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.

10 Key points UK + USA Export Controls

Strong & Herd LLP offer consultancy, training and helpline advice on both UK and USA Export Licensing Controls here are a few key points based on questions we regularly receive from clients.

1. SPIRE - Shared Primary Information Recourse Environment - UK computerised export licensing system links export licence information with the UK customs computer CHIEF - Customs Handling of Import and Export Freight.

2. Dual-use does NOT mean a commercial item sold to the military. To be controlled as dual-use the goods/technology must be listed in the dual-use list (in the UK/EC known as DUEC; known as EAR in the USA). This list is highly technical and lists the technology levels of controlled goods.

3. Dual-use list, high technology levels are set in the Wassenaar Arrangement by member countries and is common to all member countries. Key members are the 27 EU member states, Australia, New Zealand, Japan, Switzerland, Norway, Canada and the USA.

4. Dual-use controls are known as the Export Administration Regulations (EAR) in the USA and goods caught on the EAR are subject to extra-territoriality controls if re-exported or incorporated into other equipment which is subsequently re-exported. Need to check the rules.

5. The USA extends export licensing controls to the re-export of controlled goods/technology both under EAR and under the military controls of ITAR - International Traffic in Arms Regulations. This denies re-exports to embargoed/sanctioned countries, controls re-export of EAR and ITAR items and controls "re-transfer" (ie moving to another party in the same country) for ITAR goods/technology.

6. EU DUEC and USA EAR - both based on same dual-use regulations and category numbers in both control lists are the same. EU call them category numbers, USA call them the Export Control Classification Number (ECCN). An example of one is: 3A001.b

7. The type of goods named in dual-use regulations headings, eg computers, sensors, etc but which are below the levels of technology specifically listed are not subject to export licence controls - except to embargoed/ sanctioned countries. These goods are known as EAR99 in the USA and LIC99 in the UK

8. Goods/ technology specially (specifically) designed, modified or configured for military purposes are subject to export licence controls.

9. Military goods/ technology are subject to national controls. The USA has the Munitions List (ML) under ITAR. UK has the Military List (ML). Germany, for eg, has the Ammunition List (AL). None of them are the same - though EU looking at standardising military controls. USA ITAR controls are very strict, including re-export and re-transfer of ITAR items/ technology.

10. USA extra-territoriality controls may affect any country buying USA controlled goods/ technology (both EAR and ITAR) whether it is purchased direct from an US supplier or not.

If you have any questions regarding this complicated topic we will try to help. Contact us at info@strongandherd.co.uk

Freight companies and Customs Compliance

Though I know this doesn't apply to all freight forwarders and clearing agents but why are so many still getting import declarations and export declarations to customs wrong - even when they have been given clear instructions. What can we do about it? HM Revenue & Customs and the Export Control Organisation expect exporters and importers to control their freight companies - you given them written instructions with key information: EORI (VAT Number), Customs Procedure Code (CPC), commodity code (tariff number), export licence number, customs authorisation numbers, eg for IPR, OPR, Warehousing, etc. The import or export customs declaration comes back from the freight forwarder (if you are lucky) and one or most of the details are wrong. Perhaps with the increase in AEO approved companies this problem will fade but it seems that training for both companies exporting from the UK and companies importing into the EU is essential. In the meantime customs compliance takes up a lot of time in our office - instructing, checking, double checking, chasing forms, reporting errors and chasing amendments. Any comments?