Forwarders move goods. Customs agents protect your bottom line
Many importers rely on their freight forwarder to handle customs declarations, which is fine if your only concern is getting the goods across the border and nothing more. But what happens when issues arise with the customs systems that are used to facilitate these cross-border movements? The predecessor to CDS, CHIEF often threw up issues at the best of times and by 2021 it was past its useable lifespan and under immense pressure from the additional declarations as a result of Brexit. One issue in particular proved very costly for many importers that predominantly relied on forwarders rather than tried and tested agents.
Clearing is not the same as claiming.
For various reasons, certain imported goods are subject to quotas, and quotas for steel are a particularly sensitive topic when it comes to quotas. Leaving aside the politics of whether the stell quotas are fair or not, allocations to these quotas are live and dynamic; they are allocated on a first come first serve basis. For customs clearance that means they change in real time and unlike static tariff measures, what happens one declaration can affect all other waiting entries claiming that same quota. A single mistake could wipe out a quota for everyone else. That’s why it’s so important that claims are processed correctly.
Back in the days of CHIEF, from the end of 2021 to 2024 migration to CDS many declarations received error messages when trying to enter quota details. Import entries that were trying to claim the quota were being rejected, despite sufficient balance being available. While CHIEF operations did offer guidance on how to clear these customs entries, they didn’t provide details on what to do after the entry was finalised. They offered the use of duty override codes to get the entry through without paying the outside of quota rate of 25% for steel. Entries began to clear, and duty wasn’t charged, just as if the quota had been used correctly, right?
Your import cleared, but don’t quota me on that.
However, further action was often required for many importers, and whether it was done correctly or resulted in costly errors depended on who they had entrusted to clear their goods. Overriding the duty on a customs declaration does only one thing, remove the duty payment from the declaration. It does not and has never made claim to the import quota. They simply allow the declaration to clear while leaving HMRC to treat the quota untouched. Now the outcome to the trader and the same, goods received but no duty to pay. So, what is the problem?
If the import quota is not claimed, then HMRC cannot control the amount of duty free steel that enters GB. If the total amount of steel that enters GB exceeds the balance of the quota and override codes are used, then HMRC has effectively lost out on the revenue collection it was due.
Sure enough after many years of building up their resources HMRC have begun to investigate all those entries that overrode the duty due, after all the import quota has not been claimed only the import duty has been waived; a huge difference in the eyes of HMRC. While the use of override codes was allowed to get the entry cleared without the unnecessarily paying the duty, a retrospective claim to the quota was required to ensure its balance was correctly reflected. This is exactly what a large number of freight forwarders did not do.
Separating the wheat from the CHIEF
Freight forwarders are experts at moving goods, but it’s become noticeably clear over the last few years that customs is not their strong point. You wouldn’t go to a customs agent and ask them to move freight; it’s just not their area of expertise. The steel quota fiasco inadvertently has shown a clear divide between a seasoned customs agent and those that offer customs without considering the liabilities they could be walking their customers into.
After speaking to several importers who have received huge duty bills from HMRC, they all had one thing in common, they generally imported from the EU only and the agent they had used was primarily focused on moving freight. They weren’t seasoned customs agents who had seen these issues before on rest of world movements. Brexit generated an additional 27m declarations a year and as a result, a large number of freight forwarders and even hauliers who never got involved in customs before stepped up to fill the void. While the capacity crisis was solved a compliance catastrophe was quietly brewing.
At the other end of the scale, veteran customs agents who had seen issues like this before were not phased. As they had encountered problems claiming quotas on rest of world shipments before, they knew that the override codes were just step one. By following up with a retrospective claim to quota with a C285 immediately after the entry had cleared, they ensured the importer both received their goods in timely manner and correctly used the available balance of the quota.
A customs declaration is in essence a legal tax filing with HMRC, in the same way a VAT return is. You wouldn’t entrust the latter to your freight forwarder and nor should allow them to complete the former. Professional customs agents are there to balance the compliance element of customs evenly with the logistics side.
Don’t let poor paperwork steel your duty
We’ve seen importers left exposed because their forwarder didn’t follow up with a C285 claim to secure the claim to quota. In one case, an importer lost over £170,000 simply because deadlines were missed after their agent relied only on the overrides. Currently HMRC are not accepting late claims to quotas for full period, the usual time limit is 3 years but in this case, they are only allowing claims back into the final open quarter. While groups within the steel industry are busy working to lift this restriction, HMRC has not stopped its pursuit of unpaid duty. If you have imported steel products since Brexit, we advise you to check your paperwork and ensure that quotas were claimed correctly.