Professional Documents
Culture Documents
Week 36 Seminar
Week 36 Seminar
Problem 1
My Address
My Berry's Address
Date: 1 November 2011
Dear Mr Berry,
In response to your letter please find details on the customs issues.
Inwards Processing Relief (IPR)
IPR is in relation to goods which are imported in the UK to be processed
and then re-exported. There are two levels:
1) Suspension system - This is where the duty and import VAT is suspended, and
do not become chargeable provided the goods are re-exported within six months.
2) The drawback system - This is where the duty and import are paid at the point
the products are imported and refunded once the goods are exported.
To use IPR, authorisation has to be obtained from customs, this can either be local
which can be made at the time of import on the C88 form or there is the integrated,
specific or single community authorisations which last for a maximum of 3 years.
To use IPR the economic conditions have to be fulfilled, these are (Article 5398 2459
193 EEC), where the item imported is not affecting EU trade.
Processing Under Customs Control (PCC)
This applies where the component being imported is at a higher duty rate
than the finished product. The duty rate under PCC of the component being
imported is set at the rate of the finished article which would be at 3% in your case.
PCC needs to be authorised and can only be granted if:
-
AEO certificate allows for suspension of customs duties. If you were an AEO then you
would know as you would have had to apply for the authorisation. These procedures
cannot be retrospective and have to be applied for at the point of import or prior
authorisation is required. It would be beneficial for you to use either IPR or
PCC however you have to show that importing the chemical is not affecting
the economic conditions i.e the French chemical is available so why are you
importing.
Problem 2
Notes for presentation
1) General Points
- Normally import VAT and any Customs Duties due must be paid at the point of
importation before goods can be released into free circulation in the community.
- The Customs Warehousing procedure allows the storage of goods in a Customs
Warehouse without the need to pay import duties before the foods can be entered
into the customs warehouse.
- The use of a Customs warehouse could represent a significant cashflow saving to
Kee Products Ltd (Kee).
- Based on last years figures, Kee would have paid customs duties in the region of
7,200,000 (120 million x 6%) and import VAT in the region of 22,260,000 on the
products that it imported into the UK that sat idle in its warehouse for an average of
80 days.
Had the goods been imported into a customs warehouse, payment of these import
duties could have been delayed until the goods were ready to be sold and removed
from the customs warehouse.
If the goods are never removed from a customs warehouse, the import duties never
become due.
In addition, no import duties become due on any goods that are re exported outside
of the community from a customs warehouse.
2) What is a Customs Warehouse?
A customs warehouse is any place approved by and under the supervision of
HMRC where goods can be stored as they were being stored outside of the
community.
A customs warehouse (CW) may be either a Public Warehouse or a Private
Warehouse.
A public Warehouse (Type A) is a CW available for use by any person for the
warehousing of goods. In return the warehouse keeper will charge a fee for the use
of his warehouse.
A private warehouse means a customs warehouse reserved for the warehousing of
goods by the warehousing keeper.
In the UK, the following types of private warehouses may be used:
- D This may be either a virtual (i.e. stock control system) or physical warehouse.
- C A physical warehouse
- E A virtual warehouse
Where goods are released into free circulation from a CW, import duties are
normally due at the prevailing rates at the time the goods are removed
from the CW.
However, where a type D warehouse is used, import duties are calculated using
the rates at the time of entry into a CW.
As rates of duty usually decreased over time and Kee is looking to acquire its own
warehouse premises, I would recommend that a physical type C warehouse is
the most appropriate for Kee to apply for.
Please note that no retail sales may take place in a CW.
Applying for a CW
An application to operate a CW must be made to HMRC.
An application must be made in writing and authorisation will not be issued
retrospectively.
However, unless the authorisation to operate a CW is revolved the authorisation has
no time limit. Therefore, goods entered into a CW can be stored there indefinitely
without any import duties becoming due.
Storage of goods in a CW
Once goods are entered into a CW they cannot undergo any processing
other than usual forms of handling.
I understand that Kees products sometimes need to be repackaged to meet the
needs of customers.
Simply repackaging products is acceptable in a CW as it is considered to be a usual
form of handling.
If further processing is required the goods will need to be entered into another
customs procedure such as IPR. More information on this can be provided if required.
Responsibilities of a warehouse keeper
The warehouse keeper shall be responsible for:
a) Ensuring that goods entered into the CW are not removed from HMRCs
supervision
b) Fulfilling the obligations that arise from the storage of goods in the CW
c) Complying with any particular conditions specified in the authorisation.
The warehouse keeper will be required to keep detailed stock records of all the goods
placed under the CW procedure.
The record keeping requirements place on a warehouse keeper can be onerous.