What are the key points to consider when importing and exporting medicines, and pharmaceuticals?
In an era of interconnected markets and rapid advancements in healthcare, the global pharmaceutical trade plays a pivotal role in ensuring that life-saving medications reach every corner of the world. According to ONS data, in 2022, over £25 billion in medicinal and pharmaceutical products were exported and more than £30 billion were imported into the UK[1].
Whilst the international trade of medicinal products is a thriving and lucrative business model, achieving customs compliance involves navigating a complex set of regulations and requirements.
Shrishti Jain explores some of the key areas that are crucial when thinking about customs compliance in the international pharmaceutical trade, so you can begin to actively prevent your company from receiving deficiencies during the MHRA (Medicines & Healthcare Products Regulatory Agency) and HMRC regulatory inspections and for streamlining your pharmaceutical supply chain.
Customs Declaration
One of the key areas to focus in the customs compliance is Customs declaration – a formal document submitted to the HMRC when importing or exporting a medicinal product.
The information on a customs declaration typically includes: importer/exporter information, description of goods, quantity, value of goods, origin, customs procedure code, incoterms, transportation details, packaging information, insurance and freight charges.
This helps customs authorities assess the nature of the goods, determine applicable duties and taxes, and ensures compliance with import-export regulations and restrictions. If a false declaration is submitted it may lead to the products being held or seized at the border and may result in fines from the HMRC.
International Trade Matters can provide specific advice on the completion of customs declarations. In my experience, the 3 primary elements of the customs declaration with most deficiencies are:
1. Harmonised System Commodity Codes (Tariff Code):
A Harmonised System (HS) Commodity Code is a unique code specific product and provides a standardized classification framework that facilitates the harmonization of customs procedures, tariff schedules, and trade statistics across different countries.
Each HS code can vary depending on the specific type of medicinal product and its composition. The structure of HS codes typically consists of 6 digits, although some countries may further extend the code for more detailed classification.
For example the HS code of a pharmaceutical finished drug will be different from that of a herbal medicine, vaccine, a dental product or a diagnostic kit. Some of the HS codes commonly used in the pharmaceutical industry include 3004, 3002, 3003, 3006 etc.
You can find out more about how HS codes work in this article by Mike Court or take a look at this quick video explainer.
2. Customs Procedure Code (CPC):
Customs Procedure Code helps authorities to establish the purpose of import or export and determine appropriate treatment of medicinal products at the border.
According to the MHRA, a UK wholesaler is not permitted to ‘import’ a product from a third country for export under a Wholesale Distribution Authorisation (WDA), as that is a manufacturing activity. Therefore, for Introduction for export of medicinal products, the wholesaler must use the ‘correct customs procedures’, to only ‘introduce’ the product for supply to a customer in a third country[2].
The MHRA GDP (Good Distribution Practice), GMP (Good Manufacturing Practice) inspectors routinely request the businesses for their import export documentation during the inspection, including SAD ( Single Administrative Document, also referred to as C88), and except them to be correct, accurate and in line with the authorised activities covered on the licence.
Common customs procedures that may be identified by Customs Procedure Codes include:
- Importation for Home Use
- Exportation
- Transit
- Temporary Admissions
- Customs Warehousing
- Inward Processing
- Outward Processing
3. Incoterms® rules (International Commercial Terms):
These are the set of standardised trade terms published by the International Chamber of Commerce (ICC) that are widely used in international commercial transactions to define the responsibilities, risks, and obligations of buyers and sellers involved in the sale and transportation of goods.
These terms are crucial for clarifying the aspects of a transaction such as delivery point, transportation costs, transfer of risk, import/export formalities and insurance. Some of the commonly used Incoterms® are:
- FCA (Free Carrier)
- FOB (Free On Board)
- CIF (Cost, Insurance, and Freight)
- DAP (Delivered At Place)
- DDP (Delivered Duty Paid)
Each Incoterms® rule has its specific implications and obligations for both parties, and since it is the legal responsibility of the declarant to accurately declare the goods to the HMRC, using correct Incoterms® rule gives the required control to the buyer and seller based on their specific needs, the nature of the goods, and the transportation mode.
Specialists at International Trade Matters are available to advise on the use of Incoterms® and their application to ensure you are able to minimise risk and potential cost. For further reading, access to an on-demand webinar and Incoterms® wallchart, follow this link.
Recap – are you ready to import and export?
As an importer or exporter of medicinal products, it is your responsibility to know your products and accurately describe them on the customs declarations, enquire into the import export regulations in the destination country, licence requirements, any restrictions, prohibitions and use the correct customs procedure code for smooth and lawful international trade. As the industry continues to evolve, a strategic and adaptable approach to international trade will be the key to success in the pharmaceutical import-export arena.
Srishti and the team are available to provide direct advice, accredited training, auditing & management services and much more. Get in touch today!
References:
[1] Office for National Statistics, Trade in Goods: Country-by-commodity exports & Office for National Statistics, Trade in Goods: Country-by-commodity imports (accessed on 05.Feb.2024).
[2] UK MHRA Guidane notes: https://www.gov.uk/guidance/sourcing-medicines-for-the-great-britain-market-from-an-approved-country-for-import-or-northern-ireland