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The UK has left the EU customs union, single market, and VAT area. The new Trade and Cooperation Agreement (PDF 8.40MB) (TCA) determines the terms of UK trade with the EU From 1 January 2021. Some constituency businesses and individual constituents find dealing with the amended import and export procedures challenging. Below are the main sources of information which may be of use to people dealing with constituency casework concerning questions about customs rules.
This document is intended to be a general overview of some of the issues arising from trade with the EU. It is not a comprehensive guide to all aspects of trading with the EU and does not cover the circumstances of any specific case.
Tariffs and rules of origin
The UK-EU TCA secures zero tariffs and quotas on goods moving between the EU and UK, provided those goods meet the rules of origin (RoO). The RoO determine the “economic nationality” of a good based on where the products or materials (or inputs) used in their production come from. They prevent goods manufactured in third countries being routed through the UK (or the EU) in order to avoid paying third country tariffs. The UK Government has published a summary explainer of the TCA.
To benefit from the TCA zero tariff, businesses must demonstrate the origin of their goods. A product qualifies as ‘originating’, if it is ‘wholly obtained’ in the UK and EU, or has been substantially transformed in one or both markets. That is why, as reported by Financial Times, businesses that re-export goods from third countries with little or no further processing, may still face tariffs when trading with EU Member States.
Rules of origin can be complex. In some cases, the rules are specific to particular products.
Overview of UK-EU customs processes
The Government is phasing in border controls for most goods over 2021. On 11 March, it announced a new timetable for introducing import border control processes, with full controls effective from 1 January 2022. This gives businesses more time to complete customs declarations on goods imported into the UK from the EU. While tariffs are still be payable where they are due, this payment may be deferred. The EU has introduced full customs controls from day one.
Government’s Border Operating Model (PDF 7.76MB) gives a comprehensive overview of customs processes, both imports from and exports to the EU. See also Border Operating Model Case Studies (PDF 4.09MB) for end-to-end scenario examples.
European Commission guidance Brexit: end of transition period FAQs on tax and customs (PDF 852KB) answers the most common questions about EU customs rules. More detailed technical guidance is available.
First steps for businesses
Businesses will need to familiarise themselves with new processes. These include: getting ready to make customs declarations, knowing how to classify their goods correctly, and following safety and security requirements for their goods. The government advises businesses to get expert help with the administrative requirements.
Get ready to make customs declarations
Customs declarations are required from 1 January 2021 on all exports from the UK and if businesses are importing controlled goods such as alcohol, weapons, chemicals, or drugs. If a business imports goods that are not controlled, they may be able to delay making declarations for up to six months.
Know how to classify goods
In order to apply the right tariffs, traders are responsible for correct classification of goods and recording of the origin of goods. Incorrect commodity codes or inaccurate recording of origin in customs declarations may mean that the wrong amount of tax or duty will be charged. Traders may classify their goods themselves but HMRC often advises getting help of customs intermediaries to ensure that goods are classified correctly. More information is on GOV.UK: Guidance Claiming preferential rates of duty between the UK and EU.
Businesses importing goods can check the applicable UK tariff duties and VAT rates with the help of the HMRC Trade Tariff tool.
Follow safety and security requirements
UK and EU safety and security declarations are required on both imports and exports although there is no need to make an entry summary declaration for goods imported into Great Britain from the EU between 1 January and 30 June 2021. Exporting from the UK, a trader has to make an exit summary declaration. Limited temporary wavers apply to goods going from Great Britain into Northern Ireland.
Submitting customs declarations can be complex. The Government Border Operating Model The Government Border Operating Model (PDF 7.76MB) recommends (p31) that businesses get a contract with a customs intermediary who can do this on their customers’ behalf. HMRC regularly updates lists of customs agents and fast parcel operators.
The Government has allocated £20 million for a Brexit Support Fund for small and medium-sized businesses to help them adapt to new customs and tax rules when trading with the EU. Grants of up to £2,000 are available to help with training or getting professional advice on new customs, rules of origin and VAT processes. The Government has published guidance on this fund. The scheme follows the now closed Customs Grant Scheme, under which £80 million were spent on recruitment, customs training and IT grants to businesses.
Individual businesses can find information on customs and tax rules through various UK government channels:
- The transition checker personalises information on HMRC processes for importing, exporting or customs relief.
- Customs & International Trade Helpline number is 0300 322 9434. The Government has published a list of Brexit transition helplines.
- HMRC offers webinars about importing and exporting as well as short films
- Constituents can sign up for BEIS Business Readiness bulletins.
- Different rules apply to Northern Ireland Businesses moving goods between Great Britain and Northern Ireland can use the free Trader Support Service, which provides information and can completes declarations on traders’ behalf.
- Food Standards Agency website explains businesses how to export food and drink.
European Commission has a Taxation and Customs information website. In individual cases it may be advisable to consult the involved EU Member State’s customs authorities. Some authorities have dedicated UK contact points and offer information in English language.
The Commons Library does not intend the information in this article to address the specific circumstances of any particular individual. We have published it to support the work of MPs. You should not rely upon it as legal or professional advice, or as a substitute for it. We do not accept any liability whatsoever for any errors, omissions or misstatements contained herein. You should consult a suitably qualified professional if you require specific advice or information. Read our briefing for information about sources of legal advice and help.