Prior to the UK leaving the European Union, goods could travel freely between the UK and the European Union (EU) without any duties or taxes or the need for customs declarations. From 1st January 2021, the UK is no longer a member of the EU’s single market or customs union, and both UK and EU businesses are now required to make customs declarations (import and export). For many businesses this is the first time that they have been required to operate customs processes.
On 24th December 2020, the UK and EU concluded a trade agreement called the ‘EU-UK Trade and Cooperation Agreement’, which sets out preferential arrangements in a number of areas, including trade in goods and services. This agreement came into force on 1st January 2021, and specifies the rules of preferential trade between the EU and UK. Under the agreement there are no import tariffs or other customs duties or quotas on imports of EU-origin goods into the UK, or of UK-origin goods into the EU. Goods that do not qualify as UK-origin or EU-origin now pay import tariffs and other customs duties at the applicable rate.
Tariffs are customs duties on goods crossing from one customs territory to another and are usually imposed at the border on imports. Tariffs help to protect domestic producers by increasing the domestic price of the imported goods.
As an EU member state, the UK has never had to submit its own tariff schedule. Instead, EU member states share a common schedule, submitted by the EU, which is binding on all EU member states.
From 1st January 2021, the UK, as a freestanding World Trade Organisation (WTO) member, has adopted its own tariff schedule. The Taxation (Cross-border) Trade Act 2018 empowers the UK government to establish its own tariffs for trade in goods.
In previous years, the EU has negotiated several Free Trade Agreements with other countries, which allows member states to benefit from preferential tariffs on trade with those countries. From 1st January 2021, the UK can no longer benefit from any EU Free Trade Agreement with other countries. However, since leaving the EU, the UK has negotiated its own Free Trade Agreements with various countries including Israel, Japan, Singapore, South Korea and Switzerland etc., as well as the ‘EU-UK Trade and Cooperation Agreement’ with the European Union.
When importing goods into the UK, the importer would generally appoint a customs agent to make the customs declaration on its behalf. In this case, the customs agent acts as the importer’s direct representative, and on the importers’ customs clearance instructions. As such, the importer is solely liable for any customs debt, unless the agent makes a deliberate or unreasonable error having received clear instructions, in which case the agent may become jointly and severally liable.
The customs declaration requires various information, including the consignor and consignee (the sender and recipient of the goods) and the consignee's Economic Operator Registration and Identification (EORI) number. Other information includes the 10-digit commodity code (tariff code) for the goods covered by the declaration, as this will determine the applicable level (percentage) of duty payable to HMRC. The customs procedure code (CPC) is a seven-digit code which identifies the customs (and/or excise regimes) that goods are being entered into or removed from. The value of goods is used in order to determine the amount of duty and VAT payable to customs, as well as for trade statistics. There are six ways to work out the value of imported goods, the most common being the transactional value. A full description of the goods is also required along with information on packaging, the name of the declarant and details of the country of origin in the form of a two-letter code.
Controlled goods require export licences under UK law (see export controls service page). A mandatory authorisation and notification process is required for shipments of such goods from the UK to any third country including the EU. Certain other goods may require an import licence.
HMRC may issue civil penalties for non-compliance with customs law, as well as recovering any tax and duty owed. Alternatively, HMRC may issue a civil evasion penalty or seek a criminal prosecution where they believe that there has been a dishonest evasion of tax and duty, as well as recovering any outstanding tax and duty.
Andrew Skinner is an experienced regulatory trade lawyer (Solicitor) and has worked as an in-house lawyer for a global technology company, as well as in private practice. He is also a professionally qualified engineer and registered with the UK’s Engineering Council as a Chartered Engineer (CEng). Andrew advises clients on a range of trade compliance issues in various sectors, including electronics, aerospace & defence, cosmetics, IT, automotive, nuclear engineering and industrial engineering, delivering timely pragmatic advice in a way that recognises the commercial demands faced by clients.