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Introduction
Following the United Kingdom’s finalization of Brexit in 2020, the UK countries no longer enjoy the advantages of the free exchange of goods they had within the European Union. Moreover, as of October 2022, all importers in the UK must utilize the new Customs Declaration Service (CDS) system.<br>In this article, we will explore the ramifications of the CDS system and the responsibilities it imposes on goods importers.<br>
CDS system and deferment accounts
The CDS system is an online Customs Declaration Service that has been in effect in the UK since October 2022 for importations. Exportations from the UK are not yet affected by the system, but the UK plans to implement it by 2024.
For more information on the CDS system, visit 👉 here
In the UK, the CDS is now the overarching term for the customs declaration process, replacing the previous term, "deferment system," which referred to the clearing process. Importers with a deferment account will find it automatically linked to the CDS. The previous "C88" designation for the customs entry summary is now called the "CDS summary" in the UK.
A deferment account allows importers to pay their customs duties and VAT. Each account is linked to an account number. Concerning VAT in the UK, importers can either postpone it through the PVA system (similar to reverse VAT) or defer it through their deferment account, where the money is credited one month after the importation.
Did you know?
The nomenclature used to classify any cargo is commonly referred to as the Harmonized System (HS) code. In the European Union system, the HS codes typically consist of 8 to 10 digits, providing a more detailed classification of goods. However, in the United Kingdom, HS codes are represented by 6-digit codes, which offer a slightly broader categorization of products compared to the EU system.
Obligations for UK's importers
To be permitted to clear and declare any goods, importers must adhere to five obligations:
- The importer needs to have a presence in the UK, along with an EORI number (Economic Operator Registration and Identification) and a VAT number. It's worth noting that UK EORI numbers can be obtained even if importers are not physically located in the UK.
- The importer must be registered with the CDS system.
- The importer must link its CDS system to the UK broker.
- The importer's company should be listed as the invoicing entity on the commercial invoice presented in customs.
- The importer must sign the agent's POA (Power of Attorney) document with the importer's official letterhead.
For any declaration, the importer has two options based on whether they have a local presence in the UK or not. A local presence implies a UK address and at least one employee at that address.
If the importer has a local presence in the UK, a local broker acts as a direct representation. The importer of records on the CDS summary is the consignee. Duties and VAT can be paid through the consignee's deferment account or the broker's deferment account, or via cash. The importer can choose to defer or postpone the VAT.
If the importer does not have a local presence in the UK, a broker intervenes as an indirect representation, although very few brokers accept this due to exposure to all risks and responsibilities on the consignee's account. The importer of records on the CDS summary is the consignee. Duties and VAT are paid through the broker's deferment account or via cash. The importer can choose to defer (via the broker's account) or postpone the VAT.
In either case, the importer registered for this entry is the chosen entity, thanks to its EORI number. Customs duties and VAT are paid from the declarant's account, as the importer cannot have a deferment account, or in cash. Finally, the importer can choose to defer or postpone VAT.
Conclusion
In summary, OVRSEA's recommendation is as follows: Before engaging in any UK importations, it is essential to establish a UK entity that can handle the cargo clearance process. This includes obtaining a UK EORI number and setting up a deferment account. Furthermore, importers should ensure that their account is properly linked to our brokers' account.
If you have any other questions, please feel free to reach our team!
