How have the rules for exporting to the EU changed?
Zero tariffs and quotas on goods
The UK and the EU agreed to zero tariff and zero quota trade on goods, meaning that businesses will not face costly tariffs. However, to qualify for tariff-free access, firms will need to ensure goods meet Rules of Origin requirements as set out in the treaty, ensuring these goods meet the ‘local’ qualification criteria.
Rules of Origin
Access to the zero tariffs and quotas will depend on whether the goods meet the Rules of Origin required in the agreement to qualify as ‘local’. Businesses will have to identify the full origin of their goods as well as provide additional paperwork in order to qualify. However, the EU and UK have jointly agreed additional flexibility in collecting documentary evidence to prove origin during the first year, to allow them to benefit from the preferences despite the little time available between conclusion and application of the agreement. Further detail on this flexibility will be published imminently.
Customs and trade facilitation
The agreement will require customs declarations and paperwork for businesses to process the movement of goods. It does provide for mutual recognition of the Authorised Economic Operator Safety & Security scheme, allowing for streamlined customs procedures for traders already registered.
Sanitary and phytosanitary (SPS) border checks will be required for trade of live animals and products of animal origin, meaning that agri-food traders will meet with extra costs and burden.
The agreement only provides limited scope for mutual recognition of conformity assessments. This means that except for a few instances, goods will have to undergo two sets of conformity assessments rather than one if a business is seeking to place a product on both the UK and EU markets, thereby creating additional costs and complexity for businesses.
However, in specific sectors such as medicines, automotive, organics, wine, and chemicals, the UK and the EU have agreed to streamline conformity assessments.
What impact could the changes to exporting rules have on business?
The additional customs checks at the EU border have the potential to cause delays at ports if processes fail or are not followed correctly by transporters. These delays will have knock-on impacts on supply chains – and are difficult for perishable products in particular – with all products of animal origins and plants having to enter the EU via a point of entry with a Border Inspection Post.
From January 1, 2021, businesses based in Great Britain will need an EORI number (starting with GB) to import and export goods to the EU.
What is an EORI number?
An EORI number – which stands for an Economic Operator Registration and Identification Number – is a unique ID code used to track and register customs information in the EU.
Who needs an EORI number?
You can register for an EORI number as a business or an individual. Any business importing and exporting goods to the EU needs one, though if you only do digital services then you won’t need one. You also won’t need one if you’re passing goods between Northern Ireland and the Republic of Ireland.
It’s helpful to know that if your company is part of a larger holding group, then the application must be processed by the parent company, not the subsidiary.
What are commodity codes?
Commodity codes – sometimes referred to as trade tariff commodity codes – are used to classify any goods being imported or exported. Getting the right code is important to ensure compliance with customs declarations, and pay the right taxes and duties.
Why you need to know about commodity codes
Commodity codes have several uses in import and export businesses. They’re used when completing paperwork for customs declarations and can influence the amount of tax and duty you pay to import or export a product. Using the correct commodity code is also important to make sure you’re following any relevant legal or safety regulations when importing products which might be dangerous or restricted.
Structure of the code
The commodity or tariff codes used can vary in length and structure depending on the type of goods, and where they’re moving to and from.
For example, goods coming into the UK from outside of the EU will usually have a 10-digit commodity code, which can go up to 14 digits for some products. However, goods for export from the UK may only have an 8-digit code.
Each code is made up of several different elements which describe details such as the broad type of product, the material used to make it, and even the type of method used for production. It includes:
- Details required for the Harmonised system – the global customs naming system known as the HS
- EU wide information which is captured as a CN Code (which stands for the catchy Combined Nomenclature), and simply records trade levels between EU states
- TARIC integrated tariff information which covers EU trade policy information needed for national customs authorities.
What happens if you don’t have a commodity code or use an incorrect one?
If you use an incorrect commodity code, you might find that your goods are seized or delayed by customs. You might pay incorrect VAT or duty, and – if you pay too little – could be liable for extra fees and charges.
Some items can only be imported or exported with a license, such as plants, animals, or anything potentially hazardous. If you try to move these products using an incorrect commodity code, you’ll be breaking the law, and will find yourself in serious legal trouble.
Getting a BTI ruling
In some cases, it might be helpful to apply for a BTI – a binding tariff information ruling, to confirm your commodity code. It’s a legal document which confirms the commodity code agreed for your product, so there’s no guesswork involved.
Getting a BTI can be helpful because you’ll have certainty about the commodity code needed for your imports or exports. It doesn’t cost anything to get a BTI ruling, but you may need to pay if there are tests needed, for example, to determine the materials used in your product.
This ruling usually lasts for three years and is legally binding throughout the EU. It can be revoked, however, if you’re found to have provided incorrect or incomplete information about the product. It might also be reviewed early if there are changes to the law or how it’s interpreted, or if you change the nature of your product during the BTI period.