BREXIT will soon be upon us and on 31st
December 2020 as 2300Hrs, the UK will leave the EU.
Although even at this late stage much remains unclear, one
thing we do know is that whichever way this plays out, things are about to
change for us all and there is much to do for everyone to be ready for these
changes. It will be vital to understand how your sales and supply chains work,
and who is responsible for what. For example, will your European suppliers get
involved in the export customs process for your orders, and when selling to
your European clients, how they will handle the import customs requirements?
With this in mind Pharmafreight has prepared a list of
questions and answers, and other things to think about, to help your company
prepare for what lies ahead.
Buying or shipping from Europe
(imports)
- Under which Incoterm do you
purchase/use with your supplier(s), e.g. EXW, FCA, or even DAP?
If EXW (for a full list of Incoterms and their definitions see https://en.wikipedia.org/wiki/Incoterms), you are responsible for any customs action required in the origin country, and after BREXIT the UK will become a Third Country, meaning any purchases from the 27 EU Member States will be Exports, requiring some kind of customs action, e.g. customs export entry (C88). If your purchase your orders under FCA or DAP terms, your supplier is responsible for the customs paperwork.
- If you purchase your orders
EXW, have you planned with your freight forwarder or transport company to take
care of any customs export declarations or transit paperwork as required?
For
movements by Air, a customs export entry would need to be raised before the
shipment departs the origin airport, and a customs record would automatically
be raised by the UK receiving handling shed, which would then need to be
cleared through HMC’s computer system, CHIEF.
For
movements by road, a customs export entry and possibly transit paperwork linked
to a customs guarantee would need to be raised, to allow your shipment to
transit from the origin point through to the UK land border, e.g. Dover Port.
In
both instances Pharmafreight can offer local support in origin country to get
such paperwork raised, however this will involve speaking to your suppliers at
origin, and them giving authorisation for Pharmafreight to talk to Customs on
their behalf.
- What shipping documents will
be required to raise export paperwork and clear a shipment through UK Customs
(HMRC) upon arrival into the UK?
At a
basic level, your supplier will need to have its own EORI number for the export
process and provide an invoice which covers the transaction/product to be
shipped, e.g. the commercial invoice. Depending on the trade deal the UK
obtains other documents may eventually be needed, such as a certificate of
origin, however for the moment, only an invoice is required for standard
products, not under other regulatory controls, e.g. controlled drugs/animal
products.
Your
own company will also need its own EORI number (this number is shown on the C88
to HMRC to identify your company as the importer of record (IOR) in the UK, and
Pharmafreight will need to hold on file a Direct Representation authority from
your company, which authorises it to act on your behalf when talking to HMRC. (If
you have not already been asked to complete one of these forms please do get in
touch with us.)
- What if you buy your products
on a DAP basis from your EU supplier (delivered through to your door – taxes
unpaid)?
In
this case your supplier will be organising the transport from its door through
to yours. It is their responsibility to organise the customs export process and
documentation for the movement, however you would be responsible for the
customs clearance in the UK.
For
air movements, the shipment would arrive into a UK airport, again at which
point a customs record would be created by the airline carrier, and Pharmafreight
can clear the shipment through UK Customs in your name, using the shipment’s
invoice, and by holding a Direct Representation authority from your company.
You should encourage your suppliers to share flight details and copy AWBs with
you, so you can alert Pharmafreight to the shipment’s impending arrival into
the UK, avoiding possible storage charges at the airport.
For
road movements, the shipment would be most likely to arrive at a Short Sea port
such as Dover, at which point it can be cleared through UK Customs. HMRC is
advising that standard transactions can be cleared away from the border and you
have up to six months to raise a customs entry, however for larger companies
with multiple transactions, Pharmafreight would encourage customers to have
their shipments cleared upon arrival, rather than wait. Again, customers should
request truck arrival details for their orders, so when the truck does arrive at
Dover, a customs entry is waiting for it, so the truck does not get held up,
generating demurrage charges whilst the truck is delayed.
- What about the payment of
customs import duties and VAT?
