54% of UK imports come from the EU, at a value of £345 billion. The UK border will become the literal frontier of the UK's post-transition trade agenda, with disruption for supply chains a serious risk. Businesses will need to adapt to new processes and, in many cases, apply new import tariffs for imported goods.
Key challenges for business
How will the rules for importing from the EU to GB change after transition?
Customs, declarations and duties
The government has introduced a new staged approach to imports from the EU as of January 2021 that will apply both in a deal or no deal scenario. While there will still be considerable changes that importers will need to prepare for, the Border Operating Model introduces some of the most significant changes in three stages:
- From January 2021:
- Traders importing standard goods, covering everything from clothes to electronics, will need to prepare for basic customs requirements, such as keeping sufficient records of imported goods.
- Traders will also need to consider how they account for and pay VAT on imported goods. Traders will then have up to six months to complete customs declarations. While tariffs will be payable where due on relevant goods, payments can be deferred until the customs declaration has been made.
- UK safety and security declarations will not be required on imports for the first six months. Standard customs declarations will be needed from this date for controlled goods and excise goods like alcohol and tobacco products.
- There will also be physical checks at the point of destination (or other approved premises) on all high-risk live animals and plants, and a requirement to pre-notify for certain movements. However, they will not be required to enter GB via a Border Control Post (BCP).
- Export declarations and UK exit safety and security declarations will be required for all goods.
- Traders importing and exporting goods using the Common Transit Convention will need to follow all the transit procedures. These will not be introduced in stages.
- The goods vehicle movement service (GVMS) will be introduced from January for transit movements only.
- Companies importing goods will need to adapt to new import tariff schedules, applying the UK’s new global tariff (UKGT) for all markets where the UK does not a preferential trading deal and checking the terms of any new preferential trade deal, including with the EU.
- From April 2021:
- All products of animal origin (POAO) – for example meat, honey, milk or egg products, and all regulated plants and plant products – will require pre-notification and the relevant health documentation.
- Any physical checks will continue to be conducted at the point of destination until July 2021.
- From July 2021:
- Traders moving any goods will have to make full customs declarations at the point of importation and pay relevant tariffs.
- Full safety and security declarations will be required, while commodities subject to sanitary and phytosanitary (SPS) controls will have to be presented to BCPs. There will also be an increase in physical checks and the taking of samples.
- SPS checks for animals, plants and their products will take place at GB Border Control Posts and not at the destination.
- The GVMS will be in place for all imports, exports and transit movements at border locations which have chosen to introduce it.
After July, the trading conditions will default to the negotiated EU/UK FTA or no deal depending on the outcome of the negotiations.
From 1st January, VAT will be levied on imports of goods from the EU, following the same rates and structures as are applied to RoW imports. UK VAT registered traders will be able, but not normally compelled, to account for import VAT on their VAT return by using Postponed VAT Accounting. However, UK VAT registered traders who import non-controlled goods and either defer their supplementary customs declaration; or use Simplified Customs Declaration Procedures where authorised, and make an Entry in Declarants Records, must use Postponed VAT Accounting. Non-VAT registered traders have the same options available to report and pay import VAT as they do for customs duties. VAT treatment of goods imported in consignments not exceeding £135 in value will be treated differently to those goods in consignments exceeding £135.
In a no deal, imports from the EU will face tariffs when they enter the UK border. Businesses will have to adapt to new import tariffs under the new UK Global Tariff (UKGT) which comes into force from January 2021. The UKGT will apply to all countries where the UK doesn’t have a preferential trade deal, so companies will need terms of trade with all markets, including the EU.
Previous no deal preparations were based on the UK’s ‘temporary’ most favoured nation (MFN) tariff schedule published in March 2019. The new tariff is significantly different, so companies’ modelling assessments will now need to be refreshed. While there are some advantages to the new tariff rates (see below) they will represent a change and therefore require a process of adaptation.
