Changes to the IT system for UK customs declarations
For nearly three decades, businesses importing or exporting from the UK have been able to submit the relevant declarations through HMRC’s Customs Handling of Import and Export Freight (CHIEF) computer system. However, CHIEF will be closed for import declarations after September 30, 2022 and for export declarations after March 31, 2023, at which time CHIEF will be permanently closed.
Instead of CHIEF, businesses will be required to submit customs declarations through HMRC’s Customs Declaration Service (CDS). CDS was built from the ground up over several years and started working in 2019. Additional features have been added to CDS over time.
So how did we get here and what do companies need to know to move to CDS?
Towards the end of 2014, HMRC announced that it was looking to replace CHIEF. Built in the 1990s, CHIEF was based on inflexible technology, which made it very difficult to introduce new features.
According to HMRC, there were to be more than 20 EU legislative changes between 2016 and 2020, which CHIEF would not have been able to manage within its own system. These changes would have required the connection of alternative platforms to CHIEF, which would have required significant IT investments at the risk of service delivery levels.
Although CHIEF could have been updated to handle these legislative changes, it would ultimately remain unable to adapt to future changes in customs legislation. As a result, HMRC felt the only option was to replace the entire system. At the time, HMRC aimed to deliver the replacement in 2017, with the following objectives:
- reduce errors;
- provide improved service to customers (including internal HMRC users);
- eliminate the use of paper; and
- continue to provide “world-renowned service” to customs trade.
To this end, HMRC selected IBM to provide off-the-shelf customs software (also used in the Netherlands), which would be customized to meet UK needs. The software would be hosted on HMRC’s multi-digital tax platform and accessible through the government gateway. The contract was to be signed on June 24, 2016.
However, on June 23, 2016, the UK voted to leave the EU. If the UK also leaves the EU customs union, it has been estimated that the number of customs declarations submitted each year will increase from 55 million to 255 million. HMRC delayed signing the contract to ensure the product would still be suitable. Ultimately, he went on with IBM.
The revised go-live date for the new service – now called CDS – for all declarations was January 2019, two months before the UK intends to leave the EU customs union. In reality, a phased approach has been adopted. CHIEF and CDS have been running side by side for a few years. This will soon come to an end and all declarations will have to be made via CDS from April 1, 2023.
What is the difference?
HMRC says CDS is a resilient, reliable and adaptable IT platform and is the first step in transforming the UK border. Most importantly, CDS is expected to save businesses time by:
- enabling the submission of customs documents digitally and securely using the secure file upload service;
- providing access to a company’s financial information in a single dashboard where companies can view account statements, make payments and control standing authority;
- provide real-time notifications and alerts on all customs declarations and movements; and
- allowing a company to manage its finances by opening a duty deferral account and allowing the clearance of goods without delay.
There are some underlying differences between the two systems that businesses should be aware of. CHIEF was based on the boxes of the community customs code and the single administrative document. CDS, on the other hand, is based on the new Union Customs Code (or post-Brexit UK Customs Code) and data integration and harmonization rules.
This means in practice that companies will need to ensure that they are using the correct tariff when reporting via CDS, as this tariff will be different from CHIEF. The procedure codes have also changed.
The submission format is also different. While CHIEF was designed for paper forms with 68 boxes used for multiple data elements (including boxes accepting free text format data), CDS uses 91 data elements, with each element used for a single piece of data.
How should businesses prepare?
Whether a company intends to use a customs broker or broker to submit their entries or do it in-house, the following steps will need to be followed to ensure that entries can be submitted to CDS .
1. Sign up for a Government Gateway account. The vast majority of companies should already have it.
2. Apply for an Economic Operator Registration and Identification (EORI) number. It usually takes less than a week, but it can take longer during peak periods. There may be delays as companies prepare to switch to CDS. That being said, most companies that import and export will already have an EORI number.
3. Sign up for CDS. To do this, companies will need:
a) EORI number;
(b) unique tax reference (UTR);
c) business address (which HMRC holds on its customs records);
(d) national insurance number (in case of registration of an individual or an individual entrepreneur); and
e) date of creation of the enterprise.
4. Choose the payment method to use. This includes:
Businesses must decide whether to submit their own returns or have a broker or agent do so. Those instructing an agent can use the CDS Financial Dashboard to define which customs agents can use their accounts.
Alternatively, a company may decide to submit its own declarations. In this case, he will need software that can connect to CDS (through his Government Gateway account). Businesses without software should consult HMRC’s list of software developers.
Businesses that import and export can adopt CDS for both to save money by using two systems. However, some may want to wait until they are comfortable with imports before using CDS for exports.
Businesses considering submitting their own returns are recommended to use the Trader Dress Rehearsal service. This is a free service designed to help reporters (those who submit reports) prepare for CDS on-line.
It should be noted that companies importing into Northern Ireland from outside the UK and EU should already be using CDS to report these movements. As things stand, businesses transporting goods between Great Britain and Northern Ireland can continue to use the Trader Support Service to complete customs and security declarations. How this might be affected by proposed changes to the Northern Ireland Protocol is unclear at the time of writing.
Make a full import declaration via CDS
Before submitting an import declaration via CDS, businesses may need to lodge an Entry Summary Declaration (ESD) before or during the movement of goods into the UK. For imports into Great Britain, this can be done through the Safety and Security GB service. Although companies can use this service themselves (with compatible software), many will use a community system provider to submit an ESD. The goods must then be presented to customs on arrival in the UK.
If goods are boarding a vessel bound for a place that uses the freight service or where “pre-deposit” is required, a full CDS import declaration must be made before the goods are loaded. . For goods arriving at other locations, the full declaration must be made within 90 days of presenting the goods to customs.
The CDS import declaration must include:
- customs procedure code;
- commodity code;
- unique consignment reference statement; and
- other information including:
- departure point and destination
- consignee and sender
- type, quantity and packaging of the goods
- transport means and costs
- currencies and valuation methods
- certificates and licenses.
Once the declaration has been accepted, HMRC will advise the company of the amount of duty due. Any duty owing must be paid or posted using a duty deferment account before the goods can be released.
About the Author
Ed Saltmarsh, Technical Director, VAT and Customs, Faculty of Taxation