Insights

Trading with the EU: The Top Tips for Smooth Movement of Goods

Name: MHA
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Andrew Thurston · Posted on: November 7th 2022 · read

Since the 1st January 2021, many manufacturers, both UK and EU, have experienced serious issues in relation to their ability to manufacture and supply goods across the English Channel.

Depending on the type of goods being transited, the issues vary making it difficult to make a sweeping assessment of the situation since Brexit.

During a recent ICAEW webinar we discussed some of the issues we had identified during discussions with our clients and it was clear that the attendees were majorly concerned about the additional bureaucracy that a customs border imposes. With just the addition of the customs declaration there is a cost and potential risk of delay that was not there prior to 2021. Also, additional paperwork may be required, especially for manufacturers in the Agrifoods sector. This has meant significant investment in extra staffing to manage these new processes, which in turn are required to make the movement of the goods as smooth and timely as possible.

For many UK manufacturers, there are pre-existing supply chains which involve the purchase of parts and components from the EU. Although the UK/EU Trade Agreement attempts to facilitate trade by minimizing the potential for customs duties, this is restricted to ‘Originating’ goods. Many UK manufacturers will now need to maintain additional records to evidence to HMRC that their goods are ‘Originating’ and therefore subject to the zero-tariffs.

Depending on the finished product, the evidence required could cause significant administration requirements as these need to be reviewed regularly. Such is the case that we have heard from clients that their suppliers are not willing to invest in the administration required to evidence the origin of their products, resulting in the full rate of customs duty being applicable on importation.

This increases the costs to the manufacturer and potentially creates issues when determining the origin of the finished product. We would recommend that businesses review the impact of customs duty within their supply chain to ensure that any costs are considered as part of determining the price of the finished goods.

Another major issue that manufacturers are experiencing is the continued fluctuations in supply chains due to the imbalance of freight containers caused by the Covid Pandemic.

Businesses should consider managing their stock in different ways to ensure that they can maintain satisfactory levels to minimize the impact of a supply chain collapse. This increases pre-manufacturing costs due to investment in stock that may not be required for up to 12 months.

As there is now a customs border, manufacturers who are part of a processing supply chain now should consider the possibility of using Customs Special Procedures to manage their UK duty liabilities. This is especially important for businesses who do not own the parts or raw materials imported for use in the manufacturing process as the UK’s policy on the reclaim of import VAT only allows the owner of the goods to make such a claim.

What do UK manufacturers think?

We would recommend that any business who imports goods for processing considers using Inward Processing to mitigate the risk of incurring customs duty and import VAT.

HMRC are responsible for ensuring UK importers maintain a satisfactory level of compliance and there is a risk that businesses will be inspected in the near future. We strongly recommend that, if not in place now, businesses review their procedures for retaining and checking their customs declaration. Failure to do so could result in errors not being identified and render the business liable to customs debts and penalties.