It is hard to believe that it’s now 4 ½ years since Brexit was foisted upon us and we are still in the clouds as to whether or not there will be a trade deal with our since dearly departed neighbour.

Not since 1965 has Ireland not had a trade agreement with the UK with a mixture of the Anglo-Irish FTA and the subsequent accession of both countries to the then EEC (EU) in 1973.

As of midnight 31 December 2020 (less than 7 weeks away), Ireland and GB will trade as 3rd countries, whether or not a trade deal (FTA) is agreed, and that is going to impact on all aspects of business be it imports, exports, customs declarations in both directions, additional health and safety compliance/certifications, shipping and customs clearance issues, additional costs, tariffs and cash flow that will impact on an already hard pressed economy.

We are well into the 11th hour and it is now critical that any outstanding issue that may be impacted by Brexit be resolved or perhaps even reconsidered irrespective of any impending or hoped for FTA.

All goods received from or shipped to GB will, from 01 January 2021, require Customs declarations at both ends of transportation. The preparation and presentation of the declarations will fall to be agreed between the seller and the buyer but regardless of which entity presents the declarations, a cost will accrue per declaration and may well incur additional costs by way of tariffs/import duty/VAT at either point of arrival.

However, while Irish Revenue (Customs) have no sway/say on the rates of import duties, there are many mitigating procedures which can defer, delay, reduce or eliminate duties depending on the nature of your business, your markets (both source from/supply to) or indeed the end-product that you may manufacture.

EORI - Economic Operators Registration and Identification:

If you are a trader who imports or exports goods/materials, you must have an EORI number. This number is valid throughout the EU and is an absolute essential when trading in either direction. It is used as a common reference number for interactions with the customs authorities.

AEO – Authorised Economic Operator:

The AEO procedure is based on the “Customs-to-Business” partnership devised by the World Customs Organisation (WCO) and is applied worldwide under different titles but with similar principles - C-TPAT USA (Customs – Trade Partnership Against Terrorism), PIP Canada (Partners in Protection/Canada) and provides multiple benefits of mutual recognition.

Traders who voluntarily meet a range of criteria work in close cooperation with customs authorities to assure the common objective of supply chain security and are entitled to enjoy benefits and compliance simplifications throughout the EU.

This implies that there must always be a relationship between customs and the applicant/AEO. This relationship must be based on the principles of mutual transparency, correctness, fairness and responsibility.

AEO is a “must”/most beneficial in relation to other customs procedure referenced later, here.

Comprehensive Guarantee Authorisation

The Comprehensive Guarantee is a customs provision to cover two or more economic operations, declarations or customs procedures for liability (debt) that has been, or may be, incurred. The “guarantee” (security) means that any trader who has two or more declarations may apply for a comprehensive guarantee and consequent beneficial reductions or waivers that may follow.

A Comprehensive Guarantee is always linked to a second/or other procedure, e.g., Deferred Payment, Simplified Declarations, IP/OP, Warehousing, Temporary Admission, Transit.

The holder of a Comprehensive Guarantee Authorisation can:

• amalgamate all their customs guarantees under one comprehensive guarantee
• apply for a reduction or waiver in the amount of guarantee for debt/duties
• significantly reduce the amount of guarantee for debt/duties which may arise if the operator holds the status of Authorised Economic Operator Simplified (AEOC)

Deferred Payment of Import Duties

The deferred payment system (a Revenue approved bank direct debit) is a facility that enables an importer to defer payment of import charges at time of actual importation into Ireland (EU). These deferred charges include Customs Duty, import VAT, excise Duty and VRT. It’s a 3-way arrangement (guarantee) between the importer, the guarantor (bank) and Revenue (Customs) whereby any tariffs/duties incurred within any given month is deferred (postponed) until the 15th of the month following importation. For importations at the start of any given there will be a 4-6 week cash flow benefit.

Simplified Declaration (SD) for imports:

The “simplified procedures” principle covers many forms of simplification which can enable traders to present goods and relevant declarations at importation. It may allow an EORI registrant to omit some “standard” details and supporting documents at the time of customs clearance.

The simplified customs declaration is a two-step procedure as follows:

• The simplified declaration, containing the minimum required data elements is lodged by the economic operator.
• The supplementary declaration, containing the remaining required data is lodged after the goods have been released. (There are circumstances where the supplementary declaration may be waived.)

If you wish to apply for an authorisation to use the simplified declaration procedure for imports, you must:

1. Have a record of compliance with Revenue and have specific operational procedures in place, or
2. Be an AEO (Authorised Economic Operator) for Customs simplifications (AEOC).

