Finance

Companies need to beat the customs authorisation log jam before Brexit

By KPMG UK
Finance
Published: 12 February 2018

Given recent announcements on the Customs Union KPMG UK is urging companies to consider applying for Authorised Economic Operator Security and safety (AEOS) status now in order to avoid a Brexit log jam.

AEOS status can provide the right to ‘fast-track’ shipments through the customs process. Currently over 13,000 vehicles carrying goods pass through British ports each day. Of these, well over 80% (or over 10,000) are on their way to or from other EU member states. Whilst the UK is in the Customs Union, EU consignments are not subject to stringent customs administrative checks. Brexit means this could change from March 2019 and so a rush of applications is expected.

Explaining the need to apply for AEOS status now, KPMG’s Head of Customs, Bob Jones said: “According to the Institute for Government there are 180,000 traders who may need to make customs declarations for the first time after Brexit, potentially adding £4 billion and £9 billion in administrative costs. We estimate that of these, around 10-15% of these companies may need AEO status in order to access ‘fast-track’ and other key customs processes and privileges to help mitigate these and any duty costs. Firms should now be considering applying for AEO in order to have HMRC process and approve before March 2019 or certainly by the end of any transition period. Whilst this may look like a lot of time, the application process is extensive with potentially some 270 questions covering complex legal, HR, IT and financial issues. Companies often take around six months to prepare an application. With thousands of companies potentially submitting these applications, and HMRC estimating they may need an additional 3,000 to 5,000 staff, it’s easy to forecast the typical 6-12 month processing time becoming a log jam.”

Having AEO would not eliminate the regulatory barriers such as veterinary/sanitary checks and the requirement of license and authorisations. However, the UK Government White Paper suggests that the use of the “trusted trader” AEO system could be expanded to reduce the need for documentary requirements at the border, as a mitigation of the impact on ports. To date, only around 607 traders have been awarded AEO or “trusted trader” status by HMRC – ten times fewer than Germany. Of these, around 80% are forwarders or logistics providers. Less than 10 are firms overtly in the food and beverage sector.

AEOS status indicates that a company’s role in the international supply chain is secure, and that its customs controls and procedures are efficient and compliant. In most cases it provides the right to ‘fast-track’ shipments through the customs process at the ports, reduces financial security requirements and provides full access to customs special procedures and privileges.

Describing the need for early bi-lateral collaboration with France and Ireland, James Stewart, Vice Chair at KPMG UK said: “There is also an equal and opposite effect for the UK’s EU neighbours in terms of the increased customs processing and examinations Brexit could cause. It’s no good simply accelerating the UK process if the complementing EU import or export process does not enjoy similar accelerated treatment. Collaboration and post-Brexit mutual recognition on AEO is a starting point but traders will need to check and ensure simplifications can be applied each side. Early bi-lateral agreements, particularly with France and Ireland, may be essential.”