Currently, the United Kingdom is due to leave the European Union Customs Union after the end of the transition period on the 31st of December 2020. Although the new trading agreement has yet to be agreed, let alone published, there are likely to be substantial changes to how trade is regulated between the EU 27 countries and the United Kingdom.
The UK government has expressed a preference for a Canadian style deal, and by examining the customs arrangements with other countries like Norway and Switzerland who have a close arrangement with the EU but are not part of the EU, we have put together this guide of likely changes.
What impact on the UK businesses?
While this will depend on any final deal (or no deal), it is estimated that 180,000 UK businesses will be required to start adding customs forms to their exports to the EU and EU firms, including those in the Republic of Ireland, will likewise be required to generate customs forms for exports to the UK. The total cost of this is estimated to be £4 billion a year in customs clearance costs alone. Getting the right systems in place for export will be crucial to keep your exports flowing.
1. What will you need before you export?
Act on these now as you will need them for exporting outside of the EU currently, but will likely need them for EU exports next year.
What is an EORI Number and how do I get one?
Firstly, if you are exporting or importing commercially, you will require an EORI Number. EORI or Economic Operators Registration and Identification number, is a unique identifier of an exporter or importer. The application will take a few days to be processed but could get much busier towards the end of the year. Use the link above to start your application. Currently not required for exports to the EU, they most likely will be after the end of the transition period.
What are HS tariff codes?
Almost all goods will have a Harmonisation Schedule, known as a Commodity Code. These 6-10 digit codes are very detailed and very specific. A pair of jeans with 100% cotton will have a different code to one with 85% cotton and 15% Polyester.
You can use the government website to find HS tariff codes for your products.
Despatch Cloud can store all the HS tariff codes against each SKU, you can upload and download using a CSV or manually input and edit the HS tariff code. We can use this to generate your customs forms and commercial invoices required for export to the EU.
2. Customs forms for exporting to the EU
As the UK exits the customs zone, then exports and imports which did not previously require any documentation will now require it. Here is the Despatch Cloud guide to what is likely to be needed.
CN22 customs forms for trade with the EU
The CN22 form is a customs form for sending goods internationally and once the UK is out of the Customs Union, it is likely that any low value items will require one of these on the package being sent. You can use a CN22 for items up to the value of £270, using the international postal service and some couriers, over that amount you will need to use a CN23.
Some couriers will require a commercial invoice or a CN23 no matter what the value.
CN23 Custom forms for trade with the EU
For amounts over £270, you are required to use a CN23 form for post services although you can use it for lower amounts. The CN23 contains more detail than the CN22 and is the standard that Despatch Cloud processes from Royal Mail. To remind you, CN23s are only for post services, couriers normally require a commercial invoice.
Commercial invoices for trade with the EU
It is highly likely that any new trade deal being a free trade deal and not a customs union will require all orders to have a commercial invoice if you are sending by couriers. A commercial invoice needs to include all the details for customs clearance. This includes:
- The name of the sender and address and contact details,
- The name of the receiver and their address,
- Date of invoice (shipping date),
- Description of each item of goods being sent this is to enable the correct Customs Tariff Classification (SKU, EAN or part numbers are not sufficient to describe the products). If there is more than one item, they will all need to be listed,
- Sender’s VAT number (if applicable),
- Country of origin (which country were the goods manufactured in) again, if there are multiple items, you will need to list these out,
- HS tariff code, also known as a “commodity code”,
- Quantity of each item,
- The currency in which the value of the goods is expressed,
- Total value of all items covered by the invoice,
- Gross weight (inc. packaging), net weight (exc. packaging) and number of items,
- The following statement must appear “I declare all of the information to be true to the best of my knowledge”,
- The invoice must be signed and dated. Electronic signatures are acceptable.
Consequences for not having the correct customs for sending exports to the EU?
The package will either be opened and inspected (as can happen randomly) and an assessment done, or the package may simply be returned. At best, you are looking at a delay and some couriers impose additional charges. We would advise you to get your package right the first time for the best possible cross border experience. This is where Despatch Cloud can help as we link your sales channels directly with your couriers.
3. Other questions about post-transition period
These are the likely outcomes, though as the end agreements are not in place, there are likely to be changes to this. We will update you as we receive more information.
