (OV). The export health certificate must be obtained and approved by the OV. The OV will need to physically visit your premises to check and approve each pallet or item that’s being shipped, providing a physical certificate for each. There is a cost associated with that, and the GB importer and EU supplier would need to decide who that’s allocated to.

The physical certificate must physically accompany the goods as it will be stamped and signed. The electronic copies must be sent to the importer or their appointed representative.

There are similar problems and processes involved in getting phytosanitary or catch certificates for plants, fish and non-farmed fish.

The other thing the EU supplier will need to ensure is that they have the required certificates a minimum of 24 hours in advance of the goods crossing the border. They will need to lodge a pre-notification of the goods movement, with the accompanying certification, using a system called TRACES.

There is an issue at the moment because of the limited number of available OVs. The EU supplier will therefore need to ensure they’ve contacted an OV well in advance of the export.

If they leave it too late before the goods are due to move, they may not be able to book an appointment in time and their goods won’t be able to cross the border because they won’t have the required certification.

 

Planning the logistics of the export

You need to have a clear timeline and logistical plan in place for obtaining the documentation, and you also need to book your transportation and method of crossing – whether it’s by train or ferry, and what route the goods will travel by.

The key thing is to ensure you’ve got the necessary certification well in advance – whether that’s an export health certificate for animal-origin products, phytosanitary certificate for plants or catch certificate for fish.

The EU supplier will need to ensure they have obtained all the relevant documentation and uploaded these onto TRACES at least 24 hours before the crossing time – and they’re going to be very strict on these deadlines from 31 January.

 

Preparation for GB importers

The EU supplier will need to provide a digital copy of the export health, phytosanitary or catch certificate to the GB importer so that the GB business, or their customs broker, can lodge it with the IPAFFS system in the UK, 24 hours in advance of the goods movement.

The GB business or their broker will also need to lodge this in the Customs Declaration Service (CDS) as well, and they will be given a pre-authorisation number for the movement. This will be needed for the haulier when they’re creating a Goods Movement Reference (GMR) number in the Goods Vehicle Movement System  (GVMS).

As with the export requirements outside of the EU, this cannot be done last minute and you need to ensure you have a clear timescale and logistical plan for obtaining the documentation.

Within IPAFFS, a common health entry document (CHED) will be created and there are different types of CHED for different products – CHED P is the one predominantly used within most SPS movements, but there are other CHEDs for goods regulated by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and other high-risk or unusual goods. If your goods are chosen for inspection at the border, the agent will complete the CHED with the written result of the inspection.

This document will need to accompany the goods to the final destination and the importer will then need to close off the movement on the system by confirming that the goods have been delivered. This is done so that if an inspector from APHA or DEFRA wants to look at the goods after their arrival, they know where they’re going to be.

From this point, if they haven’t closed their CHED, or if they haven’t had their notification submitted in a timely manner, the importer won’t be able to continue to move the goods. HMRC and Border Force could then penalise the importer or even prohibit them from continuing to import SPS goods.

 

Which goods are categorised as needing inspection and will this affect where they can enter the UK?

Risk-based identity and physical checks will be introduced on medium-risk animal and plant goods from the EU, except from Ireland, from 30th April 2024. The inspections that need to be conducted will be determined by the risk assessments completed on the back of the documentation that’s uploaded, which is why there’s the 24-hour notice period via TRACES in the EU and IPAFFS in the UK, as this will give border force agencies the time to select which goods need to be inspected.

It’s vital, however, for importers to select the correct border control post (BCP) for the goods to enter the UK through, as not all BCPs will have the facilities to process the different types of SPS goods.

The government has provided an interactive map setting out which BCPs can process the different types of goods.

 

Who can help me comply with these new requirements?

A lot of suppliers and importers will have customs brokers who they can nominate to manage the customs processes for them, although they now charge additional costs for submitting pre-lodgements for the goods movements.

The EU supplier will nonetheless need to manage the process of obtaining the SPS certification (e.g. export health or phytosanitary certificates) themselves and then provide these to their broker so that they can pre-lodge the movement through TRACES (unless you’re collecting EXW).

