Exports: when do you need additional customs paperwork?

While some goods may be relatively simple to export, others – such as military equipment – need an export licence. This requirement also extends to goods deemed dual-use, for example drones that could be used for recreational or military purposes. 

“We see quite a high level of ignorance regarding the requirements of an export licence,” says Roger Marshall, a Trade and Customs Specialist at the Institute of Export & International Trade (IoE&T). “If you’re shipping missiles and tanks, you tend to know you need an export licence. However, we also see a lot of companies, particularly new technology companies, that have developed goods or software for recreational or commercial purposes that could also be used in a military context. Yet they are unaware that they need a licence under dual-use requirements.” 

The animal, plant and food product industries are also subject to extra conditions, such as health certificates and veterinary documentation. The obligations are varied and complex, necessitating specialist sector knowledge. “You have to know your products and whether your product is categorised as high, medium, or low risk; this dictates what is required in terms of documentation,” says Marshall. 

He adds that it is not high-risk exporters, such as raw meat providers, that usually make errors as they are well-versed in what is required. Lower risk exporters who are unsure of their categorisation are more likely to get caught out. Similarly, dangerous goods, such as chemicals, also require extra authorisations for shipping. 

Failure to understand the requirements and complete paperwork correctly can lead to delayed or failed shipments. “The customs authority on the other side also has the right to destroy those goods or return them for destruction, which has a huge impact on profitability,” says Ruth Corkin, Principal for Indirect Tax at Hillier Hopkins and a member of ICAEW’s Duties Committee.

Meeting export market requirements

In addition to their UK obligations, businesses must also remember the import conditions of the markets they are exporting to. Certificate of Origin requirements are a case in point. 

“It is the market that you are shipping to that will dictate what is required in terms of evidence,” says Marshall. The EU is relatively light-touch, he explains; you can self-declare that goods are of UK origin for many products. Shipping to Saudi Arabia, on the other hand, is completely different. “You will need a certificate of origin, verified by your Chamber of Commerce and the Saudi Embassy.” 

To check market-specific requirements, the government’s ‘Check how to export goods’ service on the UK Integrated Online Tariff website is a helpful starting point. 

Managing VAT implications

Exporting introduces several VAT considerations. “If the exported goods aren’t zero-rated VAT items, then you have to prove that the goods have moved,” says Corkin. “The work carried out for customs is part of this process, but you must be able to link your invoice to any delivery note and make sure all of the references tie up.” 

If you don’t, HMRC may argue that while you have an export declaration and an invoice, there are no references to link the two together and no evidence that the goods have moved. In that case, they will ask for the 20% VAT rate. “We see a lot of companies caught out because they don’t have this bundle of paperwork,” says Corkin.

Managing the paperwork and reference chain can be particularly tricky, depending on the Incoterms used to manage the delivery process. “Ex Works (EXW) is especially difficult as a shipping term,” says Corkin. “The customer is in control of all the paperwork, but you might not receive it. In this case, HMRC advises to charge VAT until the paperwork is provided and then you can credit it.”

Accessing export support

Completing export paperwork and customs declarations is a huge information-gathering exercise that requires specialist knowledge. Businesses looking to develop their expertise can turn to several resources, starting with the government’s international trade website and the UK Export Academy. 

Chambers of Commerce, along with bodies such as the IoE&IT, are also useful sources of support and guidance. Yet, ultimately, this is where professional advice accountants and customs agents can come to the fore by helping businesses successfully access new markets and stay on the right side of customs and duties regulations.