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 Going by the current schedule, CHIEF will be withdrawn in two stages:

  1. After 30 September 2022, you won’t be able to make import declarations on CHIEF.
  2. 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.

Exporters report ongoing post-Brexit challenges

Research from DHL Express following a 2021 study reveals mixed perspectives among small and medium sized British exporters for the remainder of the year, with one-third of those who export or plan to (33%) feeling the outlook for their business is more positive for 2022, with the remaining disagreeing (30%) or undecided (37%).

Reflecting on the time since the UK’s exit from the EU, businesses we surveyed report ongoing challenges and concerns since the departure, including volume of paperwork (45%) and complexity of regulations (50%). Despite the challenges, 60% of those who already export from the UK or plan to in the future agree that exporting goods outside the UK will continue to be a priority for their business in the future. This represents an increase from 51% of businesses surveyed one year ago.

More than a third (34%) of exporters or businesses planning to export state that the US is the market of most interest or likely to be most beneficial for their business if the government was to secure a new or enhanced trade deal.

The research is a follow-up to a study conducted one year ago and looks to explore the challenges facing small businesses across the UK. Nearly three-quarters of SMEs who export or plan to export in the future (72%) agree that Brexit has increased their costs of doing business, with over a third (38%) who already export or plan to, remaining concerned about a lack of awareness among consumers and customers about the additional import costs payable. Despite this, only a quarter of the SMEs surveyed (28%) have proactively alerted customers to the potential customs, VAT charges and shipping costs.

Ian Wilson, Chief Executive at DHL Express UK, said: “It’s been just over 18 months since the UK’s exit from the European Union, and this latest piece of research makes clear that businesses are still facing a number of challenges and are in need of support to help them navigate the changes.

Nonetheless, it’s encouraging that small and medium businesses are still continuing to prioritise exporting outside the UK, which shows a great deal of resilience through what has been a difficult time. As we look ahead to the rest of 2022 and the years to come, we hope to see more trade deals that smooth the path for global growth, and we’ll continue to support the small business community to help them thrive in a post-Brexit world.”

Slovakia: at the heart of Europe

At the recent World of Freight Expo in Bratislava, Slovakia, Logistics Business met with Zulf Hyatt-Khan, Deputy Chairman of the Council of Slovak Exporters. We spoke to  the Briton about his role, his passion for Slovakian trade, and how he is helping exporters from the country to expand their horizons.

LB: Please tell us what point of difference the council provides to its members?

ZH-K: We go back to April 2020 when our Chairman, Lukáš Parízek, founded the Council of Slovak exporters. He saw that there was a huge gap for exporters during the pandemic – problems with freight, with logistics, with cargo getting through into other countries. Manpower was down, automation systems started to fail, and there needed to be an interlocuter, so he decided to take on the mantle of creating a hub whereby all export-related topics could be centralised, whether that’s information, news, interlocution with embassies, with customs, with logistics, with freight carriers… All those disparate elements could be housed under one roof.

As a member association, we respond to the demands and the needs of our members. Apart from our strategic partners, all of them are exporters and they had these queries which we are able to help them with. Lukáš is a former Foreign State Secretary, so he had a very good relationship with state institutions and embassies. We have a particularly close relationship with most of the ambassadors here in Slovakia. That provides a unique point of difference, because we are able to communicate on behalf of our members just to make sure that their issues are dealt with.

LB: Why should businesses come to you? What benefits do you bring to the table?

ZH-K: Slovakia has a lot of potential, but [our members have been] previously over reliant on a relationship with the EU and with Germany specifically. Their aspirations to take their products into a larger market have yet to be fulfilled. So they come to us, they see an international organisation representing Slovakia’s best interests, and we make sure they have the opportunity. For example, we facilitated 15 of our members going to Dubai Expo 2020. We are opening up channels for gateways to China, with Hong Kong Investment… We are doing deals with various international institutions, which didn’t really exist here, to safeguard the interests of our members in these foreign environments.

Also, there’s an element of teaching. We’re not there to patronise our members, but we try to tell them that there’s an opportunity to internationalise their products which also didn’t traditionally exist. It’s a learning curve for us as it is for them as well.

LB: What are the specific strengths of the Council?

ZH-K: We pride ourselves on a number of elements. Firstly, we conduct our own academic research. We’ve recently commissioned a non-government export analysis which was a complete drill down into the minutiae of Slovakia’s export potential and its five-year history. We did that here with the University of Economics in Bratislava (EUBA). We’ve also recently published ‘How to do Business in the UAE’ in line with that Dubai Expo participation.

The other thing is, we’re here to help promote our members’ interests abroad, essentially, without being partisan. We are a non-government member association, so we don’t promote any  one company, but at the same time we view the collective as stronger together.

Added to that, we do podcasts with our private sector CEOs and Champions, we have an international podcast that we host with ambassadors and international luminaries, so that our members can understand what it is like going into new territories. Whether they are looking to go into Kazakhstan or the United States, we speak to those honorary consuls, we speak to those ambassadors and they paint an investment picture.

We see that as a two-way benefit; every time a Slovak business wants to go into a new market, then trade will come back the other way. Export is a two-way road – it means export for someone and import for someone else. We see those relationships as critical for our members.

LB: Can we talk about Brexit – what is your opinion?

ZH-K: There was a line drawn in the sand – either you were in the camp on one side or camped on the other. I think the media frenzy that surrounded it exacerbated a lot of peoples’ sentiments. On one side, I’d like to say I’m a big believer in the European project, but on the other side I see the advantages to the UK of being able to negotiate its trade deals without… it’s a bit harsh to say the ‘handcuffs of the EU’, but some of the restrictions and regulations that were imposed.

What I don’t approve was the manner in which it was thrust upon the UK public and how divisive it was for everyone. I think it will normalise; my parents always say “Britain is a plucky island and will just plod on”. I think that’s pretty much the focus. We see today there’s no petrol in the cars, there’s a lack of lorry drivers. It’s certainly not fluid, it’s certainly not smooth and the transition will be ugly, but eventually it will regularise and normalise.

LB: Bratislava is a great city in a great location, but just over the border is Vienna. What does it mean to your members and how you can help them.

ZH-K: It’s a bit of doubler-edge sword, really, to be honest. The centrality of Vienna, Budapest and Prague has often left Bratislava a little bit behind. Also in terms of infrastructure and investment potential. Has it maximised its potential? I’m hosting a panel [at World of Freight Expo] with the CEO of Bratislava Airport who no doubt will give us some insight into just how much volume is going through those airports, but at the same time the interconnectivity through the Danube and through the region has huge advantages for road freight and, potentially, train freight.

But in terms of airports, traditionally it has been hampered, and we’d like to see with a little bit of investment and a little bit  more ambitious infrastructure that Bratislava becomes more competitive amongst its nearby cousins.

Logistics Business (LB): We can’t help noticing you have a perfect British accent – how did you end up here in Bratislava?

Zulh Hyatt-Khan (ZH-K): You’re not the first person to say that to me this week. Yes, I am from the UK, and having spent some time travelling the world I was most recently in the Middle East. I married a Slovak lady and moved here to Slovakia.

It wasn’t always on my agenda to move to central Europe; however, I saw the potential of central Europe and Slovakia in itself to develop through its private sector and through its export, and that’s why I’ve settled here.

LB: Thank you very much, Zulf, for speaking with us today.

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