Customs Clearance Process
What is Customs Clearance?
In simple terms, the customs clearance process is the act of obtaining authorisation to move goods into or out of a country. Your international shipments must be cleared by customs authorities before they can move across a country’s border. During the customs clearance process the customs authorities will review the documentation for your shipment and may decide to inspect your goods to ensure compliance with trade regulations. Based on your customs clearance documentation and the goods being shipped, the customs agent or broker will ensure that the appropriate duties and taxes are declared, and the customs authorities will ensure these duties and taxes are collected.
HM Revenue and Customs in the UK state that getting customs clearance is complicated and the importer can employ a customs clearance agent to make the import customs clearance declaration and get their goods through UK customs.
What is a Customs Clearance Agent?
Customs Clearance Agents, also referred to as a Customs Brokers, are companies that facilitate the customs clearance of imports and exports. In many countries, the Customs Clearance Agents must be licenced or accredited with the local customs authorities. Customs Clearance Agents assist the importer with the clearance process, while submitting all necessary documentation and the customs clearance declaration or entry to enable import or export of the goods. In the case of imports, the Customs Clearance Agents will ensure that the appropriate duties and taxes are declared.
In the UK, HM Revenue and Customs state that when you are employing the services of a customs representative (Customs Clearance Agent) to prepare declarations on your behalf, it is your responsibility to determine the terms of that representation and ensure that the person making the declaration has been given clear and accurate information.
The UK Taxation (Cross Border) Trade Act 2018 (TCTA 2018) Section 21 places considerable emphasis on the appointment of a person or company as a Customs Clearance Agent. The emphasis on the word “appointment” from HM Revenue and Customs viewpoint would involve a positive action by the importer or exporter to empower the Customs Clearance Agent to clear goods on their behalf.
Appointment of a Customs Clearance Agent
When appointing a Customs Clearance Agent, it can be either on an open-ended contract which covers multiple imports or exports over an unspecified period of time, or it could be an agreement to cover a single import or export.
Direct and Indirect Representation
In the UK, HM Revenue and Customs state that it is the responsibility of the importer to determine the terms of that representation with the Customs Clearance Agent. The Taxation (Cross Border) Trade Act 2018 (TCTA 2018) Section 21 states that the importer can appoint a Customs Clearance Agent on the importer’s behalf, and
- The Customs Clearance Agent may make Customs declarations in the name of the importer and in that case the Customs Clearance Agent is acting as a “Direct Agent”.
Or
- The Customs Clearance Agent may make Customs declarations in their own name and in that case the Customs Clearance Agent is acting as an “Indirect Agent”.
Direct Agent
A Direct Agent normally works in the name of and on behalf of the importer, who is a UK based entity. The importer will be known as the 'Declarant' for the purposes of the Customs Clearance Declaration. The UK Declarant (UK importer) will be responsible for maintaining the Customs records and also providing an audit trail for HM Revenue and Customs. This is known as Direct Representation.
Indirect Agent
A Direct Agent normally works in the name of and on behalf of an entity established outside the UK using DDP (Delivered Duty Paid) Incoterms. In this case the UK Customs Clearance Agent will act in their own name. The UK Customs Clearance Agent will be responsible for maintaining the Customs records and also providing an audit trail for HM Revenue and Customs. This is known as Indirect Representation.
Correct Customs Clearance Documentation
Customs Clearance Requirements
HM Revenue and Customs state that the UK Importer of Record is responsible for ensuring that the UK Customs Clearance Agent has been given clear and accurate information.
HM Revenue and Customs also state that the UK Importer of Record must make arrangements to check the accuracy of customs clearance declarations made on their behalf.
Required Import Documents
The commercial invoice
A Commercial Invoice is one of the most important documents. This document provides information for the customs authorities to identify the goods, which helps them determine duties and taxes. The Commercial Invoice should include the correct Incoterms 2020.
Packing List
A packing list is a formal document that shows an itemised list of the goods within a shipment.
Certificate of Origin
This is often required when the country of origin needs to be known for import duty preference, import quotas, boycotts or when anti-dumping measures are in place.
Transport Documents
The documents vary depending on the method of carriage used.
Other Documents
Other documents may be required, depending on the goods being imported.
The Clearance Process
- When the goods arrive at the port, the Customs Clearance Agent will present all the necessary documentation and the Customs Declaration required for clearing the goods. The documentation must be accurate and include a commercial invoice. You can read more about what documents are necessary for your imports and exports here.
- The customs authorities may or may not examine the documentation presented. It is the importers responsibility to ensure the documentation is complete and accurate.
- The import documentation is used to identify any import duties and taxes as being payable.
- HM Revenue and Customs will make a request for payment via one of the following: Cash Accounts, Duty Deferment Accounts, Immediate Payments, Guarantee Accounts.
- Import VAT can be paid via one of the accounts above or via Postponed VAT Accounting (PVA) which was introduced on 1 January 2021.
- Once the payments process has been confirmed and no customs examination has been requested, your goods will be customs cleared.
UK Customs Clearance Process
The Customs Handling of Import and Exports Freight computer system, known as CHIEF, has been replaced with a new Government digital platform called Customs Declaration Service (CDS).
HM Revenue and Customs state that Customs Declaration Service (CDS) will provide easily access real-time import and export data, check tariffs and financial statements online, using dedicated digital dashboards.
The Customs Declaration Service (CDS) system provides different ways to process your Customs Clearance Declaration payments and you can use one of five methods to make your payment.
UK Import VAT
Postponed VAT Accounting (PVA) allows a VAT registered UK importer to account for payable import VAT on their VAT return, rather than paying it immediately or through their duty deferment account and reclaiming using the HMRC form C79.
The decision to use Postponed VAT Accounting (or not) is for the importer to make. This is not a decision for the Customs Clearance Agent, the Courier Company or the Freight Forwarder to make.
Route of Examination Codes
When importing goods into the United Kingdom, the National Clearance Hub will allocate an examination route code against the declaration entered within the Customs Declaration Service (CDS) system. The code allocated will determine how the goods will be cleared through customs and what checks will need to be implemented.
The code assigned to the imported goods will largely depend on the type of commodity and the number of imports being brought into the UK. However, random checks will also determine which customs clearance route is assigned to the customs clearance process.
Route 1 - Documentary Control
A risk has been identified that requires the declarant to submit documentation for checking. The goods are required to be held. The old CHIEF system equivalent was also Route 1.
Route 2 - Physical / External Party Control
A risk has been identified which requires the goods to be physically inspected by Border Force or some other third party. The goods are required to be held. The old CHIEF system equivalent was also Route 2.
Route 3 - Non-Blocking Documentary Control
A documentary check has been requested, but the goods do not need to be held. The old CHIEF system equivalent was also Route 3.
Route 6 - No Control Required
The declaration has been risked and no control has been required. The old CHIEF system equivalent was also Route 6.
Route 0 - Risking Not Yet Performed
The declaration is in a processing state which means that risking has not been performed yet. There was no equivalent within the old CHIEF system.
Route H - Pre-Lodge Pre-Fix
The declaration is an advance/pre-lodged type, and as such that the routing is provisional only. The old CHIEF system equivalent was also Route H.
Customs Clearance Blogs
Read my Customs Clearance Blogs to see how I have worked side by side with clients to tackle different import challenges. In each case, an appropriate solution was identified and implemented to manage the client's imports.
Get in touch about the Customs Clearance Process
If you would like more information concerning the Customs Clearance process, please contact me.
Contact Us