Your customs intermediary in the UK will also support customs processes around the goods movements, but they will need to be provided with the SPS documentation in a timely manner to ensure they can lodge the pre-notifications with IPAFFS and get the pre-authorisation number to generate the GMR for the haulier.

 

PEACHES / IPAFFS

The Procedure for Electronic Application for Certificates (PEACHES) will no longer be operational by the end of the month. IPAFFS is essentially replacing it, so it’s vital that importers and their brokers register to it as soon as possible.

 

What are the cost implications of the new regulations for EU suppliers and GB importers?

On average, the cost in Europe is generally around £38 for obtaining the certifying documentation – e.g. the export health certificate – and a certificate will be needed for each item or a pallet of items. There’s also additional administration costs if you’re using a broker to upload this onto TRACES in the EU and a broker for putting it onto IPAFFS in the UK.

The average overall additional cost for the new processes around medium-risk plant-based or animal-origin products is believed to be an additional £140 per shipment.

 

 

The majority of companies that export do so because they received a sales enquiry from abroad and wanted to take the opportunity to increase sales and profitability. In these circumstances there is usually a degree of learning on the job and the sales, finance and logistics teams manage to work it out between them. However, this approach can be stressful and result in costly mistakes such as goods being held at the border or receiving invoices for duty that weren’t expected. To export with confidence, whether you’re new or have been doing it for a while, follow our top tips to successful exporting.

 

1. Identify the correct commodity code / HS code in the relevant tariffs

All goods that are traded internationally can be identified by a number – the commodity  Code or HS code. As a general rule, export codes are 8 digits and import codes are 10 digits – the export code + 2 digits. It is essential to use the correct commodity code for the goods you are moving because it indicates what level of duty is applicable and whether any controls are in place e.g. whether you need a licence or, for food and drink products, a health certificate may be required. Each customs territory has its own tariff and there are often local variations – the UK HS code probably isn’t exactly the same as the USA HTS code. It’s advisable to check the tariff of the country you’re exporting from and to, in order not to miss anything.

 

2. What’s the final destination?

In our global economy and with new sanctions coming online weekly, it’s important to establish which country or region the end user of your product will be and what, if any, regulatory or compliance issues apply – for example export licenses. Once you know where the item is going and any wider information around transportation, you’ll then be able to select the most appropriate transport company and customs broker.

 

3. Planes, trains and automobiles (probably trucks actually)

Transport is a vital element of fulfilling your first export order, and is likely to depend on the type of good you’re selling and how quickly the customer requires it. Air transport, for instance, is quick making it ideal for fresh produce. But it is also expensive. Most items heading to a nearby destination could feasibly go by road or rail, but if you’re exporting to a country further away (and if speed of delivery isn’t crucial), then shipping by sea is likely to be a good choice.

 

4. Agree which Incoterms to use with your customer

Short for international commercial terms, Incoterms are a recognised set of arrangements covering the delivery of goods from sellers to buyers, including elements such as who will cover freight costs, insurance of goods in transit and liability for any import or export duties. In all, there are 11 Incoterms, and seven of these relate to transport. When written into a sales contract they become legally binding. Some buyers may offer to trade on Ex Works terms (EXW), where most of the responsibility for transportation and declarations rests with them.

This can be attractive to new exporters but you may struggle to prove the goods have left the country and be handed a bill for the VAT. At the other end of the spectrum is the Delivered Duty Paid terms, where the exporter undertakes all responsibility, including both the import and export declaration. While this may be helpful in attracting new customers, be aware that the seller bears most of the risk under these terms and depending on the rate of import duty and value of the consignment could be very expensive.

 

5. Understand rules of origin

Another task will be to determine the economic nationality of the goods you’re selling. Even if a product is manufactured in the UK, if a certain percentage or the value of materials / components used are not UK origin, you may not be able to claim that the end product is UK origin. The reason that origin is so important is that it affects the rate of import duty applicable when imported by your customer. For more information on this subject have a look at our FAQs, Blog, webinar or free Download.

