The High Price Of Broker Errors In Customs Declarations

The research, which was carried out by customs consultancy firm Barbourne Brook, focused on broker error rates specifically within freight, mass and currency.

It identified a startling average of 34% errors, with some brokers recorded as submitting 100% of declarations with errors. The businesses working with these brokers are potentially over or under paying customs duty by a significant margin.

HMRC is becoming more proactive when it comes to auditing and given that these discrepancies land squarely on the business rather than the broker, import and export businesses are paying the price. Figures released recently by HMRC showed that fines from audits up a staggering 74% since 2020-2021**.

There are many reasons why these costly errors are stacking up. The industry has been slow to digitalise with the declaration process still done manually, leaving room for human error.

In addition, businesses and brokers are struggling to deal with the post-Brexit market exploding, coupled with an insufficient capacity to service due to high staff turnover rates. Conversely, if a business does not have good processes, then the information given to the broker may be incorrect, meaning they could never produce a correct declaration.

Adam Wood, Head of Commercial at Barbourne Brook:

“Businesses wrongly think that what they’re giving to their customs brokers is what is being declared. However, our research indicates a different story entirely. Imagine you’re importing raw material in USD, but one in every ten transactions is wrongly declared in GBP because the broker’s system defaults to this currency. The difference between assumption and reality could cost your business thousands. Whilst some of these errors could be legitimately explained through business nuances, there is a clear call to action for UK businesses to focus serious attention on this area.”

Peter Snaith, Partner and Head of International Trade at law firm Womble Bond Dickinson, added:

“Given these high error rates and the fact that most contracts don’t include provisions that pass these risks to the declarant, it’s crucial business leaders take the necessary steps to avoid hefty fines and penalties. A first step would be to evaluate your current set-up across all of the suppliers you engage and establish what error rates you are currently working with. It’s also entirely reasonable to require contractual protection for services provided to you which do not achieve an acceptable service level, as you would expect for other parts of your business.”

On the flip side, whilst minor errors, compounded over time, can create significant exposures, they can equally amount to considerable savings and/or reclaims. Where businesses have been overpaying duty, they can go back to HMRC for up to three years to reclaim these overpayments. The customs broker for a clothing manufacturer in the UK had not been claiming preference correctly, and it is now managing through a £2.1 million reclaim from HMRC, which will be a huge cash injection now and result in ongoing savings when the error is corrected.

*Research was carried out on 107 businesses using Barbourne Brook’s CAT360 analysis tool.

**Based in information released by HMRC in response to a FOI request By Barbourne Brook.