Thanks to the excellent TV comedy “Outnumbered” we are all aware of the “elephant in the corner” – a subject or topic that is in the back of people’s minds but skirted around or avoided as being too delicate, difficult or embarrassing. At a recent BeXA event held at the wonderful Rolls Royce Learning & Development facility in Derby entitled: Innovation in Exporting: the World Awaits – I was asked to do a 10 minute slot on Customs Procedures. I had the worse time slot too, just before lunch, when, if other speakers have over-run (which usually happens) the attendees wish this one would just be cut from the agenda.
What fantastic, inspiring talks – we were entertained and overwhelmed by Simon Topman the CEO of Acme Whistles who explained why they are still producing whistles in Birmingham since 1870 and export 85% of their goods, with an export growth of 27% (6 million whistles exported a year!). Whistles, low technology – you must be joking! His story about the hand-grenadine shaped duck call for US hunters was fantastic. They know that other regions of the world will copy their new whistles in 6 months or so but they stay ahead. Then Paul Titley, Managing Director of a pharmaceutical testing company, Aesica Formulation Development explained how they keep ahead by selling Good Manufacturing Practices (GMP). Graham Tyers, Managing Director of Newson Gale and Mike Norfield, Chief Executive, Team Telecom Group also shared what gives them an edge in the international market place and why they believe exporting keeps their businesses alive. And all the time I’m thinking – customs procedures, rules, regulations, fines, penalties – did they really want to hear from me?
Well, I had prepared the talk in line with the theme of the day “Innovation in Exporting” so I knew I’d surprise a few people when I showed how exploiting your knowledge of customs regulations and being so comfortable with rules, documentation, etc, gives you “an unfair advantage” when trading internationally. But as I listened to the other speakers I realised that the role I, and other trade compliance people, play is the elephant in the corner. Great export deals are done, fantastic innovation, wonderful profits included in contracts but – rules, pre-shipment inspection, certificate of origin, tariff classification – if you squint your eyes in a marketing meeting you can probably just get a quick glimpse of the grey shape in the cornering lifting its trunk to comment before – whoosh – everyone moves on.
Well, it’s time to come out of the corner. Trade compliance is not a nasty afterthought or undesirable necessity it should be part of the planning and marketing strategy. You can’t change a commodity code of a product to get a lower duty rate or reduce licensing regulations (well not legally anyway) but you can change a product or how it is shipped to get a better commodity code (legally). Why just issue a EUR1 Form because your customer asks for one – sell the fact that as we are in the EU and have a trade agreement with our customer’s country our goods will actually be cheaper to import because of this form. Sell the fact! Even increase your price, where you have an option – example a UK exporter sells to Turkey, the standard rate of duty into Turkey for their product is 14%, if the goods can be shipped with a preference form (ATR Form) the 14% becomes NOTHING/ ZERO!!! Isn’t that worth a 1-2% increase in the selling price to make sure the form is produced? Knowledge is power, is an adage often used – well the elephant of trade compliance has quite a bit of untapped knowledge. Invite us to the table.
See other articles by Strong & Herd LLP HERE
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Showing posts with label ATR. Show all posts
Showing posts with label ATR. Show all posts
Sunday, 15 April 2012
Sunday, 5 February 2012
Preference: Supplier Declarations - do you know your responsibilities?
Supplier Declarations are more commonly used to support the issuing of preference documents, eg EUR1 Forms, invoice declarations (approved or low value) and ATR Forms (Turkey).
As the Preferential Trade Agreements (PTA) are governed by specific rules, relating to the manufacturing origin of the goods and often the percentage of components or materials bought in from a country not covered by the PTA, anyone issuing preference statements must ensure they know the status of any bought in finished goods or components/materials BEFORE issuing the preference declaration.
Companies can be asked to provide “Supplier Declarations” to customers in other EU countries, including the UK, so they can establish if the goods qualify for preference when shipping them out to other countries. These statements have the same legal responsibility as issuing the EUR1 Forms or preference statements therefore companies must have a clear procedure and control over this activity.
Any company buying goods from UK or EU suppliers cannot assume these goods meet preference conditions UNLESS they have a Supplier Declaration. These declarations are to be obtained on an annual basis and must be used when assessing if export shipments meet the rules of preference origin. Any goods, components or raw materials bought in NOT supported a Supplier Declaration must be declared as NOT QUALIFYING.
The use of these Supplier Declarations are now been extended by companies to include a statement from the supplier as to the ORIGIN (ie where it was made) and commodity code applicable to the goods.
What are your experiences of issuing or obtaining Supplier Declarations?
Do your sales people understand the importance of these forms if requested by customers?
Is issuing invoice declarations, EUR1 Form or ATR Forms treated as just another documentary requirement without management understanding there could be 5 years imprisonment in the background!
