Importing into the EU – Issues for UK Suppliers
Unless you have been living in a cave for the past eight months, you will be aware that the UK has left the EU which, for businesses moving, or attempting to move goods, between the UK and the EU, means that customs declarations need to be made to clear the goods at borders.
Dated: 10 August March 2021 Author: Terri Bruce, Director of VAT & Customs
For most UK businesses, this has resulted in increased paperwork and costs which were not entirely unexpected. However, what was not widely predicted is the difficulty for UK businesses supplying into the EU on a Delivered Duty Paid basis (“DDP”) in finding an agent to complete import documentation.
What does DDP mean?
If the seller supplies on a DDP basis it means that the seller is responsible for arranging carriage and delivering the goods at the named place, cleared for import and all applicable taxes and duties paid. This means that the seller is responsible for the customs clearance in the EU and for the payment of customs duties and import-VAT. It also usually requires the supplier to register for VAT in the Member State of importation.
Many UK businesses believed that, if they were to register for VAT, they would be able to import goods and make onwards sales reasonably smoothly. However, the reality is that it is virtually impossible to import goods into most Member States without a customs representative, and customs representatives are very hard to find.
Importing into the EU
European customs law in general does not allow import declarations by companies who are not resident within the EU. For non-EU businesses, this can be difficult as the law requires you to appoint a representative for customs purposes.
The Union Customs Code (UCC) allows a representative to be appointed on either a Direct or Indirect basis. When acting for a business established outside the EU the Representation will be Indirect, whilst it may be Direct when appointed by an EU based entity. For UK businesses, this means an indirect representative is required.
An indirect representative must have a registered office or permanent establishment in the EU. It can submit declarations on behalf of its clients but will be jointly liable for VAT and customs liabilities. This is perceived as a huge risk and, in our experience, freight companies and customs brokers are reluctant to act in this capacity for non-EU importers as they do not want to take on the associated financial risks. There are also concerns that the UCC can hold the indirect representative liable for a debt even if they were not aware of an error in a declaration on the grounds that they “should have known better”.
If a representative is willing to act, they will usually require a Power of Attorney for the person represented.
We are aware that the tax authorities in some Member States (notably Germany) have recently started to investigate DDP-cases and have blocked import VAT recovery on importation.
Options for UK Business
Perhaps the easiest solution for UK businesses is not to trade on a DDP basis but to use alternative incoterms such as DAP where the customer will act as importer.
This is not always possible, however, and so, when a business is required to supply on a DDP basis, it may be easier to import into a country where indirect representation is either not required or is easier to obtain. We have found that it is possible to appoint indirect representatives in the Netherlands and that imports can be made into ROI and Scandinavia without an indirect representative. Therefore, if appropriate, one solution may be to route all supplies through, for example, the Netherlands, which gives reasonable access to mainland Europe.
In the alternative, it may be appropriate for a UK business to create an entity or a branch in Europe which will enable it to have a direct representative there. However, there are many other implications of setting up an EU entity and all of these would have to be considered as part of a wider strategic solution. Ironically, one of the solutions of trading outside of the EU may be to create an EU establishment.
Brexit has thrown up many challenges for UK businesses trading with Europe, but, in our experience, this has proven to be one of the most frustrating issues. Solutions are available, but businesses really need to consider their overall strategy before determining the optimum approach for them. There is definitely no “one size fits all” solution.
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