Doing business in Europe has changed. The free trade agreement between Great Britain (GB) and the European Union (EU) means that the United Kingdom (UK) has left the EU’s Single Market and the Customs Union. We will point out main things to consider and what changes has Brexit had on export and import based on the Border Operating Model between the UK and the EU.
After the transition period, the UK Government has operationalised import controls on goods moving from the EU to GB, in a manner similar to the UK’s current treatment of Rest of World (RoW) goods. These controls are introduced in three stages: January, April, and July 2021. It is expected that the EU will also operationalise full import controls on goods moving from GB to the EU from 1 January 2021.
As a result, there are significant changes to the process for moving goods between GB and the EU. All businesses moving goods across the GB-EU border will need to take account of these and adapt accordingly.
What Has Changed With Brexit in Moving Goods in Europe
Traders and hauliers must take these steps following the UK-EU Trade and Cooperation Agreement.
- Customs Declarations
Importers and exporters have to complete UK and EU customs declarations after the end of the transition period. Some locations will require pre-lodgement of customs declarations prior to the movement of goods, which will particularly affect ‘roll on-roll off’ (RoRo) movements. For importers to the UK, submission of supplementary declarations was able to be delayed up to six months after import during the period January to July 2021, which has now passed.
- Customs Duties
Importers to the UK need to ensure that any customs duties applicable to their goods under the new UK Global Tariff are paid. In order to do this, importers must determine the origin, classification and customs value of their goods. There are options available to defer any payment that is due. As of 1 January 2021, for importers delaying their customs declarations the payment of duties can be delayed to the time when the supplementary declaration is submitted.
Within the European Union, there are no customs duties on goods that have been declared, fabricated, and put into circulation there. Customs duties (aka import duties) must be carried out by a natural person or a company when goods are imported from outside the EU. Three different types of customs duties are implemented:
- ad valorem duty – calculated as a percentage of the customs value of goods and is the most common customs duty;
- specific duty – depends on the weight of the good or and additional unit of measurement;
- combinational duty – is a mix of both ad valorem duty and specific duty.
Companies regularly engaging in import, transit, export or other customs operations must apply for an Economic Operators Registration and Identification (EORI) number. Find additional information on the calculation of customs duties here.
VAT levied on imports of goods from the EU and UK.
For UK businesses, VAT registered importers will be able to use postponed VAT accounting. They will not be compelled to do so unless they import noncontrolled goods and either delay their supplementary customs declarations; or use the Simplified Customs Declarations process, and make an Entry in Declarants Records.
Non-VAT registered importers have the same options available to report and pay import VAT as they do for customs duties. VAT treatment of goods imported in consignments not exceeding £135 in value will be treated differently to those goods in consignments exceeding £135. As of 1 January 2021, there are options to defer VAT payments using postponed VAT accounting.
Regarding EU businesses, when goods and services are exported out of the EU and sold to foreign companies or customers, there is normally no basis for VAT liability as the end consumer is not within the European Union. Consequently, imports into the EU are taxed to maintain equal terms and competitiveness on the European market. Find detailed information on VAT rates in the EU here.
In the first phase of Brexit, EU and non-EU sellers selling goods online to EU consumers were able to import the goods into the EU, directly to the consumer, import VAT-free if the consignment of goods is valued at €22 or below. However, this ended on 1 July 2021 and all imports are subject to EU VAT. Sellers and facilitating marketplaces can collect import VAT on import consignments valued up to €150. Or they may use the new Special Arrangements and have postal operators collect the import VAT.
- Safety & Security Declarations
In order to maintain safety and security standards, the UK Government will collect more information on goods moving into GB from the EU. This ensures the UK knows who’s coming in and how often, what they are bringing in, and why. By default, this will include safety and security declarations. Valid from 1 January 2021 to exports and 1 July 2021 to imports.
The EU’s new advance cargo information system Import Control System 2 (ICS2) supports implementation of a new customs safety and security regulatory regime aimed to better protect single market and EU citizens. It will collect data about all goods entering the EU prior to their arrival. Economic Operators (EOs) will have to declare safety and security data to ICS2, through the Entry Summary Declaration. The obligation to start filing such declarations will not be the same for all Eos and will depend on the type of services that they provide in the international movement of goods. It is linked to the three release dates of ICS2 (15 March 2021, 1 March 2023, and 1 March 2024).
Actions to Take for Moving Goods After Brexit
All traders need to consider these actions before they move goods. There are clear actions traders should take to prepare for the staged introduction of customs controls. All involved in supply chains will also need to consider the EU border requirements, procedures and access to EU or individual Member State’s systems. These will need to be met before moving goods.
Actions to be taken by companies who want to continue moving goods between the UK and EU after Brexit:
- apply for a GB Economic Operators Registration and Identification (EORI) number;
- apply for an EU EORI number;
- get a customs intermediary;
- apply for a duty deferment account;
- prepare to pay or account for vat on imported goods;
- consider commercial arrangements.
From July 2021, traders moving any goods have to:
- meet full customs requirements including submitting declarations, regardless of whether it is a controlled or a non-controlled good, as well as paying VAT and excise duty where necessary;
- submit Safety and Security declarations on all imports;
- be prepared for customs compliance checks either at port or an inland site;
- be prepared for relevant sanitary and phytosanitary (SPS) goods to enter GB via a Border Control Post either at port or an inland site, accompanied by SPS documentary requirements.
If your business is engaged in import, transit, or export of goods between the EU and UK after Brexit, and you are not sure which is the best location for your company regulation-wise, you are more than welcome to consult our advisors.