Also see article: EU Preference System: Overview
Training: The Export Course
Understanding Origin and Preference
Preference and Origin Rules Explained
Essential Guide to Customs Procedures
As the Preferential Trade Agreements (PTA) are governed by specific rules, relating to the manufacturing origin of the goods and often the percentage of components or materials bought in from a country not covered by the PTA, anyone issuing preference statements must ensure they know the status of any bought in finished goods or components/materials BEFORE issuing the preference declaration.
Companies can be asked to provide “Supplier Declarations” to customers in other EU countries, including the UK, so they can establish if the goods qualify for preference when shipping them out to other countries. These statements have the same legal responsibility as issuing the EUR1 Forms or preference statements therefore companies must have a clear procedure and control over this activity.
Any company buying goods from UK or EU suppliers cannot assume these goods meet preference conditions UNLESS they have a Supplier Declaration. These declarations are to be obtained on an annual basis and must be used when assessing if export shipments meet the rules of preference origin. Any goods, components or raw materials bought in NOT supported a Supplier Declaration must be declared as NOT QUALIFYING.
The use of these Supplier Declarations are now been extended by companies to include a statement from the supplier as to the ORIGIN (ie where it was made) and commodity code applicable to the goods.
What are your experiences of issuing or obtaining Supplier Declarations?
Do your sales people understand the importance of these forms if requested by customers?
Is issuing invoice declarations, EUR1 Form or ATR Forms treated as just another documentary requirement without management understanding there could be 5 years imprisonment in the background!
Also see article: EU Preference System: Overview
Training: The Export Course
Understanding Origin and Preference
Preference and Origin Rules Explained
Essential Guide to Customs Procedures
Friday, 1 April 2011
UK/ EC Export Documents & Procedures
Exporting to countries outside the European Community (EC) can be daunting so a planned, structured appropriate is essentials. Strong & Herd LLP are publishing some key points to help in the practical movement of goods, to ensure you are compliant and, also, to ensure key elements of the international trade agreement are not forgotten.
Exporting doesn't end with the order being received, practical issues must be addressed such as which documents do we need: what information must go on the forms, do we need anything special, have we organised the transport in a cost effective way, are we using an Incoterm that helps us rather than cause us problems? All of these issues are covered in our Export Training courses.
Here are a few tips:
1. Check the trade relationship between the EU and your clients' countries. The EU has negotiated preferential trade agreements with lots of overseas countries which allow goods made in the EU (which meet the qualification rules) to enter these countries at a reduced - often zero - rate of customs duty. This gives EU/UK manufacturers an advantage over non-EU companies. The new Free Trade Agreement coming into for on 1 July 2011 is the EU-S.Korea FTA.
2. Make sure the Incoterms rules in the contract, eg FCA, FOB, CIF, DDU, DAP, are clearly understood and that you don't do more than you are legally obliged to do. Also, makes sure you understand the full implications of what your company has agreed too - ie DDP requires you to be registered in your customers' countries so you can organise the import customs clearance and pay relevant duties and taxes.
3. Clear description of goods on the paperwork is essential. Most shipments move internationally under cover of an invoice, and this document is important because it will be seen by all parties in the supply chain. Just having part numbers or abbreviated descriptions is not helpful - at the very least there should be a plain language general description.
4. A lot of companies use system generated invoices which includes pre-loaded commodity codes (aka tariff numbers). EU Customs require a 8-digit commodity code (called the Combined Nomenclature - CN) to be made on the export declaration. Some companies show the 10-digit EU import commodity code (TARIC) on export paperwork. Remember only the first 4 or 6 numbers will match the code numbers applicable in other countries. This is under the Harmonised System (HS) Codes. Be aware that if you show full UK/EU commodity codes on the invoice you may get questions from the customer's country.
5. Value of goods - you must always show the true value of the transaction on an export invoice. Do not be tempted to under declare a value because an overseas customers says "it will help the goods get through customs quicker". There is some confusion when goods are shipped free of charge; following the WTO/GATT valuation rules for imports if there is no charge you must still price the goods at a true costs, following the principles of a) indentical pricing (not being sold this time); b) similar goods; c) cost of materials/overheads and profit.
6. Evidence of export. Under UK VAT rules you are allowed to VAT zero-rate an export, but you must be able to provide evidence that the goods have left the UK. This evidence must be in the exporting companies name (or cross-reference to them as the supplier) and show that the goods left the UK within 3 months of despatch or payment received (whichever is first). This can cause problems to exporters if they sell ExWorks as the overseas buyer is then in control of the export.
7. In the UK HM Revenue & Customs (HMRC) use an electronic export customs presentation system called NES (the National Export System) based on EU SAD Form which replaced the paper C88 Form. NES links to the customs computer CHIEF and records all exports. It is recommended that exporters receive a copy of this declaration from freight companies.
8. Indirect exports from the UK, via other EU member states, to non-EU countries must be tracked on the electronic system with a Movement Reference Number (MRN) issued on the Export Accompanying Document (EAD). Exporters who ship goods, for example, by road to Switzerland, Russia, Ukraine, etc must ensure they receive the MRN. This can be check on the Europa Database under Export.