Prohibited or restricted goods are not eligible.

Inward Processing (IP)

Inward processing allows for the duty-free “importation” of non-EU goods and materials to be “imported” into EU to undergo a process of manufacture or repair.

When “imported” under IP, the received goods are not subject to:

• Import duty
• Other taxes related to their import, such as VAT and/or excise
• Commercial policy measures

Following processing or manufacture, the finished (or semi-finished product) may be re-exported (outside the EU) or released into free circulation in the EU. Exported outside the EU would eliminate any import charges whereas free circulation into EU would crystalise tariffs applicable to the lower of the rate of the imported raw materials or the actual finished end-product which could be zero, e.g., cosmetics or pharmaceuticals.

As an example of the financial benefits of IP, according to a recent study, the benefits of IP are clearly visible on examination of the sales abroad of motor vehicles assembled under IP within the EU; out of c. €200 billion (annual) worth of EU motor vehicles exported outside EU, almost 43% (€86 billion) were motor vehicles that were produced under the IP procedure, i.e. they were essentially cars assembled in the EU from parts and components imported from 3rd countries (non-EU/the rest of the world). The numbers show how significant the IP procedure is for the EU and, significantly, UK businesses.

Furthermore, in a post Brexit scenario without a trade agreement (FTA), vehicles assembled using non-UK originating parts may not qualify for an EU-UK preferential (reduced) tariff treatment under terms of an FTA.

Outward Processing (OP)

Outward processing facilitates the temporary exportation of EU goods in order to undergo a process. The processed or semi-processed good resulting from the non-EU process may be re-imported and released for free circulation with total or partial relief from import duty. A total relief from import duties must be granted when the goods have been exported merely to be repaired free of charge because of a contractual obligation or because of a manufacturing or material defect.

In other cases of outward processing, the import duties on the re-imported products are calculated only on the basis of the value resulting from the processing operation undertaken outside the EU.

Outward processing also allows businesses to take advantage of more competitive labour costs or specific technical expertise in non-EU countries.

Warehouse/Approved Warehousing:

An approved customs warehouse can provide both financial benefits and valuable services to companies operating domestic and global supply chains. Warehousing gives the flexibility and ability to defer costs and assist cash flow as well as ensuring compliance with complex and ever-changing import and export regulations.

It is also a useful safeguard in relation to sensitive and JIT (Just In Time) deliveries in supply, retail or manufacturing scenarios.

It is worth noting that whilst within an approved warehouse (duty still suspended) additional processes may be undertaken on the stored goods (aka, “usual form of handling”).

Temporary Admission of Goods

Temporary Admission provides for goods to be brought into EU (Ireland), temporarily, with total or partial relief from import duty. Typical examples of such practice are where articles/goods may be used for purposes such as exhibiting at a trade fair, animals/horses for racing/breeding, samples, circus/concerts etc.

The TA/Temporary Admission is subject to specific conditions.

Transit

Customs “transit” is an established customs procedure used to move goods between international locations, e.g;

• between two points of a customs territory, via another/3rd country territory (UK); or
• between two or more different customs territories.

The Customs Transit procedure (NCTS/National Computerised Transit System) allows for the temporary suspension of duties, taxes and commercial policy measures that may be applied at international borders. As such, it allows customs clearance formalities to take place at the final/designated location as opposed to the point of entry into 3rd countries.

From an Ireland perspective, the customs transit system (NCTS) is a critical requisite where goods may traverse the UK land-bridge going to or from the EU. It allows for the tariff/fiscal-free movement of goods under transit from their point of departure to their point of arrival/destination where both the customs and national fiscal obligations will apply.

It will have significant bearing on the movement of excisable products such as mineral oils, alcohol and tobacco to and from Ireland.

There are different transit systems which are used within the EU, mainly the EU’s own NCTS, the Common Transit system as will apply (adopted/confirmed) by UK post Brexit and TIR - International Road Transit and ATA - Temporary Admission.

Summary

To be able exploit and benefit to the maximum any of the above customs procedures it will be necessary to be registered/approved under 1 of the 3 opening guarantees;

1. AEO / Authorised Economic Operator
2. Comprehensive Guarantee Holder
3. Deferred Payment approval
4. Approved Warehouse Keeper

As application and certification for some of the above procedures can take between 30 days to 6 months for approval it is important to kick-start the process given that January 2021 is a mere 7-8 weeks away.

As time is short it is key to apply for and implement the appropriate economic procedures, as quickly as possible.

If you wish to discuss or obtain more information on the VAT or Customs aspects outlined please contact any member of the Indirect Tax Team.