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HMRC commissioned IFF Research to undertake research on the use and understanding of customs simplifications, customs procedures and Authorised Economic Operator (AEO) authorisations.Ìý

Under European Union (EU) rules, importing and exporting goods between member states of the EU does not require special customs documentation. These rules apply for as long as the UK remains a member of the EU. UK businesses that trade with the Rest of the World (RoW) are required to be compliant with the Union Customs Code (UCC). This came into force on 1 May 2016 and governs all non-EU international goods movement.Ìý

To support and encourage international trade, the UK offers a wide range of customs simplifications and customs procedures for UK businesses that trade outside the EU.Ìý

Customs simplifications, such as simplified customs declarations, are intended to reduce import and export clearance times, administrative burden, and costs for businesses that have a history of voluntary compliance with customs and legal and regulatory requirements.Ìý

Customs procedures, such as operating a customs warehouse or moving goods under transit arrangements, are also available to help facilitate RoW trade. Separate authorisations approved by HMRC are required to operate customs procedures. The business must demonstrate compliance with relevant criteria and is bespoke to the business.Ìý

In addition, businesses can also apply for AEO status ^{[footnote 1]}. This is an internationally recognised quality mark indicating that a business’ role in the international supply chain is secure, and that their customs controls and procedures are efficient and compliant. AEO status can be granted for customs simplification (AEOC), security and safety (AEOS), or both.Ìý

While the UK remains a member of the EU, UK businesses who are trading solely with EU countries do not need to provide customs documentations, and therefore do not need to hold customs authorisations, simplifications or AEO status. However, the UK will leave the EU on 29 March 2019, and more SMEs may start applying to HMRC for customs simplifications, procedures or other authorisations.Ìý

2. Research Objectives 

Considering the UK’s planned exit from the European Union in 2019, HMRC commissioned IFF Research to undertake primary research to help HMRC better understand the current awareness, use and potential demand for customs simplifications, procedures and authorisations among Small and Medium Enterprises (SMEs).Ìý

3. ²Ñ±ð³Ù³ó´Ç»å´Ç±ô´Ç²µ²âÌý

 This report summarises key findings from 2 strands of research: 

• a quantitative telephone survey conducted with 500 individuals in charge of customs activities of businesses in June 2018 (448 interviews were conducted with SMEs and 52 with businesses providing road haulage services) 

• a qualitative ‘follow-up’ phase consisting of 41 in-depth telephone discussions with respondents from the main survey conducted from June to August 2018   

4. Key findings 

Overall awareness of customs simplifications, procedures or authorisations was low among SMEs. The majority (62%) were unable to name any customs simplifications, procedures or authorisations without being prompted during the survey and 12% were unable to recognise any of the customs simplifications, procedures and authorisation names they were prompted with during the survey.Ìý

Findings suggested that this lack of ‘top-of-mind’ awareness was linked to the fact that most SMEs did not have staff dedicated to dealing with the customs process specifically. Many participants stated that this was just one aspect of their job and that their knowledge of, and interaction with, the customs process was limited due to this.Ìý

Around 4 in 10 SMEs (42%) and 4 in 10 road hauliers (42%) were using any customs simplifications, procedures or authorisations. Inward Processing (IP) was the type most commonly used for each audience (by 16% of SMEs and 21% of road hauliers). Simplifications were primarily used to improve cash flow, for financial gains and to reduce admin burden.Ìý

A sizeable minority (37%) of SMEs were unsure whether they were using any customs simplifications, procedures or authorisations. Results from the quantitative survey and feedback collected from qualitative discussions suggest that this was largely driven by their use of third parties or agents.Ìý

The vast majority (92%) of SMEs used third parties or agents to deal with at least some of the customs process of their behalf. Businesses said they are ‘shielded from’ and had limited interaction with the customs process itself since their agents tended to deal with the whole process (49% of SMEs said the third parties or agents they used dealt with the whole customs process on their behalf, 37% said they dealt with at least some of the process and 5% said it varied).Ìý

SMEs that participated in qualitative interviews (particularly smaller SMEs) felt they heavily relied on third parties or agents to be able to conduct overseas trade because they have knowledge, expertise and resources that SMEs do not have in-house.Ìý

There was not a strong demand for additional use of customs simplifications, procedures or authorisations at the time of the research. However, there could be an appetite for increased use in the future. Some businesses that participated in qualitative interviews suggested they were not considering applying due to a lack of knowledge of customs simplifications, procedures and authorisations and findings from the survey also indicated that there is an appetite for more information on this.Ìý