Just six months to claim millions in duty refunds?

12 May 2020

The COVID-19 pandemic is leading legal teams to consider innovative ways of delivering cost savings and increasing revenues. Free Trade Agreements (FTAs) may be an unexpected source of cash for UK exporters.



The EU has estimated that in 2018 over €10 billion of UK goods exported eligible for zero or reduced tariff rates were subject to full customs duties because the exporter did not rely upon the applicable FTA.

Many UK businesses continue to export goods without claiming the preferential duty rate available under applicable FTAs.

Exporters may be entitled to reclaim overpaid duties. Duty refunds could provide a crucial cash injection during the current economic uncertainty.

With the Brexit transition period due to end on 1 January 2021, time may be running out for UK businesses to lodge refund claims.

Background

EU Member States (including the UK during the Brexit transition period) benefit from reduced or zero tariff treatment when exporting to countries with which the EU has concluded FTAs.

These FTAs have the potential to deliver significant cost savings in industries typically subject to high tariffs, including:

  • automotive;
  • clothing and footwear;
  • food and beverage; and
  • consumer electronics and parts.

However, many FTAs are underutilised. In 2018, for example, only 37% of exports from the EU to Canada utilised preferential duty rates available under the EU-Canada Comprehensive and Economic Trade Agreement ("CETA").[1]

Refund requests by UK companies could get more complicated from 1 January 2021

With the UK set to lose access to these EU FTAs on 1 January 2021, UK businesses have six months to assess whether they are owed a refund.

While the UK has negotiated the "rollover" of some of these FTAs so that they will apply after Brexit, these rolled over agreements are in essence completely new agreements.

It is therefore unclear whether the customs authorities of the destination country will continue to accept refund requests for exports made when the UK was an EU member.

To avoid the risk of losing the refund opportunity, UK businesses should act now to ensure that refund requests are made with the relevant customs authority before the UK leaves the EU.

Key export destinations

The EU has FTAs with over 70 countries. If your business exports to one of these countries, your products may be eligible for so-called 'preferential duty rates'. Notable EU FTA partners include:

Albania

Canada

CARIFORUM countries

Chile

Columbia

Costa Rica

Dominican Republic

Egypt

Israel

Japan

Korea

Kosovo

Mexico

Montenegro

Morocco

Norway

Peru

South Africa

Switzerland

Turkey

Potential refund values

Depending on the value and volume of exports, and the types of products exported, businesses may be able to claim back hundreds of thousands in overpaid duties.

Another relevant factor is the policy of the customs authority issuing the refund. Some countries (e.g. Canada) allow importers to apply for duty refunds for up to four years after the goods were initially imported into Canada. By contrast, the Korea Customs Services requires that refund requests are made within two years of the date the relevant goods cleared Korean customs.

FTAs also contain differing rules for the periods over which duty refunds can be claimed. CETA, for example, allows exporters up to three years to apply for a refund of duties paid for products that should have received preferential treatment. [2]

Information required

The precise information requirements will depend upon the relevant customs authority. Generally, exporters will need to provide:

  • evidence that the goods met the relevant origin requirements as set out in the applicable FTA - the precise requirements will depend upon the nature of the goods, but typically this requires a Certificate of Origin and/or an Origin Declaration signed by the exporter;
  • proof of export - such as Bills of Lading and/or packing lists (these will also be required for the purposes of obtaining a Certificate of Origin); and
  • a signed declaration - to confirm that the refund request is accurate, and set out the legal basis upon which a refund is being sought.

Non-UK exporters

EU based businesses will be able to make refund claims in reliance upon EU FTAs during and after the Brexit transition period, with no change to the process resulting from Brexit.

British businesses with EU entities acting as the exporter of record for their goods may also be able to continue to file refund requests without potential disruption after the expiry of the Brexit transition period.

Businesses exporting into the EU should also ensure that they are appropriately utilising FTAs. If not, businesses exporting to the EU may be able to claim refunds for any overpaid duties from the relevant EU Member State's customs authority.

Here to help

Gowling WLG's global International Trade and Customs team regularly assists clients to calculate potential duty overpayments and prepare refund documents, and manages on their behalf duty refund processes across multiple jurisdictions.


[1] See: https://ec.europa.eu/transparency/regdoc/rep/1/2019/EN/COM-2019-455-F1-EN-MAIN-PART-1.PDF.
[2] CETA, Article 21.


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