Please find below a few of the most Frequently Asked Questions to our Exporters Helpline:
I sell my goods on ex works terms; how can I get proof of export so that I don’t have to charge VAT to the export client?
Regardless of the terms of delivery or Incoterms chosen, any trader supplying goods to an overseas or EU client can only zero rate a transaction if they hold proof of export or removal from the UK in the form of a copy of an export customs declaration for the goods in their name, or a copy of a transport document proving despatch from the UK, or delivery to a client.
For clients selling on ex works terms, this can present particular problems, because, according to the strict terms of the term as applied under Incoterms 2010®, an ex works buyer is not obliged to provide the seller with any proof of export, only proof of collection. Furthermore, export customs formalities are typically the responsibility of the buyer, not the seller, so no customs entry may be made in the seller’s name.
Having said this, many ex works buyers are happy to provide proof of export on request, as it simplifies matters for them; nevertheless, this is something which needs to be checked in advance, to avoid problems at a later stage. The following are practical options:
1.Change the terms from ex works to Free Carrier (FCA) seller’s premises; this term is similar to ex works, but the seller is responsible for export customs formalities, making it possible for you to obtain proof of export.
2.If selling ex works, insert a separate clause in the agreement with the buyer, obliging them to provide proof of export as a condition of zero-rating the sale.
3.If in doubt, charge the client VAT; you can always offer to refund it on receipt of valid proof of export.
Rules regarding valid proof of export or removal can be found in HMRC notice 703 (non EU exports) or 725 (EU transactions), available at: https://www.gov.uk/government/publications/notice-999-catalogue-of-publications/notice-999-catalogue-of-publications :
How can I find what rate of duty would apply for my goods in an overseas country?
There is a very quick and convenient tool, managed by the European Union, known as the EU Market Access Database (http://madb.europa.eu/madb/datasetPreviewFormATpubli.htm?datacat_id=AT&from=publi . This allows EU traders to see what rates of duty would apply for their goods in overseas (non-EU) markets. By selecting a country and inserting the first 4 or 6 digits of the customs tariff code for a product, traders based in the EU can view a reproduction of the relevant page in that country’s customs tariff, with details of import duties. Clicking on a particular tariff code will also reveal details of local taxes and other government fees which are charged at the point of customs clearance.
The site will also indicate where a preferential duty rate might be available in a specific country for goods of EU origin, where the goods meet the eligibility criteria (which can also be viewed).
Members should be aware that the tariff view will be based on the tariff classification of the destination country. Although most countries operate on the common Harmonized System of tariff classification, the harmonization only applies for the first 6 digits of a code, so that there can be local variations between the tariffs of the destination country and that of the UK / EU. Therefore, members are advised to check the details of the tariff view carefully, to ensure that they pick the most suitable local equivalent.
I have been told that my goods may need an export licence if they are sold to an export client. How can I check whether this is correct?
Export licences may be required for a wide range of goods when sold to markets outside the EU, (and even in some cases to EU clients). Typical products requiring a licence can include military goods, “Dual Use” goods (goods which have a valid commercial function, but which could also be used for a military application), as well as articles of artistic or cultural value, medicines and drug products, some foodstuffs (such as sugar and flour), and waste products.
The largest category of goods comprises military and dual use goods; while most military goods are fairly self-evident, the category of dual use goods includes a broad range of products and technologies including materials with advanced properties or characteristics, electronics, computers, information technology and communications equipment, instruments, lasers and optics, marine and aerospace products. Export licences for this category of goods are managed by the Export Control Joint Unit, a division of the Department for International Trade, with collaboration from the Foreign & Commonwealth Office (FCO) and theMinistry of Defence.
The full range of items restricted under this category is listed in the UK Strategic Export Control Lists, which can be found at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/626629/controllist20170713.pdf . This list is lengthy and rather technical, so it is wise to seek assistance from technical colleagues when consulting it.
A quick way of checking whether goods might need an export licence for strategic exports is via the customs tariff at: https://www.trade-tariff.service.gov.uk/trade-tariff/sections : insert the 8 digit tariff code for the product, then click on the tab marked “Export” in the lower half of the page.
• On the “Export” page, scroll down to the table headed “Measures for specific countries and country groups:” You may either see a heading which reads “all Third Countries” or specific listings for individual countries.
• Opposite one of those headings, on the far right-hand column, you may see a footnote, with a code starting with “DU” or possibly "MG"
• If you click on the footnote, you will come to a comment, such as “Goods 5A001j from the dual use list.” This relates to a specific section of the Military or Dual Use list (ie; Section 5a. 001, subheading j.)
• Compare your goods against the description and specification contained in that section of he Dual Use, or Military list: if your goods meet those specifications they will require an export licence.
You should be aware that the customs tariff is not a definite confirmation whether goods do, or do not need a licence. The Consolidated Export Control list is the definitive guide in this respect. You should also bear in mind that export controls can also apply for goods which are not contained in this list, if they are exported to specific countries (for example, where sanctions are in place), or if it is suspected that goods may be used in conjunction with weapons of mass destruction programmes.
