Customs Compliance Audit

Top customs compliance risks for businesses

1. Tariff Classification All imported goods must have an assigned commodity code. Often determining the correct code is difficult and the Customs Tariff is not the easiest of systems to navigate. By not ensuring the correct commodity code is identified and declared on imports, the company is at risk of unintentionally avoiding payment of the correct import duties. Depending on the imported goods, there are also risks that anti-dumping or special tariffs/quotas may be avoided by using the incorrect code. If HMRC conduct an audit they will review these imports and raise customs debts.
2. Origin A significant risk that HMRC considers high profile due to the UK’s departure from the EU. Movements from the EU claiming ‘EU preferential origin’ will be subject to audit and the exporter can, if HMRC are not satisfied with the evidence, disallow the origin. Although the exporter will not incur customs duties, it will be subject to penalty action and the customer could be issued with a customs assessment in its country for the full customs duty. It is important for businesses to have sufficient knowledge and understanding of Tariff Preference and Origin to minimise the risk of non-compliance.
3. Incorrect payment of customs duties By not understanding the duty liabilities of your imported goods, you may not be effectively managing your ‘landed’ costs. HMRC can issue customs debts up to three years after the import so this poses a significant risk of lost revenue, as these costs are unlikely to be transferred onto customers.
4. Incorrect claim for Import VAT Since Brexit there has been a significant increase in the use of the DDP Incoterm. To potentially minimise their risk, the customs agents have declared the UK buyer as the importer. Buyer’s who have agreed DDP Incoterms must check to confirm they have not incurred VAT, via Postponed Import VAT Accounting, as HMRC may raise assessments for non-reclaimable VAT as the buyer is not the owner of the goods at time of importation.
5. Lack of customs knowledge Many businesses who trade with the EU will have suddenly been subjected to additional customs controls on their cross border movements. In many cases, it was a matter of ‘get the goods through and worry about the costs later’. We recognise that there is a significant lack of experienced customs personnel in the UK and this has not gone unnoticed by HMRC who are targeting these ‘new importers’ to confirm compliance with customs legislation.
6. Temporary imports Where goods cross borders on loan, for exhibition or testing, it is critical that the use of the correct special procedure is determined otherwise there could be a duty, or worse, a VAT liability which will not be reclaimable. For construction equipment it is key to ensure that the correct person is declared as the importer and we recognise that this requires an understanding of the customs process and negotiation with the supplier to minimise any tax risks.