Ultimate Guide to New EU Customs Rules & Rules of Origin

Trading with the EU? Prepare now to avoid frustrating customs delays and extra costs

From January 1st 2022, moving goods between the UK and EU will involve more paperwork and complexity than before – changes that could lead to frustrating delays, additional charges and duties.

Rules of Origin

Under the terms of the UK-EU Trade and Cooperation Agreement (TCA) agreement goods moving between the UK and EU could do so tariff-free provided they are classed as being of ‘UK’ or ‘EU’ origin. Origin being defined as where the goods have been produced or manufactured, not where they have been shipped from or to.

What’s Changing?

Because the rules around ‘origin’ are so complex and the guidelines were published so late, EU and UK authorities agreed they would not request proof of origin during 2021. Businesses were effectively given a one-year grace period and could self-certify their goods as qualifying for zero-tariff access.

From January 1st 2022 however businesses will have to prove any declarations they are making regarding origin are true or face penalties. Furthermore, customs authorities will be able to retrospectively request proof for any goods that were shipped during 2021.

Who will be effected?

The changes will impact any UK business importing goods from or exporting goods to the EU over the dutiable threshold. At present for imports to UK this is £1,000 and for exports to the EU it is €150.

Why is this an issue?

As a result of the lack of enforcement, complexity in proving origin and other challenges businesses have faced during 2021 many are not ready for the new rules. Simply attaching declarations stating rules of origin have been met without knowing whether they do or not, understanding the burden of proof or the implications is no longer an option.

What are the implications?

At the most basic level, if the information provided is not adequate the goods will be delayed and if they do not qualify for preferential treatment tariffs will be applied. However, authorities in both the UK and EU have the right to retrospectively request proof for goods that were shipped during 2021 and backdate any tariffs due. If they feel the incorrect declarations were made fraudulently then it could have more serious implications.

There are also concerns from UK businesses that EU authorities will use this new legislation to repeatedly delay or investigate goods being imported into the EU from UK – making intra EU trade more attractive. The same concerns have been raised by EU companies exporting to the UK.

Step 1: Ensure the goods meet the ‘origin’ requirements.

This may be straightforward for goods wholly grown or mined in the UK, but for other products it is more complicated. Typically an item must be around 50% UK or EU made to qualify, but exact rules vary by product. The TCA has over 50 pages of guidelines relating to PSRs (Product Specific Rules), covering things like change of tariff classification, value added/percentage rules, culmination and specified processes.

Step 2: Provide and keep proof

The principles to bear in mind are that the proof must be documented and needs to be kept for 4 years from date of export. For example, an exporter completing a statement on origin must hold information showing where the product originates, including, if necessary, the originating status of materials used in production. This may require separate declarations from individual suppliers, known as suppliers declarations.

At present UK importers from the EU benefit from delayed customs procedures whereby they have up to 175 days (approx. 6 months) to provide full customs paperwork. This also means that any tariffs on goods can be paid in arrears, within the same timeframe.

What’s changing?

As of January 1st 2022 full declarations will need to be made at time of import for all goods. Whilst some businesses may still be eligible for simplified procedures these will need to be authorised by HMRC in advance. This also means that any import duties due will become payable at the time of import and can no longer be deferred. VAT will also become due at the point of import, unless the business is VAT registered and uses postponed accounting.

Who will be affected?

This will mainly impact businesses doing their own customs paperwork, but even if a business uses a specialist intermediary, (such as a customs broker, freight forwarder, courier), they are still responsible for the accuracy of the information provided in the declarations.

What are the implications?

In addition to the burden of additional paperwork, there are likely to be more physical customs checks leading to increased transit times and more delays.

How can ERA help?

With further customs procedures coming into effect shortly, businesses need to ensure they are prepared and ready for the changes – both in terms of compliance and the disruption the changes are likely to cause.
If you need help understanding the new legislation, and the implications for your business feel free to get in touch.