How can I find out what documentation or regulatory requirements apply for my products in overseas markets?
The EU Market Access database is an EU-supported resource which is designed to provide EU exporters with important information on overseas markets. To use it, simply click on http://madb.europa.eu/madb/datasetPreviewFormIFpubli.htm?datacat_id=IF&from=publi and insert the destination country and, if possible, the first 4 o 6 digits of your product’s tariff code.
This will then take you to a page containing multiple links. The left-hand column provides general information on that country, including general customs processes, technical standards, information relating to food, cosmetics, medicines, plant and animal products, as well as labelling and country of origin marking regulations. The 2nd column contains information on standard documents needed for customs clearance purposes.
If you have inserted the tariff code for a product, you will also see a third column which lists specific documentary & regulatory requirements for products covered by that tariff code.
Further tabs on the left also link to information on Sanitary & phytosanitary issues, trade barriers for that country and trade statistics.
I have been told that my goods could benefit from a preferential duty rate in some overseas markets if I declare them as EU origin; Are the goods of EU origin if they are shipped from the UK? If not, how can I check whether my goods meet the requirements?
County of origin is definitely not the same as the country the goods are shipped from. Origin, in the customs sense can be considered as the country in which a product is grown, cultivated or manufactured, or where it undergoes major processing to change its nature. Origin is important in many aspects of international trade, and it is important to be able to identify the origin of any goods which you export or import.
Origin, in relation to preferential tariffs is typically assessed in two categories.
• Goods which are “wholly produced” are products which are fully grown or manufactured in one country, with no components, raw materials or involvement of any other country. This category may often apply for basic commodities, such as agricultural products, but is rare in the case of more complex manufactured goods.
• Goods can acquire origin if they undergo significant, economically justified processing in a country, even if some components do not originate in that country. Origin can be acquired if goods undergo transformation. For preferential origin, the measure of whether goods are transformed is normally defined by whether the tariff code which describes the product changes after the transformation, or whether the value is significantly altered by the processing.
For preferential origin in relation to EU trade agreements, goods are required to be only of EU origin, and not any specific member state. This is likely to change after Brexit, when the UK no longer has access to EU Free Trade Agreements, and has to negotiate its own agreements.
Assessing preferential origin is complex, because the specific rules which define preferential origin vary from one product to the next, and for different destination or origin countries. Consequently, a product which can qualify as EU origin in relation to one destination country may not be EU origin for a different one.
The current rules for assessing preferential origin are set out in HMRC Notice 828, available at: https://www.gov.uk/government/publications/notice-828-tariff-preferences-rules-of-origin-for-various-countries . Assuming that goods do not meet the criteria of “wholly produced”, you will need to refer to the lists of rules which apply for each Chapter and Heading of the tariff code, in Section 6 of this notice, and also check for any specific country-based exceptions to that rule in Chapter 7.
Another option is to use the EU Market Access Database for overseas tariffs (see question above). If a search shows that an EU preferential rate exists for a specific product and country, the specific origin rules for that product and country can be found by clicking on the heading “RoO” on the right hand side of the page opposite the product in question.
One of our engineers will be undertaking repairs for an overseas client and will need to take spares and tools with him on the plane. Is this OK?
In principle, yes, this is possible, but it is not as simple as you might think. The first thing to consider is whether the nature of the goods places any restrictions on being transported as “Merchandise in Baggage”. Goods which are considered as hazardous are severely restricted, and this now includes considerable limitations on the transport of lithium ion batteries, of the kind used in many electronic devices.
For travellers who are leaving the EU, it is also important to note that carrying goods as merchandise in baggage does not exempt the trader and traveller from the requirements to clear goods through customs, both when departing and arriving, on both the outward and return journey. While customs checks on arrival are difficult to avoid, many traders omit to clear goods through customs on departure, which can then cause problems when they come to re-enter the country of residence. Customs clearance on departure must be done by approaching the customs office at the airport of departure from the EU. This office is frequently hidden away from main areas of footfall, and may not be open throughout the airport’s operating window. Indeed, some smaller international airports may not even have an export customs office, so it is advisable to check this before departure.
Many members are worried that the traveller may be faced with import duty costs, either in the country visited, or on return to the UK. In the former case, duties may be due, although it may also be possible to suspend or reclaim these if the goods are only being imported temporarily. Goods which are exported from the UK and then reimported back can usually be imported without import duty, using either the Returned Good Relief or Duplicate List customs procedures; more details on these can be found at: https://www.gov.uk/government/publications/notice-236-returned-goods-relief . However, in order to use these, the goods must be declared at the point of departure from the UK.
Above all, resist the temptation to avoid declarations by simply slipping through the Green Channel. While you may get away with this for a while, it can often cause complications at a later stage.
An overseas client has asked us to put a different customs tariff code on our documentation compared to the ones we normally use. Is this OK?
