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Most businesses would agree with the importance of reducing inbound costs and the likelihood of unexpected additional tax demands and penalties. However, in our experience, very few businesses do actually review their customs functions or are even aware of the full extent of their legal obligations. This failure is usually borne out of lack of the required level of customs knowledge or resources within the business.
Modern customs regulations are complex and hard to understand for even the biggest players in International Trade. The European Customs Code and Implementing Regulations are cumbersome and on the whole inaccessible to the ordinary importer. However, the obligations that they impose on businesses are significant as are the obligations on HMRC to ensure that businesses are complying with their legal obligations and paying the correct duty owed.
Most businesses delegate much of the customs work to third party freight forwarders and in-house staff are forced to manage urgent daily customs issues as part of their often broader areas of responsibility.
Until now, customs law has often been relegated to the periphery of the tax-planning radar, however, the spotlight is very much now on Customs Law and Customs Compliance.
Spotlight now on Customs Compliance
Customs planning is very much being brought into focus due to three particular developments:
All three developments will oblige importers to review the procedures they are operating and to streamline and standardise them.
Consequences of poor customs compliance
HM Revenues & Customs use audit-based controls to check whether you meet your customs obligations with import transactions remaining open for three years. As well as the "traditional" consequences of failed compliance, you may face:
- Additional duty demands
- Penalties
- Delays in customs clearance and;
- A poor relationship with HMRC, suppliers, clients and investors.
Businesses may also face:
- Personal liability and fines for Senior Accounting Officers and;
- Being precluded from obtaining Authorised Economic Operator status and being blacklisted for a period of three years.
Many businesses are looking at customs compliance as their potential Achilles heal in maintaining complaint tax systems because it is poorly understood in comparison to other areas such as corporation tax, PAYE, VAT etc.
How do International Trade Solutions go about assessing my customs functions?
We focus on the following two inter-related areas when carrying out an assessment of your customs function:
- Your systems and procedures
- The accuracy of the key factors that determine your duty costs
An HMRC audit will also look to cover these two areas but with a focus on spotting risks and underpayments and not cost savings, reclaims and administrative efficiencies.
Reviewing your processes: Who and How
The first area that we will examine is a general understanding of where customs responsibilities lie within your business. This includes an examination of:
- Who has overall responsibility for customs compliance?
- How well documented and thought out are your customs procedures?
- What qualifications, experience and resources do those carrying out your customs compliance have?
- What level of checking is carried out and what are these checks
- Where are the main customs costs and compliance risks located?
Customs functions within a company are very rarely centralised within one department and often overlap into different areas such as finance, logistics, purchasing etc. As a result, we often find that there is no clear chain of responsibility or even an awareness of who is doing what, in some cases we discover that nobody is doing anything that they should be.
Furthermore, we often find that checks are not being conducted or if they are, they are not being conducted in the right places/at the right time. We have also found that transparency within a company has been lacking and problems that could have been easily rectified have escalated into major issues simply because the person who could have resolved it was not aware that the problem existed!
Finally, we need to establish whether there is a comprehensive filing system for your customs returns and a clear audit trail that HMRC can follow when they conduct a customs audit. A well thought out system will enable you to minimise the cost and disruption associated with a customs audit as well as providing you with the data to see the impact of business decisions on your customs costs and compliance risks.
Companies often delegate their responsibilities to freight forwarders. However, the company is still regarded as the importer and is thus legally accountable for any mistakes made on their behalf. It is crucial that all paperwork is sent to the company so they can check & file it correctly. For an example of how this would work in practice please click here (PDF 218kb).
Reviewing the building blocks
Customs planning can be broken down into 4 ‘building blocks’, each with its own complex set of rules and regulations, they are:
- Customs Classification
- The Origin of goods
- Customs Valuation
- Duty Relief Procedures
Each building block is analysed with specific questions to establish the risks and the potential duty savings that can be made.
Our experience and practice means that we know what questions to ask, when to ask them, how they are relevant and apply to your business as well as how to answer them. For an example of some of the questions we ask in each area please click here (PDF 136kb).
We invest heavily in resources and training to quickly, accurately and comprehensively assess the accuracy of your customs declarations and to highlight opportunities for increasing your competitiveness. Our knowledge database includes:
- The most recent and most significant ECJ and Tribunal rulings,
- European Regulations,
- Customs Code Committee papers and decisions
- Specialist articles and materials,
- Ideas and issues arising from hundreds of customs projects over the last 15 years
As we focus exclusively on Customs Law, our fingers are very much on the pulse of the latest developments in European and International Trade and the best ways to help your business
The Report & Action Plan
As part of our review we will provide you with a report highlighting any material risks or cost-saving opportunities and will provide you with an action plan of how best to proceed with the issues that have been raised. We then attend a de-briefing meeting so you have the opportunity to address any points of uncertainty and get our candid opinion on how best to proceed.
You can then make a decision on whether to implement the action plan yourselves or engage us on specific projects with the comfort of knowing likely benefits, risks, costs and timeframes.
We now have a better understanding of your business and can respond rapidly to any queries you have but also look out for developments that may impact on you. We invest in our ongoing relationship by offering free regular update meetings to keep abreast of the issues you face and outline current developments.
Contact Us
International Trade Solutions has an enviable success rate as well as excellent relations with our clients, many of whom have engaged us multiple times over a long period of time.
If you are interested in exploring how ITS may be able to assist your business please give us a call on (01905) 619229 or email us at
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