Regardless of the eventual Brexit outcome, UK companies that import or export goods to the European Union (EU) will have to examine their processes and a customs broker may need to be part of that.
The UK is currently part of the EU customs union. This means there are no customs borders between the EU countries. Typically, there’s no customs paperwork to complete or duties to pay, or VAT payments. This allows goods to pass through national ports such as Dover and Calais as seamlessly as they might travel from Birmingham to London.
Once the UK leaves the EU following Brexit, though, it will probably leave the customs union and the EU VAT area.
Although the specifics of how customs and VAT will work are yet to be decided, it’s likely paperwork and customs payments will be required when exporting to EU countries, just like when exporting to any non-EU country right now. Businesses will need an understanding of how customs and VAT work in the countries they export to, or import from.
Official government advice suggests that businesses hire freight forwarders or customs brokers to help with this.
In this article, we take a look at how customs brokers can serve your business following Brexit. And Jim Limerick, managing director of 1st Move International, who has been working in the customs industry on behalf of clients for more than 40 years, shares his advice.
What is a customs broker?
“A customs broker will check the all-important classification and get you the right commodity code,” says Limerick. “Every product on the planet has a unique individual code.
“Back in the 1970s and 1980s, it used to be a set of huge volumes of books that you would have to flip through. It’s all done electronically now. It’s a bit easier.”
The commodity code is then used to prepare the customs documentation but often that’s not all that’s required.
“Some products might need an import licence,” says Limerick. “They might be hazardous goods, or restricted. This is where the customs broker again comes in useful because they will know exactly what documentation is required.”
The customs broker is electronically registered with customs, speeding up communications, and they will know the timescales required to anticipate problems.
“We have a CRN number with customs,” adds Limerick. “We can electronically file import and export documentation. This can be done in advance of a shipment, either leaving the country or before it comes in.
“It gives you a bit of time because customs might come back with a different classification that carries a higher duty.”
Customs brokers can also help with making payments, adds Limerick.
“If you’re a regular importer and frequently have to pay duty, taxes or VAT on commodities, the customs broker or their freight agent will often have a duty deferment or a VAT deferment account,” he says.
“This means you don’t have to pay the duty or VAT immediately. You would pay that once a month. The goods are then able to get through the port quickly.”
Getting customs documentation wrong can mean goods are held up, or even confiscated.
“If there’s ever going to be a delay, it will be with customs,” adds Limerick.
Delays can mean not only increased costs for you in terms of lost revenue and storage fees, but also for your freight company, who might find one of their HGVs is not available for the next job – and who will then pass the cost on to you.
“Customs brokers are headache avoiders,” says Limerick. “That is exactly what a customs broker offers. Customs brokers take away the pain at the port of entry.”
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Customs brokers: Local vs international
It’s best to go local with customs brokers, continues Limerick.
He says: “If you’re exporting something out of Felixstowe and you’re looking for a customs broker to clear your goods, then the best one to use would be a customs broker in Felixstowe.
“He will know who the local customs guys are. The customs officer will have him on speed dial. He will know who he is and he will know that that broker is making a call to smooth a transition of a problem.”
The destination is important too.
Another benefit of using a customs broker is that they will advise about processing the goods once they reach their destination, and often this means making use of a trusted customs broker there.
Limerick provides the example of a car export he undertook recently for an auction in the US. Part of this involved employing a local customs broker in addition to his own services.
He says: “It was unusual because the car wasn’t being sold. It was being putting it into auction. You couldn’t determine a value because it hadn’t been sold. So, I’ve now got a Texas customs officer scratching his head.
“As it happens, the auctioneer had a bond. An estimated value was put on the vehicle. That meant it cleared customs. We handled all this before the vehicle even arrived.
“But if we hadn’t used the right customs broker in Texas to figure things out, the car would have missed its auction.”
How to choose a customs broker and how much they cost
While some countries license customs brokers, there is no such requirement in the UK.
“Ask your shortlist a couple of pertinent questions,” he says. “For example, ask them what the customs code is for what you’re export or importing.
“Within a very short space of time, that customs broker should be able to tell you what that customs code is, what that duty is for the particular country you’re shipping it to or what the import duty is for that in the UK.
“It’s a very simple question that would weed out the wheat from the chaff.”
The risk of being scammed are slight, he suggests.
“Customs brokering is not a business you would enter into lightly,” says Limerick. “Customs brokers take on a huge responsibility for not a lot of money.”
And that raises a vital question: How much does it cost to hire a customs broker?
Limerick suggests £45 for the services of his own firm, but there may be charges for things such as customs clearance charges ranging up to several hundred dollars, which are paid directly to customs in that country.
The government has suggested that, post-Brexit, businesses might incur costs of around £32.50 per customs entry. Notably, controlled or excise goods may have additional charges, as might foodstuffs and textiles.
Preparing for the future
Has there been an increase in business for Limerick following Brexit and the numerous cliff-edge deadlines?
“I think there’s a lot of finger-crossing going on,” he says. “We haven’t seen any real impact.”
This suggests it’s a good time for your business to contact a customs broker and seek advice before the deluge begins. While it might be too early to seek contractual agreements, creating business relationships and keeping in touch will certainly do no harm.
Success in the short term is going to be measured by your level of knowledge, which is to say, keeping on top of what’s decided in any upcoming negotiations.
Although they continue to focus on a no-deal Brexit outcome in the absence of any other firm details, the UK government websites should top your bookmark list and is a canonical source.
In terms of tasks to undertake now, you should check your company’s Economic Operator Registration and Identification (EORI) registration.
The UK government has stated that most businesses that require an EORI should have been automatically assigned one (you will need a UK EORI, and one you may have been issued in the past beginning ‘EU’ will not be suitable following Brexit).
You should also speak to any EU businesses you supply to ensure they have an EU EORI.
To see how customs and Brexit will play out across the long-term future, Limerick looks back to the 1970s and 1980s, before the EU customs agreements existed.
Every business that exported would have a shipping clerk who knew about customs and who ensured goods moved quickly.
Goods would arrive at ports such as Dover and then be fast-tracked to Inland Clearance Depots (ICDs), of which there would be several in every major city. Here, the customs formalities would be addressed in what were essentially duty-free zones.
Limerick says when he checked, the UK had just four of these. In the old days, London alone had 10.
He adds: “Not many people remember the bad times when we didn’t have borderless customs. I think people have forgot the hoops you had to jump through just to bring in 10 boxes of chocolates from France. I remember them, and I made a living out of making sure that stuff flowed smoothly.
“The infrastructures just aren’t in place right now. The upbeat is that we do have customs brokers in place now.”
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