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.