The past 40 years of global trade liberalisation has brought international growth and improved the standard of living for millions of people across the world, improving consumer choice and lowering prices. Mike Court, International Trade Compliance Specialist, examines the complex world of customs arrangements…
Across the globe, customs authorities perform key functions for their individual countries, such as revenue collection, preventing illegal exports and imports, processing cargo documentation and collecting trade statistics.
The World Trade Organisation (WTO) was formed in 1947, and has its headquarters are in Geneva the WTO acts as dispute mediator in trade deals between countries, it is run by its 174 member nations. WTO is the only global authorisation which deals with rules of trade between nations.
The WTO has six key objectives in setting up and enforcing the rules for international trade, these are: trade liberalisation, resolving trade disputes, trade transparency between trading partners, global economic management and to develop international trade. 1
At a global level, the main customs authority is the World Custom Organisation (WCO), headquartered in Brussels. The WCO has developed international trade practices and procedures such as commodity classification, rules on products, import valuation, the rules of origin covering everyday products. Also included in their remit are the rules regarding the collection of customs revenues and supply chain security to name but two.
The WCO manages the globally recognised Harmonised System (HS) goods nomenclature and manages the technical aspects if the WTO agreements on customs valuations and rules of origin. At this time of writing, there are more than 180 members of the WCO. The WCO are responsible for customs controls and introduction of best practices within customs organisations at a global level.
Through the introduction of legislation in the form of: International convention on the Simplification and Harmonization of Customs procedures (revised Kyoto Convention. The ATA Convention and the Convention on Temporary Admission (Istanbul Convention)). The SAFE Framework of Standards to Secure and facilitate the supply chain security programme commonly known as Authorised Economic Operator (AEO) concept. 2
The EU and Free Trade
The 27 member states of the European Union (EU) make up one of the largest trading blocks in the world. The removal of trade barriers such as tariffs and quotas within the EU has created a free trade area.
The European Union Association Agreement (EUAA) does something similar for a much larger range of countries. The EU represents all its member nations at the WTO and acts on behalf of members states in any disputes. Any EU agreement must first be approved by all 27 member states.
Free Trade Agreements (FTAs) are a powerful tool used by the EU to develop trade in goods and services with other third-party nations or trading areas. EU Customs is documented within the Union Customs Code (UCC). The UCC defines the legal framework for customs rules and procedures in the EU customs territory. The aims of the UCC are to promote greater legal certainty and uniformity to businesses, and increased clarity for customs officials, moving the customs processes in the EU to a fully electronic customs environment, embracing swifter customs procedures for compliant and trustworthy economic operators (AEOs). 3
The WTO’s global idea of having tariff-free trade and free movement of goods, has been eroded over time with the application of the Generalised System of Preferences (GSP) which is an EU directive which allows for products being purchased from suppliers in certain countries to be lower rated or even free from duty. The scheme, while fairly complex, is a great way for UK importers to lower their buying costs and subsequently increase their margins.
Current UK customs procedures are based on the EU’s UCC’s rules, but this will change as UK moves away from the UCC in the coming months and years. Leaving the EU will allow the UK to act independently and to set its own tariffs, to negotiate its own FTA’s and enable the UK to operate under “most favoured nation” terms. The UK is already a full member of the WTO and it will need to have its trade policy and tariffs accepted by the other members of the WTO.
The Trade and cooperation agreement between UK and EU has resulted in hard borders with the EU, with more checks on goods crossing the borders and an increase in administrative tasks such as presentation of commercial invoices, transport documents and customs entries.
Businesses within the UK are busily adapting themselves to trade outside of the EU which could result in extra costs in administration charges, the full extent of these changes has yet to be released and now is an uncertain time for all UK businesses dealing in international trade. The prospect of future trade deals with USA, Trans-Pacific Trade Group and others, will impact on how UK business look at their operations. The role of a trade manager to oversee all these changes is surely high on the agenda of most businesses, if not, then it should be!
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