Capital projects are complex, expensive and high risk. We are here to help!
Through Barbourne Brook’s collaboration with the law firm, Womble Bond Dickinson, we offer a holistic approach help you save money on capital projects. Together we provide clients with an enhanced service, offering a unified approach and access to in-depth customs planning and legal knowledge. We guide clients through the complex customs duty considerations associated with imports and exports in a post-Brexit world.
- Barbourne Brook can assist with customs planning to deliver cost savings and reclaims. Failure to do so could result in high unnecessary customs duty costs.
- Taking legal advice from Womble Bond Dickinson from project inception on procurement strategy and appropriate contract terms can save you money on the overall contract package, and help avoid costly disputes.
How to save customs duty on capital projects
Customs planning involves modelling the customs duty costs under the options open to the business, achieving improvements in gross profit margins and working capital through cash-flow savings thus making suitable elections to minimise customs duty costs, and ensuring planning will pass scrutiny by the customs authorities.
Customs is an audit-based tax, which means imports remain open for at least three years. The customs authorities inspect less than 1% of goods at the time of import. Any errors can lead to:
- Collection of underpaid customs duties
- Penalties up to the value of any underpaid customs duties
- Delays at port or seizure of goods
- Loss of any customs duty relief on the imported goods
- Reputational damage
Customs planning on capital projects focusses on the core elements that determine your duty cost, namely:
- Tariff classification
- Origin and the use of Free Trade Agreements
- Customs valuation
- Use of special procedures or reliefs
How does it work?
We have used simplified Case Studies to demonstrate how careful planning can dramatically impact profit margins and working capital.
There are 2 scenarios where a company implements a new chemical processing plant and contracts a project management company to manage the acquisition and import of the plant on their behalf, as well as continue supporting it in the future.
A Freight Forwarder is engaged to import the plant. The Freight Forwarder asks the project management company for instructions, including the tariff classification and value of each item of plant imported. The project management company asks the plant suppliers for tariff codes for each part of the plant to declare to customs at the time of import.
Capital Projects Case Study A Analysis identifies that the finished plant would be classified to a tariff heading that attracts 1.5% By using customs options and elections such as Split Consignment Relief or Inward Processing Tariff Inversion would enable you to treat the imports of the plant as the finished plant itself, giving rise to a cost of £646,000.00.
Using this approach, a total saving of £614,000 could be achieved.
Capital Projects Case Study B In this example, the IT Equipment costs were £60m rather than £3m so it is better to declare the individual parts of the plant separately. The duty costs using the election to use the tariff rate of the finished machine in this instance would be £95m at 1.5%, so £1,425,000.00.
By choosing to classify the items individually, a total saving of £165,000 could be achieved.
Essentially, getting the correct and accurate tariff codes for the plant is challenging but crucial for regulatory compliance and cost modelling. The importer’s responsibility is to determine tariff codes, and the supplier often provides best guesses based on customs tariffs in the source country.
Additional Savings
In some instances, other customs planning could further reduce customs duty costs through:
- Stripping out qualifying spend from the customs value (e.g., post-import assembly costs).
- Additional reliefs in cases where you move the plant to the UK from existing overseas operations.
- Use of free trade agreements for qualifying movements.
Barbourne Brook’s Approach
Barbourne Brook’s team of experts work with clients to find potential cost savings. We get specific authorisations and agreements to apply any planning, and monitor transactions throughout the process to ensure you make the necessary claims. This turn-key approach provides greater certainty of realising the savings, minimises compliance risk, and speeds up delivery.
Womble Bond Dickinson’s Capital Projects team can help you with procurement strategy and avoiding legal pitfalls
Womble Bond Dickinson’s team specialises in plant and infrastructure projects. With our depth of our experience of industrial projects, we can offer valuable project management support, not just legal resource. We can help lead you through the process and manage risk at every stage. We can add most value if you involve us at or before setting your procurement strategy, rather than after you have started making buying decisions. Our depth of experience allows us to help you draft RFQs in a way to avoid cost surprises down the line and maximise your legal position.
As a large firm with domestic and international reach, we can bring the scale and depth of resource that you need for large projects with quick turnaround times. Alternatively, we can provide a few of our lawyers with specialist knowledge and an international skill set to plug-in as part of your own team. Unfortunately, capital projects can run into unforeseen problems. We can ensure your contract terms help you avoid bumps in the road, and give you robust legal protection.
Next Steps
If you are considering a capital expenditure project or have recently completed, then our experienced team can advise.
Customs planning on capital projects is just one of over 200 tried and tested planning ideas we have successfully implemented for our clients over the last thirty years.
Contact Adam Wood to arrange a free initial consultation to better understand how customs planning can deliver cost savings for your business.
Lucy Pringle, Partner, forms part of Womble Bond Dickinson’s Capital Projects team, which can offer support on every legal aspect of your project from start to finish. Womble Bond Dickinson can take care of all the legal issues and support you in managing the related operational considerations to help make sure that your project, whether big or small, is a success. Contact Lucy Pringle.
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