The UKGT will result in 60% of relevant imports into the UK being tariff free (as compared to 47% under the EU’s Common External Tariff and 88% under the UK’s previous no-deal tariffs). Its key features are:
- It simplifies 40.2% of tariff lines by rounding tariffs down and eliminating low and so-called nuisance tariffs
- It eliminates tariffs on certain products where UK domestic production is zero, or very low, for example, cotton, textile fibres and woo
- It scraps the Meursing table, which is currently used to determine tariff codes on foodstuffs. This should result in a significant reduction in the complexity faced by businesses in determining the rate of customs duty applicable to over 13,000 goods
- It retains high tariffs on sectors the EU wishes to protect, including the agricultural, automotive and ceramics industries by aligning these tariffs broadly to the EU Common External Tariff
- It will impose high tariffs on agricultural imports, e.g. up to 12% + £254GBP/100kg on beef, and £139GBP/100kg on cheese.
- It leaves imports of finished pharmaceutical products and most medical devices tariff free, but applies a duty imposition of 6% on Active Pharmaceutical Ingredients (APIs) and key chemicals to produce APIs.
- It imposes a temporary zero tariff rate (and VAT waiver) to certain products used to protect against Covid-19 including Personal Protective Equipment (PPE), medical devices, disinfectant, and medical supplies from non-EU countries.
- It applies 0% rate of customs duty to imports of aircraft, helicopters and many aircraft parts.
- It cuts tariffs on over 100 low carbon products.
It duplicates the EU’s Generalised Scheme of Preferences so that products from the poorest countries will continue to attract no tariffs to protect their trade.
What impact could the changes to importing rules have on business?
As the UK government has put these measures for EU imports in place unilaterally, they will apply in both a deal and a no deal scenario. Though this gives some additional time and certainty for business to be able to prepare, there will still be significant additional paperwork and resource that businesses will have to plan for 1 January 2021.
Even so, there is still a high probability that a no deal scenario will slow the flow of goods at the UK border and that the subsequent impact of delays on businesses is of most concern are in terms of cashflow, just-in-time supply chains and perishable goods.
Key questions for business to consider
Continuity plans for the end of the transition period will be unique to every organisation. However, there are some key questions your transition plan should answer to ensure the major issues are covered.
- Do you know your GB Economic Operator Registration and Identification (EORI) number?
- Does your business understand the impact of potential delays at the border on your supply chain, particularly if you import perishable goods or use a just-in-time supply chain?
- Have you spoken to your customs broker, freight forwarder or logistics provider about how to make import declarations, or if you don’t have one, have you explored engaging one?
- Have you considered whether you can stockpile any important products, to avoid having to import in the case of a no deal?
- Have you investigated whether you are eligible to register for Transitional Simplified Procedures (TSP) to import from the EU?
- Have you familiarised yourself with the VAT rules for importing from the EU and considered any cash flow implications?
- Have you considered how the UK’s no deal tariffs may impact the goods you import, whether you can take advantage of cheaper imports from outside the EU or whether you might face new competition from abroad?
- Have you set up a duty deferment account if you import regularly?
- Have you analysed the UK’s Global Tariff (UKGT) to understand the potential impact of its application to goods that you import into the UK and checked whether the country you are importing from has a preferential trade deal with the UK.
Want the highlights? Read our Tariffs advice document
Other resources to help you plan
- Explore the government’s advice for getting ready to import, and specific advice on bringing goods through roll-on-roll-off ports like Dover and the Channel Tunnel
- Find out your Economic Operator Registration and Identification (EORI) number This will make it easier to move goods into or out of the EU in a no deal scenario
- Read this mythbuster on EORI for more information
- Sign up for Transitional Simplified Procedures (TSP) for imported goods. You will need an EORI number to do this
- Explore the grants available if your business will have to complete customs
- Check when you’ll need to account for import VAT, and how to check UK VAT numbers and claim VAT refunds. Check the rates of customs duties (tariffs) that will be applied to all imports where there is no preferential trade agreement here For a full list of countries where the UK has rolled over existing trade agreements check here
- If your goods cross into Northern Ireland from the Republic of Ireland, read the UK government’s guidance on how it intends to avoid a border.
If you operate your own cross-border road haulage, ensure you have the right licenses, permits, travel insurance and registration documents by following the guidance. Alternatively, check out the advice provided by the Freight Transport Association, and the advice provided by the Road Haulage Association