Following the UK’s departure from, products will no longer be able to move freely between EU Member States in free circulation, and certain import taxes will now become due. The good news is that the vast majority of finished product pharmaceuticals are free from duty (this is still to be confirmed and is dependent on the trade deal which the UK secures with the EU), however if duties are payable e.g. you are importing an API, Pharmafreight would encourage you to open duty deferment account with HMRC (see https://www.gov.uk/guidance/setting-up-an-account-to-defer-duty-payments-when-you-import-goods).
Having
such an account allows you to put any duty amounts to be paid against this
account, so the shipment will clear UK Customs without an upfront payment to
HMRC of the owed amount, which can be paid by you at a later date. VAT can also
be put against your deferment account, however HMRC is introducing postponed
VAT accounting for next year, which means VAT will no longer be payable immediately
upon import, and such amounts can be reconciled via your company’s VAT return
process.
If
you do not have a customs deferment account, it may be possible to pay HMRC
direct using the FAS system, or use Pharmafreight’s own deferment account,
which is available for use at extra cost.
- Will shipments coming from
the Republic of Ireland be subject to the same controls?
Yes,
a customs export entry will need to be raised in Ireland, and an import entry
will be required upon arrival at the UK border, with any duties paid at that
time, or placed onto a customs deferment account, and vice versa for shipments
travelling into the Republic of Ireland.
If you are involved in shipping to and from Northern Ireland please also be aware of changes afoot for the way we will have to handle shipments to and from there, with some level of declarations required for there too (we would encourage you to sign up to TSS if you deal with Northern Ireland (see https://www.gov.uk/guidance/trader-support-service).
Selling/delivering
into Europe (exports)
- What
documents will you need to export products from the UK?
Just like when importing shipments, you will also need an
EORI number from HMRC to export shipments. This number is shown on the export
declaration form (C88), You will also need to provide Pharmafreight with the
commercial/proforma/shipping invoice covering the sale or movement. The invoice
should also show the relevant HS tariff code ( see https://www.gov.uk/trade-tariff)
which exactly defines what you are shipping, and also makes up part of the
export customs entry.
- What
Incoterms do your sell under to your EU customers, or trade under with your
European partners?
Again, if you trade using EXW, it is the responsibility of
your buyer to take care of the customs export entry – which in theory they
would do by using their own freight forwarder or transport company, however in
recent times the UK’s MHRA has taken a stance against UK WDA holders selling
licensed medicinal products under EXW, preferring FCA (Free Carrier) as that
requires the seller to take responsibility for the export customs work,
ensuring the licence holder knows where the product is being exported to.
As part of an export shipment process under FCA and DAP
terms Pharmafreight would undertake the customs entry for its customer, as long
as it has a Direct Representation form in place from the shipper.
- How
will the customs process differ between movements via road and air?
By Road – over the last two decades, for
movements into Europe there has been a remarkable shift from airfreight over to
road freight, with the vast majority of EU trade moving on trucks between the
UK and the EU Member States. Depending on the destination country, after BREXIT
it may be necessary to use the customs road system NCTS (New Computerised
Transit System) to raise customs entries and transit paperwork (T1 forms) to
cover the moment under the Common Transit Convention (CTC). Such entries must
be backed by a transit guarantee, lodged with HMRC, to ensure that if a
shipment does not get discharged properly from under its T1, any potential
taxes (import duties etc.) are paid to customs, designed to prevent the
shipment being fraudulently re-routed to another country and delivered there.
For a charge Pharmafreight can raise all the customs paperwork required for a road movement, as well as provide the transit guarantee for any T documents needed. Its customer will need to sign a guarantee liability form to gain access to use its transit guarantee, taking on the liability for its use. To avoid potentially high costs to use Pharmafreight’s transit guarantee, clients are encouraged to obtain their own transit guarantee from HMRC (see https://www.gov.uk/guidance/import-and-export-customs-comprehensive-guarantees-ccgs)
By air – in some ways airfreight will be
somewhat easier, with an export entry being raised in CHIEF prior to departure
of the aircraft, and a customs entry will be needed upon arrival at
destination. Again, who conducts these will be dependent on the Incoterm your
company sells at.
- Will
you need a copy of the customs entry for your records?
Just like any shipments you send to Third Countries now, the
MHRA and HMRC would expect you to keep appropriate records relating to exports,
and a copy of the C88 raised on your behalf should be obtained from
Pharmafreight, or the freight agent which undertakes the export entry on your
behalf (e.g. under EXW).
