How to calculate customs duties between the UK and EU – preferential rates, rules of origin and deferrals

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Since Brexit, many businesses and private individuals involved in trade between the United Kingdom and the European Union have been asking questions about the level of customs duties, how they are calculated, and possibilities for reducing or deferring payment. In this article, we explain how to calculate customs duties after Brexit, what factors affect their amount, and when you can take advantage of exemptions.

What is a customs duty?

A customs duty is a tax imposed by the state on goods imported across the customs border. In essence, it is a form of taxation designed to protect domestic producers. In the context of trade between the UK and the EU, customs duties apply after Brexit, as the United Kingdom is no longer part of the EU Customs Union.

Important: The EU and the United Kingdom have signed the Trade and Cooperation Agreement (TCA), which provides preferential tariff rates for specified goods – however, not all products are exempt from customs duties.

How to calculate customs duties after Brexit?

Calculating customs duties may seem complicated, but let us walk through a specific example. Let’s assume a company in the United Kingdom imports power tools from Poland valued at 10,000 GBP, with an additional transport cost of 1,000 GBP, giving a total customs value of 11,000 GBP.

The tariff code for power tools is 8467 21 10 90, and the customs tariff rate is 2.7%. The customs duty will therefore be 297 GBP (11,000 x 2.7%). To calculate VAT, we add the duty to the customs value and apply the VAT rate. In the UK, the VAT rate is 20%, so the VAT tax is 2,259.40 GBP (11,297 x 20%).

Total customs and tax charges are therefore 2,556.40 GBP.

What affects the level of customs duties?

Several key factors determine the amount of customs duty to be paid:

1. Customs value of goods: Includes the value of the goods themselves plus transport costs, insurance, and other additional charges.

2. Tariff code (HS code): The customs tariff rate depends on the type of goods being imported. Each product category has a specific code assigned in the Harmonised System (HS).

3. Origin of goods: If goods originate from the UK or EU and meet the rules of origin specified in the TCA, they may qualify for reduced or zero customs duties. To benefit from preferential rates, a certificate of origin or appropriate declaration on the commercial invoice is required.

Can you avoid paying customs duties?

In certain cases, you can avoid or reduce customs duties. Under the Trade and Cooperation Agreement, goods that qualify as originating from the UK or EU can be traded at preferential customs tariff rates, often at 0%. However, it is crucial to provide proper documentation, including a certificate of origin.

Additionally, some businesses use customs warehouses to defer duty payment until goods are released to the market. This is a useful solution for importers bringing in large quantities of goods that will not be sold immediately. An experienced customs broker will help you choose the optimal solution.

Key changes in trade after Brexit

• Customs declarations: Both UK and EU businesses are now required to submit customs declarations when importing and exporting.
• Customs controls: Goods are subject to inspections and controls at the border, including sanitary and phytosanitary checks for certain products.
• EORI number: To conduct trade between the UK and EU, possession of an EORI number (Economic Operator Registration and Identification) is required.

Summary

Customs duties after Brexit can be complex, but understanding rules of origin, tariff codes, and required documentation allows businesses to avoid unnecessary costs. If you are unsure how to go through the entire process, you can submit a customs clearance request online or consult with a professional customs agent who will help you properly conduct the clearance and ensure all formalities are completed.

Need help with UK customs clearance? Contact Plutos Team — our licensed customs brokers handle all aspects of UK import and export declarations, BTOM compliance, and T1 transit documents.