9. Don't confuse "origin" of goods with "preference" - though preference rules use origin as a starting point the qualification regulations under preference are more than just that the goods were made in the EU. Additional rules of preference include a percentage of EU components, materials requiredin the manufacture, a named process to take place in the UK/EU, a change of commodity code between materials and finished goods or a combination of all three. The preference rules depends on the customer country and the commodity code of the goods.
10. Export licensing controls affect the supply of certain goods - though only about 5% of exports from the UK are controlled there are embargoes and sanctions to check. If your goods are of a high capability or technology level that could be used in a military, nuclear, space environment or have been specially designed, modified or reconfigured for millitary/ defence use then you will have to check the export licensing regulations . And, if your technology or goods originate from the USA you may also require US Department of Commerce or Department of Defence approval to re-export.
Exporting doesn't end with the order being received, practical issues must be addressed such as which documents do we need: what information must go on the forms, do we need anything special, have we organised the transport in a cost effective way, are we using an Incoterm that helps us rather than cause us problems? All of these issues are covered in our Export Training courses.
Here are a few tips:
1. Check the trade relationship between the EU and your clients' countries. The EU has negotiated preferential trade agreements with lots of overseas countries which allow goods made in the EU (which meet the qualification rules) to enter these countries at a reduced - often zero - rate of customs duty. This gives EU/UK manufacturers an advantage over non-EU companies. The new Free Trade Agreement coming into for on 1 July 2011 is the EU-S.Korea FTA.
2. Make sure the Incoterms rules in the contract, eg FCA, FOB, CIF, DDU, DAP, are clearly understood and that you don't do more than you are legally obliged to do. Also, makes sure you understand the full implications of what your company has agreed too - ie DDP requires you to be registered in your customers' countries so you can organise the import customs clearance and pay relevant duties and taxes.
3. Clear description of goods on the paperwork is essential. Most shipments move internationally under cover of an invoice, and this document is important because it will be seen by all parties in the supply chain. Just having part numbers or abbreviated descriptions is not helpful - at the very least there should be a plain language general description.
4. A lot of companies use system generated invoices which includes pre-loaded commodity codes (aka tariff numbers). EU Customs require a 8-digit commodity code (called the Combined Nomenclature - CN) to be made on the export declaration. Some companies show the 10-digit EU import commodity code (TARIC) on export paperwork. Remember only the first 4 or 6 numbers will match the code numbers applicable in other countries. This is under the Harmonised System (HS) Codes. Be aware that if you show full UK/EU commodity codes on the invoice you may get questions from the customer's country.
5. Value of goods - you must always show the true value of the transaction on an export invoice. Do not be tempted to under declare a value because an overseas customers says "it will help the goods get through customs quicker". There is some confusion when goods are shipped free of charge; following the WTO/GATT valuation rules for imports if there is no charge you must still price the goods at a true costs, following the principles of a) indentical pricing (not being sold this time); b) similar goods; c) cost of materials/overheads and profit.
6. Evidence of export. Under UK VAT rules you are allowed to VAT zero-rate an export, but you must be able to provide evidence that the goods have left the UK. This evidence must be in the exporting companies name (or cross-reference to them as the supplier) and show that the goods left the UK within 3 months of despatch or payment received (whichever is first). This can cause problems to exporters if they sell ExWorks as the overseas buyer is then in control of the export.
7. In the UK HM Revenue & Customs (HMRC) use an electronic export customs presentation system called NES (the National Export System) based on EU SAD Form which replaced the paper C88 Form. NES links to the customs computer CHIEF and records all exports. It is recommended that exporters receive a copy of this declaration from freight companies.
8. Indirect exports from the UK, via other EU member states, to non-EU countries must be tracked on the electronic system with a Movement Reference Number (MRN) issued on the Export Accompanying Document (EAD). Exporters who ship goods, for example, by road to Switzerland, Russia, Ukraine, etc must ensure they receive the MRN. This can be check on the Europa Database under Export.
9. Don't confuse "origin" of goods with "preference" - though preference rules use origin as a starting point the qualification regulations under preference are more than just that the goods were made in the EU. Additional rules of preference include a percentage of EU components, materials requiredin the manufacture, a named process to take place in the UK/EU, a change of commodity code between materials and finished goods or a combination of all three. The preference rules depends on the customer country and the commodity code of the goods.
10. Export licensing controls affect the supply of certain goods - though only about 5% of exports from the UK are controlled there are embargoes and sanctions to check. If your goods are of a high capability or technology level that could be used in a military, nuclear, space environment or have been specially designed, modified or reconfigured for millitary/ defence use then you will have to check the export licensing regulations . And, if your technology or goods originate from the USA you may also require US Department of Commerce or Department of Defence approval to re-export.
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