The UK Government has launched a major new campaign with advice for businesses and individuals under the strapline “Check, Change, Go”, encouraging them to take steps to prepare for the end of the Brexit transition period on 31 December 2020. At the same time, the Government published its proposed operating model for the UK/EU border, providing more detail on how it sees imports and exports moving between the UK and the EU once it has left the bloc’s single market and customs union.
How will the new border operate?
Partly as a result of COVID-19, the Government has decided to introduce new border controls in three stages up to 1 July 2021, in an attempt to give industry extra time to make necessary arrangements.
It is worth noting that separate rules will apply to Northern Ireland. Those rules will be developed under the Northern Ireland Protocol and are not covered by the proposed operating model.
The three stages are as follows:
- Stage 1 (from January 2021):
Businesses importing standard goods (such as clothes or electronic goods) will need to complete customs declarations from 1 January 2021 although, in the majority of cases, these can be deferred by up to six months.
Businesses looking to defer will need to keep their own records and follow up with a supplementary declaration, which will need to be submitted to HMRC within six months of the point of import. In order to complete the supplementary declaration, businesses (or intermediaries acting on their behalf) will need to be authorised for simplified declaration procedures and have a Duty Deferment Account.
Export declarations will be required for all goods, and from January 2021 to the end of June 2021 for goods moving via locations without existing customs control systems (including ‘roll on-roll off’ (RoRo) listed locations and other non-inventory linked locations) an arrived declaration must be submitted before the goods have left the trader’s premises.
Businesses will also need to ensure that any customs duties applicable to their goods are paid. In a ‘no trade deal’ scenario, these will be the tariffs set out in the new UK Global Tariff. In order to do this, it will be necessary for businesses to know the origin, classification and customs value of their goods. The proposed border model allows for the possibility to defer payments that are due until the relevant customs declaration has been made.
Businesses will also need to consider how they account for and pay VAT on imported goods. VAT registered importers will be able to use postponed VAT accounting. Non-VAT registered importers will have the same options available to report and pay import VAT as they do for customs duties.
Safety and security declarations
UK Safety and Security declarations will not be required on imports for the first six months (although will be required for exports, along with export declarations).
In relation to controlled or excise goods, standard customs declarations (as currently apply to rest of world goods) will be required from January 2021.
There will also be physical checks at the point of destination or other approved premises on all high-risk live animals and plants, and a requirement to pre-notify certain movements.
Other ‘non-standard’ goods, such as strategic imports or goods covered by International Conventions also have their own additional requirements.
- Stage 2 (from April 2021):
There will be increased requirements for specific imports. For example, all products of animal origin (POAO) will require pre-notification and relevant documentation. Physical checks will continue to be conducted at the point of destination until July 2021.
- Stage 3 (from July 2021):
The new border model will apply in its entirety (with additional final requirements for certain imports). Businesses moving any goods will have to make full customs declarations at the point of importation and pay relevant tariffs. For exports, only goods moving via specified locations will be able to submit an arrived declaration. Full Safety and Security declarations will be required, while additional checks on e.g. animals and plants will take place at border control posts rather than at their destination.
What else is the Government doing to support the transition?
The Government is developing an alternative customs process to assist ports that may not have the space and infrastructure to operate under the traditional customs model where goods can be stored temporarily at the border before being declared to customs.
A new IT platform will support a ‘pre-lodgement’ model, known as the Goods Vehicle Movement Service (GVMS), where goods arriving at the border will be required to have submitted a customs declaration in advance. Interestingly, its use will not be mandatory and the choice between using a temporary storage and a pre-lodgement model will be a commercial decision for border location operators.
From July 2021, the GVMS will be in place for all imports and exports at border locations which have chosen to introduce it. However, it may be introduced immediately at the end of the transition period for transit movements where ports chose to do so (see further below).
The UK has also negotiated membership of the Common Transit Convention (CTC) after the end of the transition period. The CTC means that (for trade between members of the convention) businesses only have to make customs declarations and pay import duties on arrival at their final destination. The current members are the EU member states, the EFTA countries (Iceland, Norway, Liechtenstein and Switzerland) as well as Turkey, Macedonia and Serbia. The CTC will apply to the UK as an independent state from 1 January 2021 (i.e. it will not be introduced in stages).
As noted above, the GVMS will be introduced from January only for transit movements – meaning that e.g. EU hauliers (who have not been the subject of a Government campaign) may need to submit their Transit Movement Reference Numbers (MRNs) and vehicle/trailer registrations via the GVMS before checking in at their port of departure.
As part of plans to help hauliers and HGV drivers understand if they are carrying the right documentation, the UK Government is also developing a new app, known as the Smart Freight Service (SFS), for the RoRo freight industry. The service will be for drivers carrying goods from the UK to the EU. HGV drivers without the correct documentation risk being stopped from boarding services departing the UK or on arrival at an EU port, fined, or sent back to the UK. This could lead to significant queues and delays on the roads approaching ports in the UK and so the service will look to help tackle this problem, as well as help drivers with the transition.
What should businesses do to prepare?
In terms of immediate steps, the UK Government has recommended actions such as applying for a GB EORI number (which is mandatory for all businesses moving goods into or out of GB), applying for a Duty Deferment Account and engaging a customs intermediary. The final recommendation might well be the most pressing given reports of a lack of capacity in the professional customs industry – the Road Haulage Association estimates that 50,000 new agents will be needed to meet demand.
Businesses will also need to follow updates from the European Commission on its own plans for the border and the end of the transition period, as well as ensure that their logistics and transport suppliers are prepared for any regulatory changes – for example, haulage companies may need to meet additional operator licensing requirements from January 2021.
Businesses will also need to keep abreast of and prepare for regulatory divergence more generally, for example in relation to type approvals, product labelling and marketing.