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brexit advice for the motorcycle trade

Business consultancy Claridon has issued advice to the motorcycle community on Brexit to “give a better insight into the current situation and what the trade should be doing in preparation”.

Claridon says it works with the UK government and British Chambers of Commerce in an advisory capacity on various aspects of international trade matters, and is a member of the Bank of England’s Monetary Policy Committee for the South-East region of the UK.

Claridon’s Christopher Scott also pointed out that “we are passionate bikers at Claridon and part of the biking community”.

The company writes:

No-one knows in which direction Brexit is currently heading or if there will even be a Brexit at all. What we do know, however, is that a significant amount of uncertainty has been created for companies large and small. The government have been working behind the scenes to introduce procedures to ease disruption to the supply chain.

The worst case scenario would be a no-deal Brexit and the government is strongly advising companies to prepare for this in the event a deal cannot be agreed. Hopefully a no-deal Brexit is completely avoided but we’ll cover this scenario first.

Import

If you are currently moving goods between the EU and UK you will know they move freely across borders without the need for Customs clearance formalities at the time of departure or arrival.

Under a no-deal Brexit, this would change significantly as a Customs clearance declaration would be required. You will need to prepare for a new set of rules to ensure that your business remains compliant and able to continue trading with your suppliers.

You will need an EORI number from HMRC, which is a fairly straightforward process. Without an EORI number you will not be able to import from the EU into the UK. An EORI is an Economic Registration and Identification number and with this identification number it will enable Customs declarations to be submitted electronically.

An EORI will also enable you to apply to be authorised for Customs simplifications such as Transitional Simplified Procedures (TSP).

TSP is a special scheme that UK Customs has announced to assist importers in the event of a no-deal and is only likely to apply if there is a no-deal exit. If the UK has an orderly withdrawal a transition period will keep things largely as they are now until new arrangements are worked out and agreed upon.

You can apply for an EORI on line via the following link and you will need to provide the following information with your application:

Your VAT number.
The start date of your business.
Your UTR number (Taxpayer Reference) which is a 10 digit number.
 
If you are an individual or a sole trader business you must also provide your National Insurance number.

If your organisation has either a holding company or a parent company, they must apply for an EORI number on your behalf.

Once you have applied for an EORI number you should receive this between 12-36 hours, depending on HMRC’s workload, and it can take up to 48 hours for your EORI to be registered on HMRC’s systems before it can be used for processing Customs declarations.

If you already have an EORI number but it does not have a GB prefix, you will need to re-apply for a new EORI.

The benefits of TSP approval are:

Goods can be imported into the UK from the EU without the need to make a full Customs declaration at the border or the need to pay import duties & taxes (if applicable) immediately.   

Importers may be able to delay submitting Customs declarations for most non-controlled goods and paying any import duties & taxes (if applicable) for about the first six months after the UK leaves the EU.

This system with a six months’ grace period was introduced for when the UK was originally leaving the EU on 29 March, 2019. Although it has not been officially confirmed, it may well be that the same grace period will apply should the UK leave on the 31 October. Traders will need to keep track of announcements from HMRC as matters develop.

TSP was originally announced for imports at RO/RO (roll-on roll-off) ferry ports but has subsequently been extended to cover all UK ports and airports.

TSP will require Entry in Declarants Records (EIDR) to be recorded which provides a clear record of the transportation process. It is therefore very important that precise records are maintained in the event of a future inspection from HMRC.

To obtain TSP, you will need to have a Customs deferment account (DAN) and Comprehensive Customs Guarantee (CCG).

A Customs deferment account enables an agreed maximum monthly limit of duties and taxes to be deferred for payment until the 15th day of the following month from importation, allowing between two and six weeks’ credit. However, special arrangements for goods coming from the EU countries may apply under TSP and you may not need to give a guarantee immediately.

HMRC issued a draft Customs tariff on 13 March 2019 under which about 90% of products were classified as duty free, not just from the EU but the rest of the world, which is necessary to comply with WTO rules. This tariff is likely to be applied if the UK leaves with a no-deal on 31 October.

A Customs Comprehensive Guarantee is a guarantee to HMRC by a financial institution such as a bank to cover the duty and tax liability. The guarantee must cover two months of liability because the limit in month two could have been reached before the payment of the previous month’s liability has been taken.

However, for TSP-approved traders the requirement for a guarantee may be delayed for six months or more to ease disruption and assist trader’s cash flow.

