As the UK seems set to exit the Customs Union post BREXIT, the implications for the movement of excise goods between the UK and the EU are becoming clearer.
At present excise goods in EU Free Circulation (that is those produced in the EU or imported to EU Free Circulation) move between the UK and the rest of the EU under the Excise Movement Control System (EMCS). The excise duty is suspended under cover of an electronic administrative document (e-AD) with the excise duty being paid in the Member State of destination (consumption).
A UK excise trader delivering to a customer in another Member State can submit an e-AD for his consignment to HMRC. The e-AD is closed and his guarantee discharged once he receives confirmation via EMCS that the goods have been delivered. If he buys from a supplier in another Member State, the goods are delivered directly to his door and he confirms receipt in EMCS. His supplier is responsible for the guarantee.
If the UK leaves the Customs Union, UK acquisitions and despatches become UK imports and exports. Exports from the UK to the EU will require a UK export declaration and an EU import declaration. For UK imports from the EU the opposite will apply. But at least there will be no more INTRASTAT.
Having to potentially submit import and export declarations will be bad enough and will increase cost and could lead to delays in customs clearance. For goods which are also subject to excise duties (alcohol, tobacco products and mineral oils) things will be even worse.
Post BREXIT, the EU will undoubtedly continue to operate EMCS. But what will UK companies who trade with the EU do?
A UK supplier of excise goods with a contract on a delivered basis will need to:
- export from the UK
- prove he has done so to discharge his UK excise duty liability
- import the goods into the EU and (assuming he customs clears them into the EU at that point).
- place them under EMCS at the point of import.
All this will be a lot more complicated, costly and time consuming than is currently the case.
Imports will be slightly simpler in theory. However, unless an importer wants to pay the excise duty at the point of arrival in the UK, he will need to provide a financial guarantee to cover any losses between that point and his bonded warehouse, as his supplier’s EMCS guarantee will end at the point of export from the EU (as is currently the case).
Businesses need to be as ready as they can to adapt to any changes. They can start to do this now by ensuring they fully understand their supply chains and their part in it and ensure their contracts do not bind them into continuing to do something post BREXIT they either cannot do or which will be prohibitively expensive.