Business Finance: Peter Harrup warns of changes in the importy duty regime
- Credit: Archant
International trade continues to be a driving force of the world’s economy, and importing goods into the UK is common practice for many local manufacturers and their supply chain.
But when did you last take a detailed look at the amount of customs duty your company pays? If it’s been a while and you’ve left it up to forwarding agents to manage the process, changes to customs duties may have already started to eat into your profit margins.
Recent reforms have radically changed entitlement to preferential duty rates. Many countries have been removed from the generalised system of preferences (GSP) scheme, which grants lower (sometime nil) rates of duty to goods originating in these countries at the time they are imported into the European Union (EU).
From January 1, 2014, the reformed EU GSP scheme has focused on encouraging trade with countries most in need, known as the “least developed countries”. As a result, only 87 countries now benefit, compared with 176 last year. Preferential access for specific products from India and China, among others, have been removed, while countries such as Brazil and Russia have lost their GSP status altogether.
Further changes are afoot. From 1 January, 2015, China, the Maldives and Thailand will also be removed from the GSP scheme. Goods originating in these countries will no longer benefit from preferential duty rates unless they enter into a free trade agreement with the EU.
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All companies involved in international trade need to understand the impact of these changes on their supply chain and ultimately their bottom line. A review of the preferential rates of duty available under the GSP agreement and other FTAs that the EU has in place can deliver real value.
Businesses should seek to identify alternative source countries where preferential rates of duty are available. Even if commercial factors such as quality and existing relationships with suppliers make alternative sourcing problematic, there are a number of other customs duty reliefs and regimes which could mitigate your duty burden.
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Importers must also be aware of HM Revenue & Customs’ commodity codes for imported goods, inaccurate use of which is potentially costing businesses thousands of pounds a year. A short time spent researching the available codes and methods of obtaining exemptions on certain goods can pay big dividends in cost savings on import duties.
: : Peter Harrup is a partner at BDO LLP in Ipswich.