For VAT, imports from the EU will be subject to postponed accounting in the event of a no-deal exit and VAT will be paid by importers on their normal VAT return. This is different to imports from the rest of the world, where VAT has to be paid immediately upon arrival.
                                                                                                  
If you are directly making the logistic arrangements from your supplier, you will need to provide your carrier with either a Master Reference Number (MRN) which will be generated in the EU supplier country and your EORI number upon the vehicle arrival at the EU port of exit. The MRN number will be generated on the pre-lodgement Export Customs declaration and this is required to obtain both the export Customs clearance at the EU exit port and import Customs clearance at the UK arrival port.  

If your supplier is organising the logistics arrangements it will be their responsibility to manage this process and provide the MRN, although you will still need to manage the UK Customs clearance formalities – unless it has been pre-agreed with your supplier that they will manage this also.

If you do not want to manage the import Customs process yourself, you can engage a Customs broker, preferably AEO certified, who will have the expertise and infrastructure already in place to manage all the necessary Customs formalities, and compliance of EIDR. Most Customs brokers will operate their own Customs deferment account which can negate the need for your company to set up their own. Customs brokers will make a charge for using their deferment account to cover the cost of the Customs Comprehensive Guarantee.   

However, under TSP it’s likely that even if duty is applicable (remember that 90% of products will be duty free) there is likely to be a six-month grace period before full declarations and any duty has to  be paid.

To give an example, the draft tariff in the event of a no-deal exit gives a Customs duty rate of 6%-8% for motorcycles (depending on engine size) but most spare parts would be duty free.
 
As the majority of goods from the EU are arriving by roadfreight via RO/RO ports it would be prudent in the early stages to allow adequate transit time when ordering from your suppliers if it looks like there will be a no-deal exit at the end of October. While the RO/RO ports are confident they can minimise disruption, the whole Customs infrastructure will be under untested pressure which could result in congestion and delays. These are perhaps more likely on the EU side, which doesn’t currently have an equivalent to TSP.

Depending on the urgency of your consignments it may be may be necessary to reconsider the usual mode of transport for your supply chain if pressure on the Customs infrastructure isn’t coping. This is likely to be an issue in the early weeks of a no-deal exit but should settle down fairly quickly as the logistics providers and transport companies familiarise themselves  with the new arrangements.

In the event the UK Government agree a deal with the EU, there will be a transition period during which the supply chain will continue to operate as it does now, with no Customs declarations, Customs duties & taxes or border checks for non-controlled goods.

If there is an orderly exit from the EU with a transition period (which maybe  for up to two years) followed by a free trade deal, a Customs declaration will be required but this can be managed  by a logistics provider or Customs broker if necessary.

Export

Under a no-deal Brexit, the process to export from the UK to the EU would be as follows:

You will require an EORI number if your company does not already have this.

The process to obtain an EORI is explained previously under importing from the EU to the UK.

If you are directly arranging the logistics arrangements to the consignee you will need to register for a “CHIEF badge” to enable you to submit to HMRC the combined Exit Summary Declaration (ESD) to HMRC for the consignment to be cleared at the UK port of exit and EU port of import. An ESD is also referred to as a Safety and Security Declaration.

If you are exporting the consignment by roadfreight the ESD will need to contain details about the consignment as well as the vehicle registration number of the vehicle carrying the goods to the final destination. The ESD will generate a Master Reference Number (MRN) which should be submitted to the UK port of exit and Customs Broker at the EU port of arrival, prior to the vehicle’s arrival.

If you are exporting by airfreight you will need to follow the same procedure but in place of the vehicle registration number you need to input the AWB number.

A “CHIEF badge” (Customs Handling Import Export Freight) is a HMRC facility to enable Customs declarations to be transmitted electronically.

If you do not want to manage the export process yourself you can engage a Customs broker, preferably AEO certified, who will have the expertise and infrastructure already in place.

In the event the UK government agrees a deal with the EU, there will be a transition period during which the supply chain will continue to operate as it does now, with no Customs declarations, Customs duties & taxes or border checks for non-controlled goods.

If there is an orderly exit from the EU with a transition period (which may be for up to two years) followed by a free trade deal, a Customs declaration will be required but this can be managed by a logistics provider or Customs broker if necessary.

If any of the motorcycle community requires clarification, advice  or assistance in applying for EORI & TSP ( which is what they need to be doing now )  we are more than happy to guide them through the maze, and they can contact us by e-mail – [email protected]
 

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