Importing from abroad: understanding your responsibilities
Importing from abroad can benefit many small businesses. Lower prices and favourable exchange rates mean goods can be brought into the United Kingdom from abroad inexpensively. Where there is a lack of domestic choice, importing allows access to a wider variety of goods which may be more readily available and more appealing to customers than what is otherwise on offer.
To import goods, sea or air travel is involved – so there are logistics to consider. So, here are some key questions to ask if you intend to begin importing…
Where are you importing the goods from?
If importing from anywhere within the EU, you need a commodity code for your goods and you will need to pay VAT. However, you won’t have to pay import duty and normally you won’t need an import licence.
If your goods are coming from outside the EU, you will still need the commodity code and have to pay VAT. In addition to this you will also have to pay duty, declare your goods to customs, and you may need an import licence for your goods.
What is a commodity code?
Commodity codes classify goods for import (and export), enabling you to ensure you pay the correct tax and duty on them, and follow the appropriate regulations.
All the commodity codes for goods can be found in the Trade Tariff, which is available on the gov.uk website.
How do you pay VAT on your imported goods?
The VAT you owe firstly has to be calculated based on the value of the goods, transportation used, insurance, and other duties or levies. Payment can be made electronically to HMRC when the goods go through customs.
When dealing with customs, you need an Economic Operator Registration and Identification (EORI) number, which is a unique reference number for importers, and you should obtain your EORI number as soon as you intend to import. If you are VAT‑registered, you might already have one. If not, however, you can apply for one online via HMRC and you should receive it within three working days of your application.
For imports from countries outside the EU, you must also register with the CHIEF system. CHIEF (Customs Handling of Import and Export Freight) is a processing system that records customs declarations and collects revenue. It also collects trade and transport statistics and controls, and detects the import of restricted and prohibited goods. You declare goods through CHIEF using the Single Administration Document (SAD).
How do you obtain an import licence?
It’s not guaranteed that you will need an import licence. In fact, most goods don’t require one. The commodity code will show whether there are any controls, i.e. whether one of the following applies:
- A ban, which means imports are prohibited (e.g. offensive weapons)
- A quota, which means what can be imported is restricted by volume (e.g. textiles from Belarus)
- Surveillance, which means imports are monitored by licensing
There is no single authority in the UK responsible for controls and licensing, so it’s important to check carefully which particular government department is concerned with the type of goods you want to import. For example, Defra is responsible for import controls in respect of agricultural goods, including meat and dairy products.
Goods such as textiles and clothing, and iron and steel, require an import licence from the Department for Business, Innovation and Skills (BIS). To get one, you have to sign up to the BIS Import Case Management System (ICMS) and register for an import licence via an online form.
Importing: the stuff of dreams or a logistical nightmare?
The information above will come as no surprise to those who anticipated that there would be a lot to consider when taking those first steps towards importing. However, even the most energetic small business owner might struggle with the extra work.
On top of the legal aspects covered above, it is essential to find the right goods from the right suppliers, and build solid professional relationships with those suppliers. Also, don’t forget the transport arrangements and insurance on top. You will need to make sure that your imported goods reach you, and that they are in good condition on arrival.
Assuming you have to arrange everything detailed above, how are you going to get on with running your business?
Freight forwarding services
Using a freight forwarding service – an agent that specialises in moving cargo – enables you to overcome any logistics problems. On your behalf, the freight forwarder will oversee packing, deal with transportation, and maintain documentation. They will also arrange customs clearance and pay VAT and duty on your behalf, which will be included in the bill that you receive from them.
You will need to supply your freight forwarder with instructions, but after this stage you can leave them in charge of the importing side of your business, knowing that everything will be handled properly.
Whether you decide to use a freight forwarder or handle importing yourself, you should now know what your personal responsibilities are, and the importance of fulfilling them to ensure your small business’ success.
For more information on all things logistics, head to the Warehouse & Logistics section of the blog.