A chance for businesses to reduce their post-Brexit customs duty bill – UK tariff suspensions

May 2021

Exactly a year following the publication of the UK’s Global Tariff, the UK government announced on 20 May 2021 that the UK will launch its own tariff suspension scheme, tailored to the needs of UK businesses.

This means legible goods will benefit from paying no customs duties upon import into the UK. As a UK business paying customs duties currently, this is a window of opportunity to apply for a tariff suspension to reduce your future customs duty bill.

What does this mean in practice, and who can apply for this benefit?

Background

When goods cross a border to enter another customs territory, they attract Most Favoured Nation (MFN, sometimes referred to as the WTO rate) customs duty rate set by the customs authorities of the importing country. Depending on their preferential origin, they may be able to benefit from preferential treatments set out in the relevant agreements that customs territory has with other countries.

Prior to Brexit, the UK applied the EU’s Common Customs Tariff (“CCT”). So goods entering the EU via the UK or France would attract the same customs duty rate. This is because countries in the same customs union apply the same external tariff rates.

Leaving the EU meant that the UK can set its own customs duty rates for goods arriving in its own customs territory. In preparation for the end of the Brexit transition period, the UK published its own tariff on 19 May 2020. It is called the UK Global Tariff ("UKGT").

At the same time as the UKGT’s publication in May 2020, the UK also published its draft trade agreement with the EU. The UKGT was believed to have political significance, as it signalled to the EU that unless there is a trade agreement, EU exports will be subject to the UK’s MFN rates.

The UKGT has been through minor amendments since its initial publication. It can be accessed online here.

What are tariff suspensions and quotas

Businesses source goods from other countries for a wide range of reasons. One of which may be that the material they need cannot be sourced in the quality or quantity needed. So, these businesses have no choice but to pay the customs duty charged on such material which is unavailable in the domestic market. Tariff suspension and quotas can help in such situations by reducing the customs duty bill for these businesses. Tariff suspension allows an unlimited quantity of the goods covered to be imported into the UK at reduced tariff rate. Tariff quotas allow limited quantities to be imported at a reduced rate.

Tariff suspensions and quotas that existed when the UK was part of the EU were carried over to the UK’s independent regime. It appears that the UK is now ready to tailor it to better fit UK businesses.

How to apply

The updated duty suspensions and tariff quotas guidance states that businesses can apply for a new duty suspension between 1 June 2021 and 31 July 2021 by completing the application form. Successful applicants will be able to benefit from the suspension between 2022 and 2024. It is possible to renew before the suspensions expiry.

There are a number of criteria used to assess an application, they are listed in this guidance and reproduced below.

Your application should meet all of the following criteria:

~ applicants should submit a completed form by 11.55pm on 31 July 2021

~ applicants are based in the UK or Crown Dependencies

~ UK and Crown Dependency businesses would have saved at least £10,000 in duties if the suspension had been in force in 2020 - you can provide 2019 data if your business has been impacted by COVID-19

~ the request is not for a product that is traded between related parties, in circumstances which would mean other UK or Crown Dependency businesses cannot benefit from a suspension

~ the product or substitutable products are not produced in the UK or Crown Dependencies, only produced in limited quantities, or production is temporarily insufficient

~ the product will be used in a production process or there is a specific temporary need for the product

If you do not meet all of the criteria, you should provide an explanation in the form as to why your application should be considered.

The government will also assess requests with regard to other relevant considerations. More information about the assessment criteria and process is included in the guidance section of the application form.

What to think about before applying

Whilst tariff suspensions are usually granted on raw material, there is a chance for applications that do not cover such materials to be submitted for review. The explanation should be worded carefully to ensure that the application is considered and that the time and effort spent do not go to waste.

Once granted, note that your competitors may also benefit from the suspension you have requested. On the other hand, you may wish to object to competitors’ applications (UK and Crown Dependency businesses will be able to make objections to any application later this year). Research is key.

This article was written by Jessica Yang, Director (JY XBorder Consulting Ltd) and Toby Spink, Director (BKR Consultants Limited).

Links

Guidance - UK Trade Tariff: duty suspensions and tariff quotas

https://www.gov.uk/guidance/duty-suspensions-and-tariff-quotas

UK Global Online Tariff

https://www.trade-tariff.service.gov.uk/sections

This article first appeared in CCRM Journal for Practitioners in Europe, Issue 8, April / May 2021

https://www.customsclearance.net/en/articles/a-chance-for-businesses-to-reduce-their-post-brexit-customs-duty-bill-uk-tariff-suspensions

It can also be found here: https://www.bkrconsultants.com/media-articles/a-chance-to-reduce-your-post-brexit-duty-bill