Cutting out unnecessary expenditure is a top priority for most fruit firms at the best of times, let alone in the midst of a recession. But when it comes to import tax bureaucracy, help is at hand.
The Customs Consultancy is an independent company that helps importers throughout the EU reduce the amount of customs duty and other indirect taxes they are required to pay. Over the last 15 years, the Reading-based team estimates that it has collectively been responsible for the recovery of more than €60 million (£54m).
As well as helping food - specifically fruit - importers, The Customs Consultancy also represents clients in the automotive, chemical and electronics industries.
Director Steve Cock says: “Our aim is to provide international customs duty minimisation and recovery services with little or no resource input from our clients. We seek to manage the entire claim process with regard to duty recovery and we take on the responsibility for satisfying any reporting requirements in relation to ongoing savings.
“In order to bring about repayments and savings, we always seek the pre-approval of the relevant revenue authority. As a result, our work can be relied on.”
The firm works on a ‘success only’ basis, with fees based on the amount of duty recovered or the future savings achieved. “Savings are accumulative and we could reasonably expect to reduce any importer’s duty payments by between 10 and 30 per cent,” Steve Cock tells FPJ. “In addition, we are able to recover similar levels of duty that have been overpaid in the previous three years.”
So how can The Customs Consultancy glean savings? Duty, Steve Cock explains, is based on three factors:
• Tariff classification - i.e. what the goods are. This determines the base rate of tax, which is generally expressed as a percentage;
• Country of origin - where preferential trading arrangements allow for decreased rates of duty or even its elimination.This is particularly important in the fresh food industry, whenproduce is often sourced from less developed countries, where preferential rates apply; or
• Value - which may or may not be set at the time of import, i.e. invoiced goods or those shipped on a consignment basis.In the case of consignment goods, duty is paid on deposit with the importer required to report the value of the goods when it is eventually determined, i.e. what the supplier is eventually paid.
Steve Cock explains: “In relation to the above, within the fresh food industry, the first two points cannot be manipulated.Any duty savings must, therefore, come from changes to the value of the goods.
“In relation to value, there are generally two ways to save duty. This can be achieved by making use of allowances, which exist to eliminate non-dutiable factors from the value for duty.In addition, the importer can recover duty when it is over-paid as a result of the goods not being of the expected quality.As a further point in relation to fresh produce, there is also the impact of Simplified Import Values (SIV).”
SIMPLIFIED IMPORT VALUES
The SIV system allows for fixed duty payment based on a euro value per 100kg of imported produce.This euro rate is calculated with reference to the prices achieved for fresh produce across the EU. As most of the market data that is used to compile the SIVs is generated in the eurozone, the values that are set are weighted in favour of averages that are achieved in this currency.
“When sterling is strong in comparison to the euro, this benefits UK importers,” says Steve Cock.“However, the opposite is equally true.At this time, the euro is particularly strong and UK importers are generally advised to move over to invoice or computed values.In the case of one of our clients with a wide selection of product types, the saving by moving over from SIVs in 2008 was 20 per cent.The forecast duty reduction for 2009 is 35 per cent, as the euro has increased in value.For our clients that have made use of SIVs in the past, we take on the responsibility of calculating the value to be declared to customs.”
Virtually every consignment of imported fruit will contain goods that are below the required standard. “Often this is picked up by the importer, especially when the goods are sorted and re-packed before onward sale,” says Steve Cock. “In such circumstances, we have found that it is extremely unlikely that the importer will seek a refund of the duty in relation to the poor-quality fruit.The losses involved will be dependent on the type of fruit involved.We have found that the greatest losses are in stonefruit and, for example, we are aware of rates as high as 30 per cent in bad years for cherries. Typically, the rates fall at about five to 10 per cent.”
BUYING COMMISSIONS
It is very common for fruit to be purchased from agents, who in turn source the goods from growers.“Where this is the case, the agent will certainly increase the value of the fruit purchased before selling it on to the importer,” says Steve Cock.“This uplift, however, is not dutiable and can be excluded from the value declared to customs. Typically, we find that buying commissions fall in the range of five to 7.5 per cent. In order to make the deduction, the value needs to be distinguished from the price paid for the goods.This can be done on the supplier’s invoice or customs may accept a periodic declaration.”
FINANCING
Where an importer is given time to pay for the fruit that it imports, there is an element of financing included within the price declared. “As with buying commissions, this element should not be subject to duty,” says Steve Cock.“The value of the financing will depend on the rate of borrowing in the country of export and the time given to pay for the goods.Given that many fruit-exporting countries do not have first-world economies, rates of interest can be high.As a result, for each 30-day period granted in the trading terms, we are generally able to deduct one per cent from the value for duty.”
FAIRTRADE
When Fairtrade fruit is imported, part of the value of the consignment represents a charitable donation,which does not form part of the true value of the goods and can potentially be deducted.
AIRFREIGHT
When fruit is delayed and has to be airfreighted, and the terms of trade provided by the supplier include the cost of freight to the EU and this is expected to be by sea, importers can be left at a disadvantage.“The value of the goods declared to customs will have increased to include this much more expensive means of transport,” says Steve Cock.“It is possible, however, that the value of seafreight can still be declared.Where this occurs, as much as half the duty paid can be refunded.”
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