 

6. Prepare your customer for import VAT

Many of our clients report that customers in the EU are surprised and annoyed when required by the transport company / customs broker to pay import VAT. When the UK was a member of the European Union this wasn’t an issue and a shockingly high number of EU companies still haven’t got to grips with the UK being a third country. All export sales from the UK are 0% rated for VAT but the customer will have to pay VAT at their local rate when the goods arrive at an EU border (unless you’ve agreed to deliver using DDP Incoterms). If they are registered for VAT they can account for it in the normal way on their VAT return but as the money has to be paid up front it will have an impact on their cash flow which can be a nasty surprise if they’re not expecting it. Good communication in advance will solve most export problems.

 

All of this can be rather daunting if you’re new to it and even seasoned exporters trip up every now and again because the landscape is constantly changing. If you’re concerned about anything to do with exporting (or importing) get in touch today to arrange a free consultation and benefit from the peace of mind that working with an Intertrade Services Groups provides.

The government has said it will be removing a commodity code requirement for export declarations submitted via the Customs Declaration Service (CDS).

The change will apply to those submitting export declarations under the Export Memorandum of Understanding (Export MoU) via CDS.

The government agency has said that it is giving advanced notice so that traders can take action and plan accordingly.

The change will take effect from today after which a commodity code will no longer be needed, providing the supplementary declaration is submitted through CDS.

HMRC says that those using the old Customs Handling of Import and Export Freight (CHIEF) system do not need to take any further action.

The Export MoU is a measure agreed to between the government and the express delivery industry, described by HMRC “as an easement for low-value post and parcel exports travelling from Great Britain and Northern Ireland”.

It is frequently used by Fast Parcel Operators (FPOs) and reduces the amount of paperwork needed for smaller exports by clearing a large proportion of parcels that express operators regularly move across borders.

In order for a package to qualify, the goods value needs to be less than £900 and must not be controlled, restricted or subject to other customs procedures (like inward or outward processing or customs warehousing).

HMRC also used the opportunity to remind traders to complete their move to using CDS for export ahead of the 30 March deadline.

The long-running CHIEF-to-CDS switchover is approaching its final stages, with the government saying that it is working to help businesses complete the move ahead of the final deadline.

CHIEF hasn’t been operational for import declarations since 30 September 2022.

17,000 ships usually pass through the Suez Canal a year, carrying an estimated $1trn of goods and accounting for 12% of global trade.

However, due to the ongoing crisis in the Middle East and attacks on shipping in the Red Sea, only a fraction of this trade is currently using this vital trade short cut between Asia and Europe.

With ships increasingly taking a very long route around South Africa and the Cape of Good Hope, the knock-on impact on global trade and the world economy is self-evident.

The Panama Canal is just as important as the Suez Canal for shipping, as the Latin American route also carries $270bn in trade every year.

Throughout 2023, authorities have slowly been putting more and more restrictions on the canal, restricting the number of ships that can travel through and creating a sizeable backlog of vessels waiting to make the trip.

This has created a singular crisis for the world trade network, as two of its most important chokepoints are now operating under heavy restrictions.

The consequences for manufacturers with complex supply chains are likely to be significant. The question is whether the increase in shipping times and associated costs are painful enough for Western manufacturers to refocus their supply chains from “just in time” to “just in case” where reliability and security are prioritised over lower costs and higher profit margins.

We heard after the seismic disruption to global supply chains caused by the pandemic that manufacturers would seek to source raw materials and components closer to home but there is little evidence it actually happened.

Only time will tell if the latest events are sufficient to tip the scales.

Introduction

The impact of Brexit on SME manufacturers has been enormous and many would argue extremely detrimental. In this blog I look at some of the most significant issues.