The answer depends on how much of a variation there is between your tariff code & the one which he wants you to use. It is worth remembering that there can be small variations between tariff codes for the same product in different countries. Most of the countries in the world are members of the World Customs Organization, and use the Harmonized System of tariff classification, but this only coordinates tariff codes down to sub-heading (6 digit) level. Therefore, if there are minor differences after the 6th digit, this may be simply caused by local national variations.
If, however, the client wants you to quote a completely different tariff code from yours, this should be treated with extreme caution, as it may be a sign that the client wishes to misdeclare goods to customs in their country, possibly to pay a lower rate of duty. If you suspect that this is the case, you should definitely not agree to do it, as you may be considered to be complicit in a criminal act.
There are also occasions where, despite the Harmonized System, different countries’ customs authorities may disagree on the correct classification for a product, and the client may be a victim of this. While this may be perfectly innocent, it should still be treated with some caution, and only go ahead with this after careful checking, and if the client can provide external evidence to prove this.
Most exporters include the UK / EU tariff code on their commercial / sales invoices. This is done primarily to give a carrier or forwarder who carries out an export customs declaration on your behalf the necessary information to provide an accurate entry, which complies with your legal obligations as a UK exporter. When a buyer submits an import customs entry after the goods arrive at the destination, it is their responsibility, not yours to declare the goods correctly and accurately in the destination country, using the correct tariff code for that country. If supplier is not happy to include a tariff code on the commercial invoice, the buyer can provide other evidence to substantiate whatever code they wish to use.
Whatever you decide to do, it is important that all tariff codes that are mentioned on the invoice are clearly indicated with their nationality (ie UK tariff code,… ) This will ensure that a forwarder or customs agent does not use a UK code for a US customs entry, or vice versa. If you do decide to include a US code on an invoice (as in the first example above), we would recommend that the UK code is also included, with both codes clearly identified.
If you do decide to include a US tariff code on an invoice, it is a good idea to make it clear to the consignee that you are including this information at their specific request, and that you take no responsibility for the accuracy of the information. You should keep a record of this correspondence in case of any future consequences.
A new client in South Korea has asked us to quote a Customs Authorisation number on our invoice. What is this, and how can we find it?
A Customs Authorisation number is also known in the UK as an Approved Exporter registration number, and occurs in relation to declarations of preferential origin when trading with countries which have a preferential tariff agreement with the EU. It indicates that a trader has been authorised to issue a declaration of preferential origin on an invoice or other commercial document, instead of having to issue an EUR1 declaration of origin which has to be authorised by a chamber of commerce or HM Revenue & Customs.
Normally invoice declarations can only be issued instead of an EUR1 if the goods have a “low value” (usually either £5,700 or €6,000). However an Approved Exporter is able to use invoice declarations for goods of any value, but must show their approval number on the invoice, which is then checked by the customs office in the destination country.
This process is particularly relevant for exporters to, or importers from South Korea, because the Free Trade Agreement negotiations which set up that preferential agreement specified that EUR1 forms would not be used. Therefore, the only way of declaring preferential origin for goods to take advantage of the favourable duty rates is by issuing an invoice declaration.
If you are selling goods to South Korea, and the value of individual shipments exceeds the low value threshold, you will need to apply for Approved Exporter status to declare each different product as EU origin. Without this, an importer will pay the higher duty rate. Of course, this can only be done if the goods to meet the eligibility requirements for EU goods (see question above). Further information on Approved Exporter can be found in Section 5 of HMRC Notice 827: https://www.gov.uk/government/publications/notice-827-european-union-preferences-export-procedures/notice-827-european-union-preferences-export-procedures#simplified-procedures-for-approved-exporters
We are supplying some goods free of charge for an overseas customer; can we show zero value on our documentation?
No, you always have to show a value for customs purposes. Customs values are based on the worth of the goods, not the price, so they still have a value even if you choose not to charge a client or if there is no sale.
The World Trade Organisation established rules for customs valuation (Customs Valuation Agreement), which sets out a hierarchy of procedures for valuation of goods. The first of these is based on the sales, or transaction price, but in cases when there is no transaction, the subsequent rules set out the processes, the first of which is the “transaction value of identical goods sold for export to the same country of importation and exported at or about the same time as the goods being valued.”. In other words, this can be considered as the price that you would charge if there was a sale
The rules then go on to provide a hierarchy of other methods of valuation, which include the transaction value of similar goods, as well as a model for computing a value of goods if there is no comparable transaction value (such as prototype equipment).
Many traders are reluctant to quote a value for FOC shipments, such as warranty items, because they do not want a client to have to pay import duties. This is not a valid reason, and could be considered as an intention to defraud a foreign government of legitimate import duty revenue. If you do not want a client or partner to have to pay import duty, other options are available, such as shipping the goods on DDP (Delivered Duty Paid) terms, and having duty charges billed back to you.
Note: These answers are intended to provide guidance in relation to commonly occurring issues faced by members. Many international regulations can be complex and variable, depending on specific products, circumstances, or details of transactions. Members should seek specific advice if their particular circumstances differ from the above, or if they are unsure about the detail of individual answers.
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