Last November, the government’s Revenue & Customs office (HMRC) published guidance which introduced three options for documenting the transfer of goods between Great Britain and assets on the UK Continental Shelf (UKCS).
These changes, which took immediate effect, mark a significant shift from the existing process. The reasoning behind this sweeping legislation is crucial in shaping the future of an industry already facing considerable challenges.
The options are:
- Full declaration
- Simplified declaration
- Declaration by Conduct (DbC) using the UKCS imports/exports process
Full declarations: businesses are to provide comprehensive shipping details, just as they would for goods moving outside the UK. This includes commodity codes, country of origin, values and other essential data for every item.
Simplified declarations: while HMRC has confirmed this option exists, I am personally unaware of any known approvals for Entry in Declarant’s Records (EIDR) applications specific to the UKCS. In principle, companies should be able to enter goods into records and submit a Customs Declaration Service (CDS) entry at a later date.
Declaration by Conduct (DbC): this is the newest and most significant change that the guidance introduced. The DbC is to be made in two parts:
- loading/unloading a vessel or aircraft going to or coming from the UKCS; and
- submitting information about the goods to HMRC.
Historically, the submission was made using the FAL and GAR forms but from last November, the G-Form was introduced to complete this action. This approach aimed to lighten the administrative burden on businesses by cutting out the need for a declaration at the point of shipment.
However, this is not a free pass. Businesses still have to ensure compliance with HMRC’s requirements, including maintaining records and ensuring that movements align with the UKCS imports or exports process. The introduction of DbC should streamline operations, but companies which don’t fully understand how it works will face potential compliance risks.
Background
Previously, goods moving between GB and the UKCS could be declared on a ship’s manifest, but sometimes additional monthly Summary Declarations (SD) had to be submitted to HMRC. Ships also submitted a FAL Form (National Maritime Single Window Service) alongside the SD, in line with the International Maritime Organisation (IMO) FAL Convention, which aimed to standardise reporting at ports. However, the challenges of transitioning to the new Union Customs Code (UCC) and the sheer volume of applications HMRC needed to process, led them to announce that businesses should apply for the necessary authorisations, but if approvals were not granted by 1 May, existing practices could continue temporarily but only for applications submitted before 30 April 2016.
This confusing approach led to further fragmentation of industry processes. Companies no longer had any latitude: timing alone would decide which operational model applied.
Any company established after April 30 2016 could not benefit from the same transitional allowances afforded to existing energy operators. This created an uneven playing field in an already turbulent period after the 2015 economic crisis and the declining investment in oil and gas exploration.
In April 2016 energy companies had to check their compliance with HMRC’s C&E48 form requirements for movement of goods on and off the UKCS. Customs Information Paper (CIP) 14(2016) was introduced, which drew a line under the long-standing simplifications. These meetings were crucial in working through the details of the new framework and preparing for the future.
Bethan Customs Consultancy was then still a newish company, and it quickly became clear that running a business while navigating complex legislative changes was more than just a challenge: it had become a passion project. The journey, while not always financially rewarding, was rich in experience.
Whatdo the latest changes mean for businesses operating in the UKCS?
As of March 27, HMRC has announced an extension to the testing and implementation period beyond 31st May which is welcome news, with the new date to be confirmed in due course. That said, there is still the expectation that companies should be working towards meeting the requirements. Regular discussions between industry representatives and HMRC are focused on developing the most workable solution.
HMRC has advised: "The purpose of the G-form is to support the DbC process by providing Border Force and HMRC with information to support compliance activities both at the border and post- movement. It has been designed to keep the amount of information requested to a minimum while providing the most useful information to assist colleagues. This allows Border Force to select goods for checks at the border, both based on the information provided and ad hoc checks while at the port location. For compliance colleagues, the information will allow them to verify goods that are eligible for Returned Goods Relief when re-imported by checking all movements are accounted for in your records and declared correctly."
The economic impact
HMRC has stated: "This measure is not expected to have any significant economic impact." But let’s break that down at a very simplistic and high level, as it currently stands, for the port of Aberdeen alone:
- Each vessel’s manifest could include: 50 exporters therefore 50 companies are expected to complete the DbC form.
- With three declaration options per exporter, this could mean: 150 DbC forms/ vessel.
- At a cost of about £45 per form (as charged by third parties), this equates to £6,750/ vessel.
- Number of vessels sailing per day: average of 12/ day (https://www.portofaberdeen.co.uk/live- information/vessel-sailings) = £81,000/day for DbC.
Within the above illustration, the annual cost for these forms would be approximately £29mn – and that is only accounting for outbound journeys. These vessels must also return, possibly laden, effectively doubling the cost.
And that is only to complete these forms. This doesn't factor in the hidden costs of this unworkable and unmanageable process such as the need to return goods, increased storage fees, on-hire costs, necessary system updates, and the environmental impact of additional CO2 emissions. Even with the reduction to one form per sailing, the question and implications around liability remain, as well as the ability to comply with rules such as Returned Goods Relief that are yet, at this late stage, to be clarified.
The financial burden of compliance under these new rules is considerable, raising serious concerns about long-term sustainability and indeed viability, for businesses operating on the UKCS.
Opportunity knocks
This is a critical opportunity for the industry to speak up, be heard and actively shape the solution. With the testing period now extended beyond May 31, now is the time to raise concerns and be sure that HMRC fully understands the real impact of these changes on your organisation. HMRC have an email address for all such correspondence: ukcsdeclarationspolicydelivery@hmrc.gov.uk
HMRC is working closely with industry to smooth the path towards this new era, with a number of steering group meetings, technical focus meetings and stakeholder meetings. At the time of going to press HMRC had stated its intention to issue the first iteration of the Customs Technical Handbook before the end of April.
This will outline the main procedures, answer common questions and provide clarity to all involved. These collective efforts will build a bridge over potentially choppy waters, setting a course for a customs system fit for the future.