Food and Drink

The first point to make is that British producers of food and drink related goods (known as sanitary and phytosanitary products) have been at a significant disadvantage to their EU counterparts because they have had to complete hugely complicated customs paperwork and have their products certified before they can be exported to the EU whereas we are still allowing EU food and drink into the UK without any of these requirements. The time and investment needed to complete the documents correctly, much of it in several languages, is out of the reach of many SMEs so they have stopped exporting to the EU even though there is strong demand for their products. For perishable items, a delay at the border due to a mistake on the paperwork often results in the entire consignment being destroyed because it wouldn’t be viable by the time it reached customers. The playing field needs to be levelled urgently, preferably by a relaxation of EU customs regulations for imports of these products. Whilst the Border Operating Target Model demonstrates good progress in this area, the further delays to introducing controls means British producers continue to be at a disadvantage and don’t have the confidence to plan and invest in exports to the EU.

Resource

The additional costs of customs paperwork for imports and exports is also relevant to manufacturers of non SPS goods. Huge amounts of time and money have been invested by SMEs in training their staff on commodity codes, incoterms, rules of origin etc. but understandably mistakes are still made which result in costly delays. What many people fail to understand is that the 27 EU member states have different regulations governing imports so you may need to provide one type of safety certificate when you sell something to France than you do to Germany or Italy. When we were signed up to the rules and regulations of the EU this wasn’t a problem but now our products are scrutinised like those of any other third country. Keeping track of and complying with the different requirements of each country can also be prohibitively expensive for SMEs.

CE/UKCA Mark

Many manufacturers have spent time and money finding an EU company to act as their Authorised Representative and on getting their products tested by an EU approved laboratory. The implementation of the UKCA mark has been delayed again which leads many manufacturers to question whether we will end up simply accepting the CE mark in which case UK companies have been put at a disadvantage unnecessarily.

Supply Chains

Mistakes on customs paperwork have caused huge numbers of delays at borders which in turn disrupt supply chains. There was a lot of talk after Brexit and during the pandemic about reshoring but the fact remains that many manufacturers need to import at least some of the raw materials, components or parts that they need. In the past they could operate on a just in time basis but have now had to move to a just in case scenario whereby they keep higher levels of stock of the things that they need. This has implications for running costs because more warehouse space is needed, and cash flow because money they could use more productively is tied up in stock.

Rules of Origin

The subject of rules of origin was covered extensively in the media recently in relation to the automotive industry but it equally applies to SMEs who are often suppliers to the huge multinationals and so part of their supply chain. The amount of resource required to determine the origin of where something was manufactured, rather than just where you bought it from, is immense and beyond the capabilities of many SMEs even assuming they realise this is something they need to do. Once they’ve done this we expect them to read the Trade and Cooperation Agreement to find out which rule of origin applies to their product and then work out whether their product complies. When you consider the number of suppliers, materials, parts, components and end products each manufacturer represents it’s an incredibly complex calculation that may need to be repeated many times. I would urge the UK and the EU to look at simplifying rules of origin at the very least.

Export Licenses

The requirement for dual-use export licenses to the EU has been a huge problem for some SME manufacturers. The process of determining whether a license is required, what type of license and then actually applying for it is complex and time-consuming. The time currently taken to grant licenses is often over 90 days which means British manufacturers are losing orders to competitors from China predominantly and often licenses are refused even for innocuous items that in a sane world wouldn’t need one anyway. The industry absolutely accepts the necessity of export control licenses but the system in the UK is broken and British manufacturers are going out of business or being bought by foreign companies, including all of their intellectual property as a result.

Conclusion

These are some of the specific customs related problems that were caused by Brexit. I could also have mentioned trade with Northern Ireland and the difficulties of recruiting and retaining EU workers which are both huge challenges for SMEs. But the overarching backdrop to all these issues is what feels like a lack of coherent strategy. The goalposts are always moving, manufacturers have been told on numerous occasions to prepare for new regulations or controls only for the deadline to be pushed back several times or the idea abandoned altogether. So much time and money has been wasted in this way. You can’t expect companies to invest and innovate to increase productivity when the rug might be pulled out from under them in 6- or 12-months’ time. British SME manufacturers just want to get on with growing their businesses and most people accept that this is the new reality and that we must adapt to make it work. But we need clarity and certainty from government. And some funding wouldn’t go amiss either.

