CDS is here – and this time, it’s for real

Martin Meacock, VP of Product Management at Descartes, talks about the implications of CDS on the end of CHIEF.

With a global pandemic, chaos at the borders, an HGV driver shortage and ensuing supply chain chaos, compounded by political uncertainty, inflation and a fuel and energy crisis – it’s fair to say UK business has had a challenging few years. And that’s not to mention Brexit.

Since exiting the EU, UK traders have weathered the introduction, delay and ultimate abandoning of some of the rules and regulations for importing goods into the UK. They’ve adopted the new, full controls on exports in the other direction and adapted to new processes laid out by the Northern Ireland Protocol. To add to the disruption, the way UK Customs declarations should be filed is changing and a new customs declaration system (CDS), will take over from the legacy CHIEF.

After the best part of four years, HMRC has finally set dates, and the deadlines are looming. Going by the current schedule, CHIEF will be withdrawn in two stages:

After 30 September 2022, you won’t be able to make import declarations on CHIEF.
After 31 March 2023, you won’t be able to make export declarations on CHIEF.

Lack of preparedness

HMRC recently sent letters to 220,000 GB VAT registered traders and although not all of them will be importers and or exporters, and many will use the services of a broker or forwarder, this communication is indicative of the lack of awareness – and lack of preparedness – for the impending move. An estimated 4,200 companies made customs declarations in 2017. That figure’s only increased post-Brexit, with a number of new players entering the intermediary market from consulting and the IT world.

While some traders were early adopters (and Descartes was the first company to get its customers onto the new system way back in 2018) a huge number have yet to make the switch.

Fear of the new system as well as scepticism about HMRC and trade readiness has been understandable – as too the expectation of further delays based on precedent – yet, the consequences of inaction are now speeding dangerously close to becoming a reality. It seems it’s taken the announcement of two final deadlines to spur the remainder into action – to find out exactly what’s required – and to many that’s come as a shock.

From the latest data requirements and processes, to the sheer scale of the challenge associated with new systems and software; the move from CHIEF to CDS is far from straightforward. CDS is a dramatic shift away from the previous ways of working in CHIEF, right from the way the customs declaration looks, to the new data needed.

HMRC has tried to introduce some simplifications. For example, a blanket document code to declare that no prohibitions or restrictions apply “999L” has been temporarily introduced under CDS to speed up onboarding. And, like other software houses, Descartes continues to make changes to ease the process; however nothing can replace the time necessary to learn a new system and there is nothing like real user experience to drive improvement.

“Companies will need significant help to make the change”

Training and education are essential as is access to test systems to ensure organisations understand the new processes and steps required. In recent weeks, Descartes has seen an exponential increase in companies engaging to be ready for CDS, showing a new hunger for education and training that we expect to increase as we move ever closer to the end of CHIEF.

Changes are also necessary to ensure that brokers are able to act efficiently on behalf of traders, including where traders must ensure they have set up their duty deferment accounts properly, digitally allowing brokers to use them on their behalf and ensuring they have put new direct debit mandates in place.

Brokers will also be looking to get more specific instructions from importers, not only regarding any prohibitions or restrictions but also with regard to the trading relationship between buyer and seller, and whether any considerations have to be made about the valuation of the goods being imported.

For die hard customs geeks this is nothing new, but CDS has brought this back into focus with specific declaration elements and the risk of a broker being considered jointly liable for any customs debt, if they are unable to prove they received specific instructions and are acting under a ‘direct representative’ status.

With all the pressure on resources to reach the maximum efficiency, automation is key part of CDS. But unless companies have already put in place the level of integration or master data required, then it might be too late to benefit.

Reality bites

There is a great deal of source information available. HMRC has provided documents, such as declaration completion guidance; while systems providers such as Descartes have created online training courses, videos and other online guides as well as further technical solutions to guide users without making decisions for them. But those who have left it until now hoping for individual attention are going to find it difficult and it may be impossible to receive the attention they would prefer. With just a few months to go, group sessions from software providers on how to use the software, or external training organisations who can provide more generic CDS guidance are now the most likely to help.

And while both software providers’ and HMRC’s support teams have been bolstered in anticipation of the surge of questions and enquiries, it’s inevitable that there will be delays in responding, which is why self learning and education is going to be vital.

Time critical

It’s never been more important for declarants to understand the requirements to submit the customs declarations they need to, and be aware of changes in the codes used or information required.

If you choose to use a broker rather than submit your own declarations there are still five steps that should be taken:

Register for a Government Gateway account if you do not already have one;
Apply for an Economic Operator Registration and Identification number if you do not already have one;
Register for the Customs Declaration Service via www.gov.uk/hmrc/cds-get-access . This will allow you to obtain your Import VAT and Postponed VAT statements as well as authorise declarants to use your deferment, cash or security accounts;
Choose which payment method to use and ensure you have set up the correct Direct Debits or authorisations;
Set up a process to ensure your broker has clear instructions and information about your consignment. For example – the incoterms, awareness for all values, the location information, and nature of transaction information.

Traders using brokers should also be prepared for the fact that the type of evidence and data they receive today will change – the old CHIEF prints just don’t exist anymore, the C88 is dead and the data is structured differently.

Conclusion

So even if there is a further delay to CHIEF decommissioning, or perhaps you only submit export declarations, it remains vital to take action today and be CDS ready; even if you do not plan to go live immediately you can both get on the front foot and take advantage of any dual-running possibilities.

Over time of course, CDS will become the new normal. Until then, let’s not fool ourselves that it’ll be a smooth ride, it’s a bumpy road to progress.