With many businesses experiencing a fall in sales, emphasis is being placed on efficiency drives and cost-cutting exercises in preparation for the post-recession recovery.

We understand that finance executives have a balanced scorecard including:

• Cutting costs
  
• Improving competitiveness
  
• Improving cash-flow
  
• Minimising risk

You are constantly looking to identify and implement projects to deliver against these objectives. Common tactics include reviewing supplier arrangements, refinancing with the banks, working on effective tax structures and hedging currency movements to name a few examples.

Customs planning is another tactic which can be used to deliver the above goals. In fact, there are two clear reasons for looking in to this area again, namely:

• Customs cost savings are often easier to realise than savings in other areas because they are looked at less frequently and can often be implemented with minimal co-operation from other parties;
  
• Changes in reviewing supplier arrangements, working on tax strategies, hedging etc are likely to have wider customs implications, some positive, some negative.

We have outlined below five key methods to immediately cut customs costs and inject cash into your business and highlighted some common business tactics which will give rise to customs issues.

Cutting customs costs

Review your customs classification or commodity codes

The customs tariff includes over 16,000 lines and although the difference in two classifications can be wafer thin the duty rate differences can be significant.

Stripping non-dutiable elements

The customs regulations set out a number of items you can strip out of your customs value and reduce your duty costs including buying commissions, finance charges, post import transport etc. The European Courts have issued a number of decisions that impact on the qualifying conditions and how some of these factors can be applied with retrospective effect.

Improving cash-flow through deferment schemes and customs warehousing

Any improvement in cash-flow management reduces the need to call on lines of credit, which are increasingly hard to come by or increasingly costly. Duty deferment allows you to pay customs duty and import VAT on the 10th day of the month following release to free circulation. Furthermore, the associated guarantee can be greatly reduced by ensuring account limits are set at the appropriate amount and applying for an exemption from guaranteeing the import VAT element.

Trade Agreements

The EU has put in place Trade Agreements with over 200 counties which allow qualifying goods to benefit from reduced and often zero rates of duty. Trade statistics show that a significant number of goods which could benefit under these arrangements are failing to be claimed, leaving significant sums on the table.

Duty Relief Schemes

Customs law specifically provides for a number of duty relief schemes and again many businesses are not taking advantage of these.

The above examples are just a small sample of over 170 tried and tested planning ideas that we have developed and can implement to your advantage.

Customs Implications of Other Cost Cutting Strategies

When businesses implement new strategies and tactics these often give rise to unexpected customs duty implications. A proactive approach can ensure that these tactics give rise to additional customs cost savings or at least do not result in additional customs duty costs. For example:

Working with Suppliers

Rebates with suppliers. Many businesses have opened up agreements entered into when the trade outlook was significantly better and have negotiated more favourable trade terms and prices. These rebates may be reflected through debit or credit notes rather than being reflected on the invoices. In these instances, customs duty is likely to be paid on the old higher value, leading to potential overpayments. Businesses may be able to recover these overpayments and reduce ongoing costs.

First Sale. Businesses are more likely to find suppliers willing to work with them to disclose earlier sales in the supply chain and strip subsequent mark-ups from the customs value. This allows for a reduction in transaction costs without impacting upon the amount settled between the parties. In effect, the EU is subsidising price reductions.

Hedging

Many businesses are finding it more essential to hedge exchange rate transactions as margins tighten. We are finding that pre-purchased foreign currencies are increasingly giving better rates than the customs spot rate used to convert foreign currencies to sterling for duty purposes. It may be possible to obtain HMRC agreement to use your pre-purchased rate rather than customs exchange rate and realise significant cost savings.

Tax Restructuring

Businesses looking at tax restructuring should also think about the customs implications of these acts and whether they give rise to potential increased duty demands of further savings. The introduction of toll manufacturing, consignment or call off arrangements and switching from branch to subsidiary (or vice versa) all have customs implications.

Taking Steps to Realise these Benefits- Now!

Many of the planning issues set out above have retrospective effect going back up to three years, which means that any initial benefits can be significant! Quick action will ensure potential benefits do not slip away.

We are currently working with a number of businesses to quickly identify and realise customs duty savings and make significant duty reclaims. We offer a number of fee structures including success- based fees whereby we get paid out of savings and reclaims.

Call us now on 01905 619229 or e-mail rob@internationaltradesolutions to arrange a free of charge meeting to explore how your company can be realising the benefits of customs planning.