What customs rules apply when I buy Northern Ireland-made incubators in England?
“I buy incubators from my British supplier in Manchester, England. He is a distributor for a Northern Irish manufacturer of these machines. What customs rules apply when I import the incubators into the Netherlands?”
The UK consists of England, Scotland, Wales, and Northern Ireland. Northern Ireland follows the customs rules of the EU. This separate status is defined in the EU-UK Trade and Cooperation Agreement 'Protocol on Ireland and Northern Ireland'.
Export from Northern Ireland to England
The manufacturer files an export declaration for the incubators with customs, using HS code 8436 21 00 00, upon sending them to the distributor in England. The British distributor files an import declaration in England. Customs assesses whether the distributor must pay import duties. For these incubators, 0% import duty applies in the UK. The distributor pays 20% UK VAT, but can claim a refund.
Export from England to the Netherlands
Generally speaking, the UK distributor will file the export declaration. In the Netherlands, the importer files an import declaration. However, if the buyer and seller have agreed upon the Incoterm EXW, the buyer is responsible for the export declaration. If they have agreed upon the Incoterm DDP, the seller needs to file the import declaration.
In the Netherlands, you pay 1.7% import duty and 21% VAT to import incubators. You do not pay any import duty if the incubators are of preferential UK origin. In the EU-UK Trade and Cooperation Agreement (page 487, and notes 3 and 4 on page 441) you can read when a machine with HS code 8436 has preferential UK origin. You can reverse-charge the VAT with an Article 23 permit.
Proof of preferential origin
You prove the preferential UK origin of the incubators to Dutch Customs with a Statement on Origin. Your supplier includes the text of the statement (pdf, explanation in Dutch, texts in English) on his sales invoice and adds his GB EORI number.
Your supplier needs proof that the incubators are of preferential UK origin. After all, the supplier did not produce them. He asks his Northern Irish supplier for a Supplier's declaration for products having preferential origin status.
Buy directly in Northern Ireland
You can also have the incubators shipped directly from Northern Ireland to the Netherlands. Because Northern Ireland follows the customs rules of the EU, you can import the goods into the EU without a customs declaration. In this case, the manufacturer must agree to the direct delivery of the incubators. This can have consequences for his agreement with the English distributor. If the distributor holds exclusive sales rights for the EU or the Netherlands, he will have to fundamentally change this agreement. The distributor then loses income, because he no longer supplies you.
Northern Irish VAT
In case the Northern Irish manufacturer directly supplies the incubators, he may transfer the Northern Irish VAT to you. This is according to the rules for intra-Community acquisition. The manufacturer will include his Northern Irish VAT number on the invoice, plus your Dutch VAT number. He will state the 0% VAT rate with the text: 'VAT zero-rated intra-Community supply of goods following article 138 Directive 2006/112/EC'.
You include this VAT in your VAT return under section 4b 'Supplies/services from countries inside the EU'. You calculate 21% turnover tax over the purchase amount of the invoice and include this amount in your VAT return. You also include VAT amounts listed under section 4b in section 5b, ‘Voorbelasting' (input tax). On balance, you will not pay any VAT on the purchase.
My UK customer has returned a bread machine for repair and adjustment. What do I have to arrange?"In 2005, I delivered a bread machine to a UK customer. My customer now wants to have this machine repaired and adjusted. What do I have to arrange for export and import?"
The bread machine with HS code 8438 10 10 00 is located in the UK. The EU is a ‘third country’ for the UK, which means an export declaration at UK customs is required. And an import declaration is required at Dutch Customs.
UK declarationThe exporter files an export declaration with customs in the UK. Who acts as an exporter? You, a customs agent, or your customer?
If you agree with your customer that you pick up the machine and arrange all transport, then you are the exporter. You can arrange this with the Incoterm® Ex Works, for example. You arrange the export declaration with British customs. For this you need access to the UK declaration system, which is the Customs Handling of Import and Export Freight (CHIEF). You also need a UK EORI number.
You can also outsource the declaration to a local customs agent. For this you also need a British EORI number for your company, but you do not need to access the CHIEF system yourself.
You could also agree with your customer that they will file a declaration in the UK. In that case, you will need to use a different Incoterm®, because your customer is now also responsible for (part of) the transport of the bread machine.
Declaration in the NetherlandsYou will need to agree on who will act as the importer for the import declaration at Dutch Customs. If your customer arranges all transport, including customs declaration, you agree on Incoterm® DDP. If you agree on a different Incoterm® together, you are responsible for the customs declaration.
You use an EORI number for the customs declaration in the Netherlands. If you make a declaration yourself, you need software to access the declaration system of Dutch Customs. You can also outsource the declaration to a customs representative, carrier, or forwarder.
In the Netherlands you pay import duties and VAT. The import duty on this bread machine is 1.7%. The VAT rate is 21%.
After repairAfter the bread machine has been repaired and adjusted, it will be returned to the UK. Customs declarations are also required for the return journey. In the UK, you pay duties and UK VAT on the import of the machine, including repair and adjustment costs. For the bread machine with HS code 8438 10 10 00 the import duty is 0%. The VAT is 20%.
Less costs with customs processingYou pay no import duties and VAT when you use the inward processing procedure. For this procedure, you apply for the ‘inward processing’ authorisation via the EU Trader Portal. In the UK, your customer applies for the ‘outward processing’ permit, because this permit requires you to be in the UK. You now do not pay import duties and VAT on the bread machine that you have repaired and adjusted. In the UK, your customer will only pay duties and VAT on the costs of the repair and adjustment. The import duty is 0% and the VAT 20%. If the repair is covered by the warranty, the VAT on the repair is also exempt. Your customer then only pays VAT on the value of the adjustment.