Customs duties

Duties, or “tariffs” are taxes that are usually levied on the value of goods imported into a country but can, in certain circumstances be due on exports. The liability for duty depends on the type of commodity/product being imported, the country of origin and whether the importation is subject to any Free Trade Agreements (FTAs) in place between the trading parties. The UK has numerous FTA’s in place, for example, the UK and EU’s Trade and Cooperation Agreement signed in December 2020.

When duty is due on importation, the party responsible for payment depends on the shipping terms, or “Incoterms”, but is usually paid by the ‘importer of record’, which can therefore be you or your customer.

In principle customs duty is irrecoverable from HMRC (or other country authority) unless a reclaim becomes due through incorrect data elements presented at the time of importation to the UK. A reclaim is permitted up to a 3-year period. This distinguishes duty from VAT, another tax due at import, which may be reclaimed if an importer is registered for VAT in the country where the goods are imported and, usually as a rule, if it owns the goods at the time of import.

There are various regimes which allows customs duty to be suspended at the time of importation, thus resulting in no duty being paid. These regimes usually need to be applied for at the time of importation to the UK, but on occasions retrospective applications can be made.

Given that duty is a cost within purchase and sales supply chains it is important to understand and be confident with what is being paid, and to review that periodically. If correct details are not presented to HMRC at the time of importation – for example, value, commodity code, origin status, preference status under an FTA – it is possible than you or your customer will experience difficulties identifying true landed costs resulting in pricing issues, contractual disputes or unhappy customers unwilling to trade in future. Or it may simply result in your profit margin being eroded. This is why it is important to plan for duty and to seek expert assistance in doing so.

Customs agents should be able to help you both in terms of entering the correct paperwork for declarations to clear customs and comment on commodity codes. But, accuracy in regard to the latter is not always present, for example when agents are dealing with bulk shipments and cannot identify goods to which a relief could applies (Return Good Relief, Temporary Admission as an example). Also, given our experience of submitting retrospective duty claims for our clients it is clear that the classification of goods is an art in itself. There are often subtle differences in types of commodities which can lead to the duty rates being much higher than they need to be. For example male fragrances (0%) versus aftershave (6%). Hair Turbans hat (2%) versus clothing (12%).

For the above reasons, in addition to the services of your customs agent, you should consider obtaining advice from a customs specialist. Kreston Reeves can assist you in this regard.

How we can advise on duty

• Planning to minimise duty: Post Brexit, issues have arisen such as duty being due twice, on goods imported into the UK prior to their sale into the EU. We can review your supply chains and identify ways of minimising duty, including through customs warehousing, or by recommending alternative processes.

• Duty reviews – reliefs: The amount of customs duty due can be legitimately reduced or removed using Customs reliefs and suspensions. The type of relief applicable will depend on how the goods are to be used, for example for testing purposes, temporary import/export or for processing/manufacture prior to re-export.

• Duty reviews – claims: We can review the UK duty you have paid over the past 3 years, identify lower, correct, tariffs and submit claims to HMRC on your behalf. It is important to do this with care to avoid the possibility of penalties for incorrect claims.

• Advice and claims in other countries: The Kreston global network of accounting and business advisory firms, present in over 120 countries, can assist you with any advice on duties that you encounter around the world.

• Origin advice: Given that the “easement” period for clearing imports into the UK has now disappeared and full Customs procedures must be followed, the ‘rule of origin’, in terms of meeting the zero preferential tariff when trading in goods between the UK and EU, needs to be carefully considered. We can advise on this and also the procedures that must be followed by suppliers and customers in order to avoid subsequent challenges for importers, whether that be you or your customers.

• Customs valuation: The total landed-cost of products needs to be identified when importing goods to different countries, thus understanding margins and costs of customers. Through visibility of these costs, an importer can understand if the amount of customs duty due can be reduced through the use of reliefs and other planning opportunities. We can advise on this.