New HMRC Guidelines on Customs Responsibility

Is your business fully prepared to meet its customs responsibilities and avoid potential liabilities under the new HMRC guidelines?

HMRC has recently updated its guidance on the responsibilities of businesses when working with customs agents. These new guidelines aim to provide clarity on who is ultimately liable for customs debts, a crucial issue for companies involved in international trade.

The key takeaway from these updates is that the responsibility for any customs agent errors lies squarely with the business, not the customs agent. This includes instances where goods are misclassified, undervalued, or incorrectly imported using preferential rates. While customs brokers play a significant role in facilitating the process, the business is still accountable for the accuracy of customs declarations and any customs debt incurred.

The updated HMRC guidelines focus on two main areas:

Clear Assignment of Responsibility: HMRC has explicitly stated that businesses are responsible for ensuring the accuracy of the information provided to customs brokers. Even though brokers act on behalf of companies, businesses cannot shift the blame entirely if something goes wrong.
Liability for Customs Debt: Whether a business has direct or indirect representation with their customs broker impacts who is liable for any customs duties underpaid. Customs agent contracts default to making their business clients solely liable to HMRC and severely limit any contractual liability. Errors by customs agents, such as misclassification of goods or failure to meet the criteria for preferential rates, could lead to significant financial consequences for the business.

Adam Wood, Head of Commercial at Barbourne Brook, comments:

“To avoid potential customs issues, businesses should conduct a gap analysis to assess their current processes and identify areas of improvement. This analysis would help businesses understand where they fall short, and what needs to be corrected.”

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Adam Wood the Head of Commercial at Barbourne Brook

Adam Wood, Head of Commercial at Barbourne Brook, comments:

“To avoid potential customs issues … a gap analysis would help businesses understand where they fall short and what needs to be corrected.”

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In addition to this, businesses should:

Review and document internal processes: Ensure that proper controls are in place to prevent future errors.

Quantify errors: Whether it’s an overpayment or underpayment to HMRC, businesses need to quantify the mistake and take appropriate steps to correct it, such as making voluntary disclosures or filing claims for refunds.

Wood highlighted the importance of addressing these responsibilities promptly:

“With HMRC’s clarified stance, the defence of being unaware or uncertain about the regulations no longer holds weight. Companies must ensure that they have robust processes, controls, and resources to meet their customs obligations. These guidelines impact all businesses engaged in customs processes. Non-compliance or errors in customs declarations could lead to significant financial implications, affecting a company’s bottom line. Therefore, businesses need to take these guidelines seriously and act accordingly to avoid potential penalties or liabilities.”

In conclusion, the updated HMRC guidelines serve as a reminder for businesses to take full responsibility for their customs transactions. With clear guidance now available, businesses should proactively review and strengthen their customs processes to ensure compliance and avoid costly mistakes.