Now the UK has completed the Brexit transition, there are many new rules for warehouses to follow and much tighter stock auditing is needed by businesses who import or export goods between the UK and EU. Any business importing goods from outside the UK that wishes to delay duty payments until a sale has been made or manufactured goods are completed will need to be using a customs warehouse.

There are two types of customs warehouse, which is designed to store goods deposited by other people. These are a public or private customs warehouse. Depending on the scale of your business, you may decide to invest in a private customs warehouse, which you operate directly and which houses only your goods. Many organisations have taken this route, which is why warehousing is in such great demand currently in the UK.

If you wish to adopt the private customs warehouse route, you will need to be authorised as the warehousekeeper by HMRC and apply for this status. If you haven’t done so already, you will also need to adopt tight stock management and auditing processes – to precisely track the movement of goods, preventing stock losses and shrinkage. This requirement can be automated using warehouse management system (WMS) software.

Correct processes for private customs warehouses post Brexit

If you decide to invest in a private customs warehouse, you will be responsible for the following:

• Declaring goods correctly as they arrive in the UK
• Ensuring goods are in the correct warehouse within 5 days of customs clearance
• Having the right warehousing approvals (supplied by HMRC) for the types of goods held, e.g. food and drink, pharmaceuticals, frozen goods
• Correct removal or release declarations when the goods finally leave the customs warehouse, including the payment of any duty due.

Goods can be moved to another customs warehouse without triggering a duty payment, but you as the warehousing provider will have to keep records on the movement of these goods and their location. You’ll also need to complete a declaration when you move goods between different authorisation holders.

Customs warehousing for manufacturers

If you are a manufacturer and will ultimately be removing goods as a new finished product, these will need to have been classified as either the individual items upon entry, or parts of a finished product when they leave the warehouse. All the parts must be presented together in the quantities that make a specific number of the finished products. For example, if you’re removing parts A, B, C, D and E that make up product F, and you have 12 sets of each (60 parts in total), you can remove the goods as 12 items under the classification that applies to product F. In each case, the goods must have parts so far advanced that they have the essential features of the finished product. Where the finished product contains UK and non-UK parts, the non-UK goods must form the essential character of the finished product before the addition of the UK parts.

Paying duty and import VAT

Calculating the amount of duty and VAT on goods removed from a customs warehouse to free circulation will depend on a number of factors including the quantity of goods being removed, the value of the goods and the tariff classification of the goods. In the future, the RoO (region of origin) of the goods will also become more critical, with lower duty rates for manufactured goods containing a higher proportion of UK RoO raw materials. Some items may also qualify for a reduced or zero duty rate under a tariff preference or a tariff quota, or the goods may be entitled to an import duty relief.

Tight post Brexit audit trail

All of these changes highlight the significant increases to paperwork and the tight audit trail now needed as a result of Brexit. Using a WMS can help to regain control of key processes in your post Brexit warehouse, for example by automating stock management. As soon as goods enter the warehouse, they can be checked in and assigned a secure location, where they stay until officially released. At any point in time, reports can be generated to verify exactly where and how much stock is being held in a customs warehouse. This verifies that no leakages have taken place.

Key advantages of perpetual inventory checking for customs warehouses

On an ongoing basis, stock audits also can be conducted automatically, using perpetual inventory functionality which avoids any need to hold official stock counts. Instead, perpetual inventory checking (or cyclical counting) becomes a daily housekeeping process to verify the on-hand quantity of a specific number of stock products. It is the most effective method of accurately recording and maintaining the inventory in a customs warehouse.

7 reasons why perpetual inventory is the most efficient stock auditing method

• Ability to continue working as usual while counting is in process;
• Accurate recording of all goods movements to control duty payments;
• Ensures stock receipts are put away in the correct locations and can be identified quickly;
• Prevents shrinkage from theft and the mishandling of stocked items;
• Allows the Audit trail to be shortened to a more acceptable level;
• Opportunity to continually improve processes by analysing stock discrepancies;
• Avoids HMRC non-compliance for duty payments and indirect taxes.

If you are interested in learning more about how a WMS can help manage the paperwork in your post Brexit warehouse, please get in touch.