New customs regulations are set to come in to force from 1 May 2016, which will have a dramatic impact on the process of clearance for goods transported internationally.
The Union Customs Code
The new European Union Custom Code (UCC) has been designed to streamline customs legislation globally, and, upon implementation, will provide a unified process for over 80% of countries.
UCC has been devised with three main objectives in mind:
- The facilitation of safe and legitimate trade.
- A paperless environment for customs and global trade.
- The harmonisation, standardisation and simplification of customs procedures and controls.
Replacing existing customs codes, there will be significant changes with regards to duties payable under the new UCC, specifically with regards to royalties and licence fees. Current customs legislations allow duties to be paid against such items under the first sale for export valuation. However, under the new UCC regulations, this will be abolished and duties will be payable against the transaction value based on the sale. In other words, the value of the goods when sold by the retailer to the end consumer, as opposed to the value when imported from the manufacturer.
For all companies trading globally, the biggest effect of the new UCC will be the apparent necessity for them to trade with Authorised Economic Operator (AEO) status.
What is AEO?
AEO (Authorised Economic Operator) is an internationally recognised accreditation issued by customs. Holders of the AEO status are deemed to meet supply chain security standards, and are privy to access certain simplified customs procedures.
What effect will the new UCC regulations have on companies that are not AEO approved?
Within the current customs system, AEO has been beneficial to those companies who have held the status, in getting faster customs clearance. Whilst the requirement for a company to hold the Authorised Economic Operator (AEO) certification will still not be mandatory, the impact upon companies not operating under the status could cause significant issues within their supply chains.
Under the revised AEO status, companies without accreditation will require large financial commitments to cover the hefty mandatory guarantees that will be applied for both actual and potential Customs import duties that could be accrued through their trade processes. In short, importers and exporters using, or intending to use simplified customs procedures such as inward processing relief, customs warehousing, temporary storage, temporary admission or community transit will have to fulfil AEO criteria
It is expected that companies that are not AEO accredited after 1 May 2016 may also face potentially lengthy delays in gaining clearance on items entering the UK, as additional, more rigorous checks are set to be implemented at border control; delays that could subsequently lead to an increase in rent at ports along with increased costs for clearance of goods.
Uptake for AEO status has been slower in UK than other countries but with new regulations, and as AEO becomes more widely spread, more companies are insisting their suppliers are AEO accredited.
What is the Solution?
So whilst it’s apparent that trading without AEO will become a very difficult proposition, the process for a business to become AEO accredited can take time. Gathering of evidence to support the application can be time consuming and operationally can be impractical when already busy with elements of the day to day running of the business.
What’s more, the criteria to meet the AEO status is set to become more complex. An in-depth analysis of the company business model will be required, with evidence of compliance of all taxes for the business for the past 3 years.