How prepared is your business for customs regulations post-transition?

The UK’s Brexit transition period ends on 31 December 2020, meaning that a new reality takes effect from 1 January 2021.

A phased approach to the introduction of “import controls” in the UK will be adopted from this date.  This will include some easements on the timing of import submissions for the first six months post-transition.  However, 1 January 2021 will introduce seismic changes to procedures for all businesses involved in international trade with the EU.

As such, now is the right time for businesses to begin preparations for the “new normal” of filing customs declarations for UK/EU movements and understanding the implications this will have for your internal customs processes, controls and supply chain operations.

How prepared are you for 1 January 2021?  Five main questions will help you to decide:

1. How does the UK Global Tariff impact your proposed Brexit planning?

The release of the UK’s tariff applicable to imported goods from 1 January 2021 has provided a more certain basis on which to plan.  Although the general move is to reduce rates in comparison to today, many products are still subject to positive duty rates. 

What impact does this have on your customs profile, costs and Brexit mitigation planning?

2. Do you have sufficient visibility of your customs opportunities and compliance risks?

Customs duty is, in the main, triggered by goods crossing borders.  It can be difficult to quantify the impact of customs duties on your business and to oversee the compliance of the declarations made in your name.  With a potential exponential increase in volumes of imports and exports, this will become even more complex to manage.  The use of data analytics tools can bring your customs data to life by summarising key metrics and highlighting key opportunities and compliance. 

Do you use such tools?

3. How efficient are your customs compliance processes and can they scale up post-transition?

It is common for the filing of customs declarations to be outsourced to brokers.  Will the increase in volumes be catered for by your current providers?  Would you consider taking the process in-house and using a duty management system to submit your own declarations?  Could this generate cost savings and process efficiencies, and would it also give you more control over the process?

4. How accurate is your master data such as product classification, and how will you manage origin rules under Free Trade Agreements?

The classification of a product drives the duty rate applicable.  A data cleansing exercise, particularly in respect of previous EU-UK movements of goods to review their accuracy, extend the commodity code to 10 digits and to confirm any product-specific restrictions which could apply is vital at this time.  Have you carried out this kind of review?  We have seen product file reviews leading to reclaim opportunities being identified, for example reclaiming over £1m across three years for a toy retailer.

Similarly, where the UK agrees on Free Trade Agreements with other countries (including the EU), the origin of the product and whether it meets the product-specific rules to qualify for preferential duty rates will become increasingly important.  These rules can be complex to evaluate and maintain, but there are systems which can help support this process and provide the up-to-date global content required.  Does your master data hold this level of cost information?

How agile is your master data to flex to meet the needs of new customs processes and systems?

5. Would your business benefit from grant funding for customs training or more?

Government funding has been made available for UK established businesses (or UK branches) which import from or export to the EU and intend to complete customs declarations in-house in the future, to train their people.  This is allocated on a “first-come, first-served” basis. 

Have you applied for this funding?  Separately, £50million of funding has been made available from July 2020 to support intermediaries with training, IT and recruitment aimed at helping to accelerate growth in this sector.  Could this apply to you?

Decisions during uncertain times seem more difficult to come to.  To assist businesses, KPMG provides a free one-hour review session to discuss your existing customs processes and preparation for 1 January 2021.  We will review options to optimise and future-proof your processes, generate cost savings, process efficiencies and time savings.  This review will generate a blueprint for your future state customs processes and how we can support you.

For more information, please contact GC Business Growth Hub.