Since the United Kingdom officially left the European Union on January 31, 2020, and the transition period ended on December 31, 2020, businesses importing goods from EU countries to the UK now face a fundamentally different trading landscape. The seamless, duty-free movement of goods that characterised EU membership has been replaced by customs declarations, regulatory checks, and potential import duties.
For companies that rely on European suppliers, understanding the new import duty framework is essential for maintaining profitability and ensuring smooth supply chain operations. This comprehensive guide will walk you through everything you need to know about import duties when bringing goods from the EU into the UK.
Understanding Import Duty: The Basics
Import duty, also known as customs duty, is a tax levied on goods when they cross international borders. Before Brexit, goods moving between EU member states and the UK were exempt from customs duties under the single market framework. Now, all goods entering the UK from the EU are subject to customs procedures, although many products may qualify for zero or reduced tariff rates under the UK-EU Trade and Cooperation Agreement (TCA).
The import duty you pay depends on several factors, including the type of goods being imported, their country of origin, and their declared customs value. It is crucial to understand that even if your goods attract a zero tariff rate, you are still required to complete customs declarations and follow proper import procedures.
The UK Global Tariff and EU Trade Agreement
The UK Global Tariff (UKGT) replaced the EU’s Common External Tariff following Brexit. This tariff schedule determines the duty rates applicable to goods imported into the UK from countries without preferential trade agreements.
However, the UK-EU Trade and Cooperation Agreement provides significant relief for businesses trading with European partners. Under this agreement, goods that qualify as originating in the EU can be imported into the UK at zero tariff rates. This preferential treatment applies to most goods, but there are important conditions that must be met.
To benefit from zero tariffs under the TCA, goods must meet the Rules of Origin requirements. This means proving that products were wholly obtained, produced, or sufficiently processed within the EU. Documentation such as supplier declarations and statements of origin are essential for demonstrating compliance with these rules.
How to Calculate Import Duties
Calculating import duties involves several steps and requires accurate information about your goods. The first step is to determine the correct commodity code for your products. The UK uses an eight-digit tariff classification system based on the Harmonised System, with additional digits for specific categories. Assigning the correct code is critical, as it determines the applicable duty rate and any regulatory requirements.
Once you have identified the correct commodity code, you can find the corresponding duty rate in the UK Trade Tariff database. The customs value of your goods forms the basis for calculating the duty. This value typically includes the cost of the goods, insurance, and freight charges up to the UK border, known as the CIF value.
The basic formula for calculating import duty is straightforward: Customs Value multiplied by the Duty Rate equals the Import Duty payable. For example, if you are importing goods with a customs value of £10,000 and the applicable duty rate is 5%, your import duty would be £500.
VAT on Imports from the EU
In addition to import duty, businesses must also account for Value Added Tax on goods imported from the EU. Import VAT is charged at the standard UK rate of 20% for most goods, although reduced rates apply to certain categories such as children’s car seats and home energy products.
The taxable amount for import VAT includes the customs value of the goods plus any import duty paid. Using the previous example, if you paid £500 in import duty on goods worth £10,000, your import VAT would be calculated on £10,500, resulting in a VAT liability of £2,100.
Many businesses choose to use Postponed VAT Accounting (PVA), which allows them to account for import VAT on their VAT return rather than paying it at the point of entry. This significantly improves cash flow and reduces the administrative burden of reclaiming VAT paid at the border.
Required Documentation for EU Imports
Proper documentation is essential for smooth customs clearance when importing goods from the EU to the UK. The key documents you will need include commercial invoices that detail the goods being shipped, their value, and the parties involved in the transaction. Packing lists provide detailed information about the contents and packaging of each shipment.
A Bill of Lading or Airway Bill serves as the contract of carriage and provides proof of shipment. For goods claiming preferential tariff treatment under the TCA, you will need a statement of origin from your EU supplier or evidence of the goods’ EU origin.
You must also have an EORI number (Economic Operators Registration and Identification number) to import goods into the UK. This unique identifier is used by customs authorities to track and monitor shipments. If you do not already have an EORI number, you can apply for one through the HMRC website.
The Role of Customs Brokers in EU to UK Import Procedures
Navigating the complexities of post-Brexit import procedures can be challenging for businesses, particularly those without prior experience in international trade. This is where customs brokers play an invaluable role.
What is a Customs Broker?
A customs broker, also known as a customs agent or clearance agent, is a licensed professional who specialises in customs procedures and regulations. These experts act as intermediaries between importers and customs authorities, ensuring that goods are cleared efficiently and in compliance with all applicable laws and regulations.
Services Provided by Customs Brokers
Customs brokers offer a comprehensive range of services to businesses importing goods from the EU to the UK. One of their primary functions is preparing and submitting customs declarations on behalf of their clients. These declarations must be accurate and complete, as errors can result in delays, penalties, and additional costs.
Brokers also assist with tariff classification, helping businesses identify the correct commodity codes for their products. This expertise is particularly valuable for companies importing complex or unusual goods that may be difficult to classify accurately.
Additionally, customs brokers advise on duty relief schemes and trade agreements that may reduce the amount of duty payable. They can help you take advantage of preferential tariff rates under the TCA and identify opportunities for duty savings through schemes such as Inward Processing Relief or Customs Warehousing.
Benefits of Using a Customs Broker
Engaging a customs broker offers numerous benefits for businesses importing from the EU. First and foremost, their expertise ensures compliance with customs regulations, reducing the risk of penalties and seizures. They stay up to date with changing regulations and can adapt quickly to new requirements.
Customs brokers also save businesses valuable time and resources. Rather than dedicating internal staff to learn and manage complex customs procedures, companies can focus on their core activities while leaving customs matters to the experts. This is particularly beneficial for small and medium-sized enterprises that may not have the capacity to handle customs compliance in-house.
Furthermore, experienced brokers often have established relationships with customs officials and other stakeholders in the supply chain. These connections can facilitate faster clearance times and help resolve issues more efficiently when they arise.
Choosing the Right Customs Broker
When selecting a customs broker, businesses should consider several factors. Look for brokers with experience in your specific industry or product category, as different goods may have unique regulatory requirements. Verify that the broker is properly licensed and has a good reputation within the industry.
Consider the range of services offered and whether they align with your needs. Some brokers provide comprehensive logistics services, while others focus exclusively on customs clearance. Finally, ensure that the broker uses modern technology and can integrate with your existing systems for seamless communication and data exchange.
Conclusion
Importing goods from the EU to the UK post-Brexit requires careful attention to customs procedures, documentation, and duty calculations. While the UK-EU Trade and Cooperation Agreement provides preferential access for qualifying goods, businesses must ensure they meet the Rules of Origin requirements and maintain proper records.
Understanding your obligations and working with experienced professionals such as customs brokers can help streamline your import operations and avoid costly mistakes. By staying informed about regulatory changes and taking advantage of available duty relief schemes, businesses can continue to trade successfully with European partners while managing the additional costs and complexities introduced by Brexit.
