New Articles

How to Mitigate the Burden of Brexit Disruption

brexit

How to Mitigate the Burden of Brexit Disruption

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.

______________________________________________________________

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.