If you are importing it is imperative that you proactively manage your imports – your imports are your responsibility
International Trade Specialist, Frances Fawcett works with numerous importers and exporters and frequently advises on appropriate approaches to import management
Why is this a bigger issue now?
Since the UK’s departure from the EU, billions of pounds worth of imports are now subject to new processes. Businesses had been told to prepare and easements have been put in place to make the transition to a post-Brexit world smoother for us all. Unfortunately, some of these easements have also led to a false sense of security for many traders which is only revealed when some examination of record keeping takes place.
For a full run down of the issues to consider and how the easements have helped, see our article from March 2021.
To be fair to businesses, it was extremely hard to prepare for a world outside of the EU. Uncertainty about our trading relationship with the EU ran until late in December 2020 and the signing of the Trade and Cooperation Agreement. Furthermore, although the UK government ran an extensive communications campaign and provided a lot of information, it was, by necessity, generic. When you need to communicate to a food producer with a turnover of under £1m and 10% of their business in the EU and a distributor of imported goods from the US and a manufacturer of precision measuring equipment with a turnover of over £20m per annum, you have to be generic. Those are descriptions of just three businesses that I am currently working with, and their needs naturally vary considerably.
One the most common challenges that I help businesses overcome, is the need to apply the “official” information to their own businesses. Everything you need to know is online somewhere – either on HMRC’s website, the EU official web site or other sources such as trade bodies and other specialists. The internet is a wonderful source of information – but picking you way through what feels like the entire works of Encyclopaedia Britannica and William Shakespeare multiplied by 10 is daunting and time consuming. And requirements change so this task is not going to get easier!
But you must understand your obligations and proactively manage your imports. I often quote the following from one page on the vast array of gov.uk resources:
It’s your responsibility to correctly declare goods and only negligible liability is placed on your agent.https://www.gov.uk/guidance/customs-debt-liability
Goods arriving does not necessarily mean all the paperwork has been done
The “agent” referred to above could be one of many that you are working with. There could be multiple transporters involved in your shipment and there will be customs agents taking care of declarations. These may be part of the transporters’ organisation or appointed separately. No matter who or how many are involved, it’s clear from the statement above that HMRC do not place any reliance on third parties when it comes to an audit of your importing. Your imports are your responsibility.
So, as my article in March said, just because the goods are here doesn’t mean all is well.
How proactive import management saves money
Oh my goodness, I hear you say! More work, something else for someone to do, more cost to my businesses. Well yes, in the short term this does feel like another new administrative task and any task costs money. But take a long-term view and the cost stops feeling like an expense and starts to feel more like an investment that could pay dividends, if not vital insurance against very significant costs later.
In the first instance, you might find mistakes that can save you money. If you are proactively managing your imports, you will be able to forecast the amount of duty and VAT that will be required. You can check actual charges and may well find something has been charged incorrectly and can be recovered. Over time, proactive management means that you can spot mistakes before they are made and prevent erroneous charges in the first place. Furthermore, if you are leaving duties and VAT to your transporters to manage, you are paying them fees for the service. For occasional importers, this might make sense and, of course, it is appropriate for transporters to charge for the services they provide. But for regular importers, there are cost savings to be made.
But the real sense of security that comes with proactive import management is when an audit takes place. HMRC will not audit your transporters or customs agents for your imports – they will audit you. They will ask you for records to show what you have done, that you have done it correctly and that you have paid what is owed. If they find gaps, that will raise concerns naturally leading to an even deeper audit. Along the way your staff are spending time on providing the information required – one business I met told of an audit that took 6 months and required 25% of a member of staff for that entire time. That is a very real example of how a stitch in time really can save nine.
A phrase I use often with businesses is that they are allowed to be human, but they are not allowed to be negligent. What I mean by that is that if they can show proactive management and processes, yet mistakes were made, an audit will recognise that human error occurs from time to time. If duties or VAT has been missed, it will be charged. But it is unlikely to be compounded by the addition of penalties if processes were in place and the business clearly takes the task seriously. You can imagine that the final cost of missed payments plus penalties could be considerably higher if the business is unable to show a proactive and robust management process.
How to manage imports properly
The system that will work will vary from business to business. Some businesses have dedicated document management systems in place, others track activity via a spreadsheet. It is impossible to suggest a one-size-fits-all solution because that doesn’t exist. However, one thing that does work for every business is to move from a reactive approach to a proactive approach.
What I mean by that is to stop responding to data that comes to you in the form of transporter invoices, Postponed VAT Accounting statements, C79s and other documents. Instead, create a system that records every import and enables you to track that you have met your obligations. Track when and how duty was paid, when and how VAT was accounted for and, crucially, that an import declaration has taken place.
Then, when the transporter invoices, Postponed VAT Accounting statements, C79s, etc. arrive, your task is to use them to complete the picture of correct import compliance in your records. You should know what you are importing – don’t rely on paperwork from outside to tell you what’s going on. It could be wrong, it could be incomplete.
Is this yet another fallout from Brexit?
Well, no, actually it isn’t. No matter where you are importing from, you have an obligation to manage your imports properly. The UK imports goods worth hundreds of billions of pounds each year. The “Brexit” bit of this is that around half are from EU countries. So the need for proactive import management is nothing new, and should have been in place at every importer in the UK. But for some who have previously only imported from the EU, this could be a new requirement.
Whether it’s new for your business in 2021 or something you should have been doing anyway, make sure you are proactively managing your imports. Can you afford not to?
Can we help you?
Of course. We can provide guidance bespoke to your business to help you navigate this and other aspects of your international trade. We look forward to helping you!