Customs clearance after Brexit
As the UK was part of the EU customs union, while a member of the EU, companies in the UK did not need to clear customs when sending goods to other EU countries. This is almost certainly going to change. Goods will need to clear customs and while postal items under a certain value will not be charged as happens with other low value exemptions, larger value shipments will need to pay for customs clearance. Surcharges may be levied where the incorrect documentation has been supplied.
Customs duty and VAT
A free trade area will likely remove customs duty from most if not all products, unless there is No Deal in which case WTO duty rates will apply.
However, as a third party country, EU countries will levy their countries rate of VAT on the cost of goods coming into the EU. The net effect on UK Business to Business (B2B) export companies will be limited as exports are not taxed under UK VAT laws and all EU countries are very likely to be considered an export country. On the other hand, any wholesale customer will be hit with VAT on the export as soon as the goods arrive into the EU, rather than later.
The situation with Business to Consumer (B2C) may be a little different. UK companies should not levy VAT on the items sold, but VAT may be collected by the country where the goods are going to. In Norway, they are very keen to collect the VAT and have a low threshold before VAT is levied. Other countries are more flexible. The same will be true for imports into the UK.
Even if there is a comprehensive free trade agreement, export companies should be aware that goods manufactured outside of the EU, and then exported to the EU may attract additional duty payments. Documenting the origin of goods will therefore be important for any company looking to export.
Will there be restrictions on goods exported to Europe from the UK?
Unlikely to be restrictions, but there will be additional documentation requirements on items being exported, and as goods entering the EU from the UK will need customs clearance, there may be delays. Certain industries such as food may have restrictions, but no agreement has been made yet. Ensuring that you are able to produce the customs documentation automatically will be important to avoid disruption and manage costs.
Currently, the United Kingdom maintains the same regulations as the EU. When the UK leaves the transition period, then the EU will likely require items exported to the EU to meet EU standards (and imports to meet UK standards). Documentation to prove the products meet the relevant standards may be required.
What software can help me with customers clearance with the EU?
With the ability to automate the generation of all the custom documents you need, including CN23 custom forms and commercial invoices, Despatch Cloud can help your business minimise disruption to your exports to Europe. Come and talk to us about how we can keep your business efficient.
Is there software which can generate CN23 or commercial invoices?
Yes, there are commercial software packages available. One of the most important aspects is to automate all the information required on the form, so that all the information required by the custom forms or commercial invoice is pulled in automatically. This saves a lot of time and importantly reduces mistakes and processing errors.
How can I automatically generate the customs forms from my sales channels?
Most of the data that is needed to generate either a CN23 or a commercial invoice is already on your sales channel (such as Shopify, Amazon, Magento, WooCommerce, eBay, Bluepark, EKM, Fruugo, OnBuy, Etsy, Big Commerce, Volusion, Channel Advisor, Cube Cart). Despatch Cloud integrates with many sales channels to draw down all the data which the customs forms or commercial invoice require. We can auto generate all the customs forms you need, or you can design your own and generate it though our system.
Part of the order processing system will print the courier or post labels with the name, address and the stamp imprint at the same time we can detect if an order needs a customs form (either a commercial invoice or a CN23) and print that out at the same time.
What about trade between the rest of the UK and Northern Ireland?
This is likely to change, but we don’t have the final information yet. At this point, it does seem possible that customs forms will be required for sending items from Northern Ireland to the rest of the United Kingdom and vice versa. Customs forms may not be required between Northern Ireland and the Republic of Ireland.
Despatch Cloud are the leading experts on integrating sales channels to postal and courier services, including auto generating the customs forms you will need. We are working to adapt to all and any changes which the Brexit transition, not just for UK companies seeking to export but also EU companies who want to import into the UK, especially those in the Republic of Ireland.
Come and talk to us today about your needs and how we can help you get your export documentation right the first time.
Commercial Invoice Software
Despatch Cloud can print commercial invoices for exporting to the UK, exporting from the UK to the EU and the rest of the world. We offer a flexible solution which can carry bespoke information. We integrate with your sales channels to automate the entire process of generating the commercial invoices you need for your exports.BACK TO BLOG