David Merritt, Author at Global Trade Magazine

It’s difficult to believe, but after nearly six years of debate and disruption, the end of the Brexit saga is close at hand. There are less than two months left until the official departure of the UK from the EU, and with each passing day the possibility of a mutually agreeable free trade arrangement between the two parties becomes less likely.

For businesses engaged in trade across the English Channel and the Irish Sea, this is likely to mean significant disorder in the form of long queues at customs checkpoints, a deluge of new documentation with which to reckon and the expense of new taxes and tariffs. Just as an example, the total volume of customs declarations is due to rise by 20% after Brexit Day.

For their part, the governments in London and Brussels are doing what they can to provide relief to those businesses that will inevitably experience adversity with the onset of Brexit. As part of this, the British government has introduced a new process called Entry in Declarants Records or EIDR. It is being made available only to those businesses that do not trade in controlled goods, such as food, chemicals, medicines, etc.

Why It Matters to Trading Businesses

As noted above, businesses engaged in trade will face a series of setbacks as the UK and EU part ways, the foremost of which will be border delays. The EIDR allows businesses to import goods into the UK without providing a full or even partial customs declaration at the point of import. That means quicker and easier release of shipments and, in turn, shorter delays. It also allows for the deferral of Value-Added Taxes (VATs) using the introduction of Postponed Accounting for VAT (PVA) and duties, as well as the deferral of supplementary declarations for individual or bulk shipments. This not only provides financial relief in the short term, but also a smoother transition into the customs regime.

What’s the Catch?

It’s not so much that there’s a catch, but there are limitations and requirements. EIDR allows traders to obtain the release of goods from a third country to a customs procedure and can be used to enter goods into:

-Free circulation;

-Customs warehousing;

-Processing;

-Specific use or;

-For export/re-export purposes

However, in order to import goods through EIDR, businesses are required to use the Customs Freight Simplified Procedure (CFSP) to complete the reporting process through the submission of a supplementary declaration. EIDR will be accessible to traders without the need for authorization until June 30, 2021.

A supplementary declaration must be completed up to six months after the date the goods were imported. If a Trader elects to use EIDR after this date, an application to HM Revenue and Customs (HMRC) will be required.

If those last two paragraphs left you shaking your head and craving alphabet soup, the good news is EIDR doesn’t require the documentation to be submitted directly by the importer, so trading businesses can lean on their customs brokers for the heavy lifting on documentation and process.

What are the Limitations?

Goods that cannot be declared using EIDR includes but is not limited to:

-Items on the Controlled Goods List – which also includes but is not limited to Excise goods, Fisheries, Endangered species, Anti-dumping duty and countervailing duties.

-ATA Carnet

-Personal Effects

-Special procedures e.g. Inwards Processing (IP) by import declaration.

What are an Importer’s Responsibilities?

Like all other documentation and duty deferral programs around the world, the EIDR will require importers to apply diligent record-keeping to ensure they are able to document their transactions and keep logs of relevant information in the event they are audited or a miscalculation occurs.

All businesses using EIDR to trade goods must:

-Maintain records for no less than 4 years.

-Ensure records are backed up and kept secure.

-Obtain the use of a CSFP software package or the services of a CFSP authorized customs agent.

-Maintain a clear audit trail of temporary imported goods.

Although EIDR will allow faster release of goods, use of simpler customs declarations and provide potential cashflow benefits to traders; these benefits could be outweighed by fees and software costs.

Make it a Supply Chain Conversation

Businesses would be well served to discuss with their trade partners and supply chain vendors precisely how they intend to operate in the post-Brexit period. In addition, they should work with their vendors, including freight forwarders, customs and freight brokers and trade consultants to conduct a thorough cost analysis to enable an informed decision on the process to be used.

Doing this today has the potential to mitigate border disruption, reduce landed costs and lessen the burden of documentation requirements, allowing businesses to focus more on what they do best and less on the minutiae of customs processes.

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David Merritt is a director in the Global Trade Consulting division of trade services firm Livingston International. He can be reached at dmerritt@livingstonintl.com.

Anyone who has ever arrived at an airport outside of his or her home country knows all too well the chaotic, tedious, and time-consuming process of going through customs and immigration.

Now imagine that, instead of people, the lineup was made up of tractor-trailers full of time-sensitive goods and was several kilometers long because there aren’t enough customs officials to process the backlog of required paperwork. Somewhere far away from the lineup is a business owner impatiently waiting for those goods and becoming far more open to the idea of finding a new supplier. Now you’ve got a sense of what the borders of the UK and EU will be like come January 1, 2021. The total volume of import and export declarations entries is anticipated to balloon to approximately 400 million annually after Brexit, adding about £13 billion a year in cost to businesses. What’s more, British officials estimate only about one in three small-to-medium-sized businesses are prepared for the customs changes compared with about 70% of large businesses.

The good news is that for those businesses engaged in trade across the English Channel (small or large), there will be some relief in the form of a fast pass. It doesn’t let you skip the queue, but it does allow you to join it with far less fuss.

With the Brexit deadline fast approaching, this is the time for traders to embrace the UK’s customs simplifications for their future business activities.

What is CFSP?

CFSP was first introduced in 2001 to enable the import of shipments by traders from third countries to be completed in two stages – an initial declaration with reduced content is submitted at the port, and a second supplementary declaration containing full data is submitted weeks later (or months later in the case of phase one of the Brexit import declaration program). The use of CFSP provides a trader with greater certainty of the receipt of goods and cash flow savings.

During the first phase of Brexit, traders of non-controlled goods who wish to defer the finalization of their import declaration for six months may elect to use Entry in the Declarant’s Records (EIDR) rather than the submission of a full or initial port declaration. This process allows importers to use their commercial records to have goods clear customs without being required to complete a full custom import declaration or the initial CFSP declaration. However, the commercial records must be supplemented with additional information required by H.M. Revenue and customs using a Supplementary Declaration via CFSP within six months of the date of import.

An importer who uses the CFSP deferred declaration process can also participate in the Postponed Value-Added Tax (VAT) accounting scheme.

Who can apply for it?

A customs broker can be authorized for CFSP and provide this on an importer’s behalf; however, more complex import operations would benefit from an importer obtaining his or her own authorization.

If an importer decides to become authorized for CFSP in their own right, an application in advance of importing must be submitted and approved and 120 days should be allowed for the approval of the application. One key factor for importers to consider when applying for CFSP is that it is not merely a matter of applying for and being granted authorization. Applicants will also require software to produce supplementary declarations to the authorities.

To be eligible for CFSP, an importer must:

-Fulfill a set of criteria and comply with any additional criteria for the simplified procedure(s) required for his or her business model.

-Maintain and retain records for all shipments processed under CFSP.

-Keep a clear audit trail, and ensure all records are backed up and kept secure.

The requirements of CFSP for an importer in their own right can be costly and time-consuming, and as such should be weighed against an intermediary completing such activities on an importer’s behalf and using their CFSP authorization.

It is imperative that controls are in place by importers to validate customs declarations made on their behalf to ensure errors are captured and corrected.

Although CFSP will allow faster release of goods, use of simpler customs declarations, and cashflow benefits to importers; these can be outweighed by the additional fees and software costs. Importers looking to make an informed decision regarding whether or not CFSP is worthwhile for their businesses should conduct a thorough cost and business-process analysis and an equally thorough review of services and cost benefits.

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David Merritt is a director in the Global Trade Consulting division of trade services firm Livingston International. He can be reached at dmerritt@livingstonintl.com.

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