A huge raft of changes to the UK’s customs framework will come into effect over the next 6 months including the Border Target Operating Model (BTOM).

But what is it and how will it affect you?

One aim of BTOM is to reduce exit checks on goods entering the UK from the EU by using a more targeted, risk-based system for checks, “underpinned by evidence and data”.

The new approach applies to security controls for all imports, and sanitary and phytosanitary (SPS) controls for imports of live animals, germinal products, animal products, plants and plant products. It sets out how controls will be delivered through simplifications, digitalisation and the UK’s new Single Trade Window.

Trusted Trader schemes will be introduced to further reduce checks on goods shipped by frequent importers and there are plans to undertake checks further away from the border to relieve the pressures and delays at ports.

The previous Trusted Trader Scheme has now been replaced by UKIMS (UK Internal Market Scheme). Assuming your application is successful it certifies that you’ve been evaluated and deemed sufficiently customs compliant to be allowed to send your goods to NI without any checks because they are confident your goods won’t slip over the border into the EU.

The BTOM also needs to be considered in the context of the Windsor Framework which was designed to secure seamless trade within the UK’s domestic market and uphold Northern Ireland’s affiliation with the EU customs union. 

The BTOM guarantees that Northern Ireland businesses will continue to enjoy unfettered access when transporting goods to Great Britain.

It also outlines the practicalities for ensuring that traders in Northern Ireland encounter no trade obstacles when moving Northern Irish Qualifying goods from Northern Ireland to Great Britain, directly or via Ireland.

Qualifying Northern Ireland Goods (QNIGs) are defined by HMRC as goods in free circulation in Northern Ireland, which means goods not under a Customs procedure or in an authorised temporary storage facility.

This move by the UK government ensures the benefits of unfettered access are more focused on Northern Ireland Traders. 

From the 31^st January 2024, all non-qualifying goods will face full Customs controls and the requirement for pre-notification and certification when moved directly from Ireland via Irish ports to Great Britain.

Export Health Certificates and Phytosanitary Certificates will be required for Irish medium-risk animal products, plants and plant products moving directly from Ireland to GB ports.

Pre-notification requirements (except for low-risk plants and plant products) and full Customs controls will be introduced for non-qualifying goods moving from Northern Ireland or Ireland to GB.

From the 31^st October 2024, The UK Government will introduce documentary and physical identity checks for medium-risk animal products, plants and plant products imported to Great Britain from the EU.

The UK Government will introduce Safety and Security declarations for EU imports. A reduced dataset for imports will be introduced. For ‘non-qualifying’ goods moving from Northern Ireland or Ireland to GB, documentary and risk-based identity and physical checks on medium-risk animal products, plants, plant products and high-risk food and feed of non-animal origin from the EU will be introduced.

New rules came into force yesterday in the UK that will require e-commerce platforms to pass information to HMRC on the income of sellers who use them.

The new measures will see HMRC gather the information on sellers of goods and services overseas before sharing it with the relevant foreign authorities in an international attempt to limit tax evasion. The regulations apply from 1 January 2024, while reporting will be required from January 2025.

They mark an implementation of the Organisation for Economic Co-operation and Development’s (OECD) ‘Model Rules for Reporting by Platform Operators’ with respect to Sellers in the Sharing and Gig Economy (MRDP) which the group has developed in talks with the UK and other nations over the last few years.

The government has said that the changes will affect “digital platforms in the UK that facilitate the provision of services or the sale of goods by UK or other taxpayers”.

UK taxpayers who sell goods or services on those platforms will also be affected, and the government notes that the platforms include those that provide services such as taxi hire and food delivery.

It notes that the new rules are not expected to have an impact on individuals who use digital platforms to purchase goods or services.

The rule not only provides a more consistent approach for OECD member countries but will also enable HMRC to quickly and efficiently exchange information with other tax authorities to access data from platforms based outside the UK.