H.M.Paperwork - Filling out the Forms!

Most of the information in this section has been taken from "The International Freight Guide" with the kind permission of the British International Freight Association.

Bill of Lading
Airway Bill
CMR Note
Standard Shipping Note
Certificates of Origin
ATA Carnet
Movement Certificates
The Role of Customs and International Trade
Customs Entry and Customs Procedure Codes
Community Transit & the Single Market Effect
EDI - Customs, Trade & the Future

COMMUNITY TRANSIT & THE SINGLE MARKET EFFECT

All of the customs' activities discussed in this section so far have related to import and export. Now, let us consider shipments within the European Union which, since the establishment of the Single Market, are now considered as arrivals and dispatches rather than imports or exports.

Goods may move freely within the EU providing they are in "free circulation"; this means that they were either made within the EU, or have been imported and all duty and taxes have been paid outright on them.

Provided goods are in free circulation, no customs controls are placed on them while inside the EU. The complication comes if they first leave the EU and then return. For example, a truck which travels from the UK to Italy is likely to travel via Switzerland while en route. This means goods arriving in Italy could be either Swiss origin or of EU origin.

The method of resolving this is via the community transit system. Normally, if goods travel from one EU Member State to another directly, they require no evidence of origin. In the Italian example above, clearly some proof is needed that the goods are of EU origin. Copies four and five of the SAD are used for this purpose, and will accompany the goods first to allow transit through Switzerland, and, secondly, to prove on arrival that the goods are in free circulation from another Member State, by indicating that they are of T2 status.

The rules, therefore, are simple. If the goods are not accompanied by a SAD form or T1 as it is known, they are assumed to be in free circulation and no controls are needed. Goods which are not duty paid, or which have other controls placed on them, will have a SAD with them and be stopped at Customs while an entry is arranged. In the Italian example above, a T2 will be issued: this allows the goods to transit Switzerland, and to be allowed community treatment when they enter Italy as the T2 shows that the goods are of EU origin.

The community transit system is also used when goods which are not in free circulation need to travel domestically. For example, goods which arrive at Felixstowe Dock may need to travel to Heathrow for export by air. As duty will not have been paid on them, they are not in free circulation, and therefore need a T1 to accompany their transfer.

The community transit system is increasingly being adopted by countries which border the EU, and here it is used, not for entry, but to provide security for the goods travelling through a country en route for the clearance point.

Before being able to issue a T1 or T2 SAD for community transit, a guarantee is required by Customs to cover potential duty and taxes on the goods which it will cover, while they are at risk. An estimate is therefore made of the likely value of goods which will move at any one time to allow this calculation to be completed. A banker's guarantee is then required in Customs' favour which will cover all the potential duty and tax.

THE SINGLE MARKET EFFECT

We saw above in community transit that there are no controls on goods which are in free circulation and simply travel between one Member State and another. However, clearly governments need information about the types of goods and their value travelling, as well as controlling the VAT aspects.This is achieved in two ways: by asking the seller and buyer to provide details of value shipped and received, and by asking larger shippers to provide detailed information about the types of goods and values which they have moved. Looking at values, we find that larger shippers (remember, they are not "exporters") who make "dispatches" are required to provide a return of goods "dispatched" via a declaration known as "Intrastat". Larger shippers are defined as those who ship goods valued in excess of £195,000 per annum. This "threshold" varies throughout the community as under EU legislation each Member State is required to collect a certain percentage of statistics. Hence the threshold in Spain or Portugal may be much lower than in the UK.

For goods which are received or "arrivals" a similar form is required, again when a company has arrivals which exceed the £160,000 threshold. Hence, a company may have to make a dispatches return via Intrastat, but not an arrivals return as their inbound cargo is below the threshold.

Intrastat returns may either be made by manually completing the form and mailing to Customs in the UK, or by making a computer submission and transmitting the data direct.

How, therefore, can Customs check who has to complete an Intrastat return? The answer is that when a company makes its VAT return, it must indicate the value of goods which have been purchased from, or sold to, other EU Member States.

Turning to VAT, it is important to recognise that, when goods are sold to a VAT registered company in another Member State, no VAT is charged on the goods. This system applies only when the customer being charged is registered, and the sender shows the buyer's VAT number on their invoice. If the person being charged is not registered, then the UK rate of VAT becomes chargeable on the goods in the same way as if the goods had been sold in the UK.

The VAT return is also the route by which VAT is controlled. We have already seen that a trader has to provide information on the VAT return of goods acquired from and sold to other Member States. When values appear in these sections of the VAT return, Customs will automatically expect to see another form called an EC sales list, or ESL as it is commonly known.The ESL is only provided by the company which dispatches the cargo. On the form will appear the VAT details of the company to whom the goods have been sold, plus the value of sales made in the preceding VAT period. This information is provided to Customs in the UK, which then passes the data to its counterparts in Europe. The details are then used to ensure that the company reporting arrivals in the Member State of destination, accounts for the VAT which would have been due. A similar procedure applies to goods received in the UK but in the reverse direction.

In the future, there are plans for charging VAT on goods sold between Member States, but until this happens, the process of reporting sales made as above, must continue.

If the goods being shipped are not in free circulation, then a T1 will accompany them and a normal SAD declaration will be required, and duty/VAT will be payable when the SAD is prepared on arrival.

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