Union Customs Code (UCC)Key Changes and Business Impacts

December 2015

Introduction

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This pack summarises the key changes and business impacts brought about by the new EU customs legislation which goes live on 1 May 2016. The aim is to provide a snapshot of actions required and details of any additional tangible costs to be incurred by businesses so that these can be built into budgets. NB it does not cover all changes, merely those likely to be of broadest relevance to businesses

The pack is split into the following key areas:

Reliefs (now called Special Procedures) Guarantees Procedures Ad Hoc inc AEO

Special Procedures(1)- General

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5 years will be the typical validity period of an authorisation (other

than those that are open ended such as

warehousing). Need to justify 5 yr period

however

At least 30 days notice required for applications for reliefs, 60 days for warehousing. Applying for a

new relief or reauthorisation before 1 April 2016 (or 1 March 2016 for warehousing) means the old

rules will apply (no guarantee required). Applications after this date will be under new rules

(guarantee required).

Current authorisations continue to be

valid and subject to the old rules until they expire – but

by May 2019 at the latest

NB it is highly likely HMRC will become

resource constrained so businesses should ensure they apply as early as possible and

provide as much detail as possible to facilitate processing

Special Procedures(2)- Regimes

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SP-1 – End Use

SP-2 Customs Warehousing

• New requirement to complete Bills of Discharge (a declaration) when goods move to end use – wef 1 May 2016 in all cases - increased compliance cost requiring additional internal resource or if outsourced, increased external cost

• Military end use relief can only be used by MoD (or EU equivalent in other MS) – sub-contractors will need to use IP once existing authorisations expire and will receive a new authorisation # to be used on entries post 1 May. Need to be EU established for IP which may cause issues for the sector given typical contractual structures and entities

• Remote retail sales to be permitted from warehouse – to enable etailers to sell from bonded warehouse stock (previously not allowed due to requirement to clear to home use THEN sell to customer - for etailing, sale takes place BEFORE the stock is picked

• Requirement to stipulate physical warehouse location for Type E (virtual)

* Nb ‘Reliefs’ section to be read in conjunction with guarantees section for key financial impacts

Special Procedures (3)- Regimes

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SP-4 – Outward Processing relief

SP-5 – Temporary Admission

• No material changes (other than guarantees)

• Goods being imported prior to 1 May 2016 under TA relief are discharged from the relief under the old rules

• Merges IP (formerly IPR) and PCC – no longer a requirement to export which provides additional cashflow benefits for goods being processed which will remain in UK. Compensatory interest will no longer apply on diversions to home use

• Existing PCC authorisations become invalid 30 April and authorised businesses will receive a new IP authorisation #. The new UCC rules will apply on reauthorisation or by 30 April 2019 at the lates

• Simplified IP (where relief is obtained through the import entry rather than an authorisation can only be used 3xs yr (current 10xs)

• IP Drawback regime withdrawn wef 1 May 2016

SP-3 Inward Processing (IP)

Guarantees – Summary of Key Impacts

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Current RulesRequired only for:• deferment accounts (2xs actual duty and import VAT liability unless SIVA approved)•Temporary Admission•Transit

UCC RulesRequired for ‘Actual’ and ‘Potential’ Liabilities:CCG (customs comprehensive guarantees) – to cover all of the below of relevance to the business•deferment accounts (2xs actual duty. Import VAT only if non EU established unless SIVA approved)•‘potential‘ debts for all reliefs and temporary storage (inc customs warehousing)•For potential, debts, potential alternative of JCLs (joint contractual liabilities) – third party (non financial institution) acts as guarantor

Reduced guarantees if AEOC

(see below)

Guarantees – Finer Detail

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• Businesses currently using a relief which expires after 1 May 2016 will need to provide a guarantee for ‘potential’ debts to be reauthorised. The potential debt is based on the amount of import VAT (see next slide however) and duty payable if a relief were not used. This figure will need to be agreed with HMRC and an application form submitted to have the guarantee level calculated. Forms not expected to be available until March 2016 which leaves little time to make arrangements before 1 May 2016

• Being AEOC (or F) approved or standard (Authorised Economic Operator) leads to a 70% reduction for ‘actual’ guarantees and 30%, 50% reduction or full waiver for ‘potential’ guarantees. No further guidance currently on how this reduction is determined by HMRC. The published checklist for HMRC officers focuses on benchmarking the business against AEOC criteria but does not detail how a decision is made on a 30% versus 50% versus full waiver. Businesses should therefore budget for guarantee amounts on the worst case scenario of a 70% reduction if they are AEOC and no reduction if they are not

• Deferment – if currently authorised and make no ‘substantial changes eg no new CPC codes used’, old rules apply until May 2019. Otherwise need to reapply and new rules apply (CCG)

• List of approved guarantors now publicly available

Guarantees – Import VAT

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‘Actual’ debts

(deferment a/c)

‘Potential’ debts

(special procedures

etc)

• Guarantee required for import VAT unless SIVA authorised (regardless of whether EU established)

• Authorisation for SIVA post 1 May 2016 requires AEOC/F standards or approval

• Existing SIVA authorisations run to 30 April ‘19 unless circumstances change and reauthorisation is required

• No guarantee required for import VAT if EU established (unless authorisation covers more than one Member State)

• EU establishment generally required to use special procedures anyway

• Usual VAT tests to prove establishment (business premises with staff, registered company or branch etc)

Procedures – Key Changes

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Changes to Pref Origin

declarations but not until 2017

Simplified dataset for T1

declarations but not until 2020

Temporary Storage provisions will need to be AEOC /F in future. This is mainly relevant to freight

forwarders/clearing agents. 90 day clock for TS will start ticking again

on 1 May 16

Some positives but generally less immediate change

AEO – Tangible Benefits

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UCC finally presents businesses with tangible benefits in the form of guarantee waivers and reductions. However guarantees were not required for ‘potential’ debts previously so this is more of a stick than carrot approach

Existing AEOCs and AEOFs will be required to demonstrate they are appropriately trained in the relevant controls associated with effective customs duty management. However this will not need to be demonstrated immediately but as part of formal ongoing monitoring (by 1 May 2019 at latest). The AEO authorisation is open ended but ongoing

monitoring effectively means at the re-audit stage

Other Changes

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• Broadening of scope of royalties being included in customs valuation• If royalties cannot be accurately allocated to a specific import (eg where

annual royalty amounts are paid), it will be necessary to apply to HMRC for a simplification methodology

• First Sale for Export valuation provisions will cease on 1 May 2016 unless there is a binding contract in place showing the values

• From 1 May 16 changes to Binding Information processes (formerly BTIs) – now only valid for 3 years (previously 6) and the decision is binding on the decision holder from 1 May 2016

Contact Details

Julie ParkManaging director VAT and customs

duty

Direct dial: 0208 977 3228Email: julie.park@thevatconsultancy.com

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