How to navigate UK customs duty and clearance

Alcohol is an excisable product, which means when you import alcohol to the UK, you may be liable for UK customs duty, excise and import VAT. Whether UK customs duty or another fee is applicable to your shipment, will depend on factors such as where the shipment originates from and if there are any trade agreements in place. For example, the UK/EU Free Trade Agreement (FTA) or quota-based agreements like the UK has in place with South Africa.

Imported wine, beer and spirits need to go through customs before they are allowed into the UK for sale. This means you, or your customs agent, will need to submit the correct customs duty and other documentation to the UK customs authority, prior to your shipment arriving at a UK port. The customs authorities will then decide if the alcoholic beverage shipment and its documents meet the required regulations and laws and can be imported into the country. At this point, you would be liable for any UK customs duty and other fees.

How much is customs duty in the UK?

UK customs duty is a fee levied by His Majesty's Revenue & Customs (HMRC) on wine, beer and spirits imports. The rate of duty will depend on the commodity that is being imported. If there is a trade agreement in place, however, then UK customs duty can be waived or reduced, if proof of preference is provided.

Types of preference

To facilitate and encourage trade, governments across the world will often negotiate trade deals known as Free Trade Agreements (FTA’s) or a Treaty, the most famous example being the EU and the Free Trade that the member countries share with each other.

FTA’s allow the countries involved to apply a preferential rate of Third Country Duty to imports of products originating from the reciprocating country. This is where the term preference comes from, because we are giving a preferential rate to a product that would normally incur Third Country Duty. 

This is monitored by WTO (World Trade Organization) who make sure they are not detrimental to other competing countries and/or markets. A fair playing field must be kept globally to ensure fair play and to avoid any monopoly holders.

It is worth noting that preferential rates only apply to Third Country Duty. VAT and Excise Duties are still applicable as normal.

There are different kinds of preferential rates the most common being zero rated preference rate which is what the UK currently has with the EU. There are also agreements like the UK has with countries such as South Africa where a quota on some products exists, once that quota has expired the standard Third Country Duty Rate will be applied.

1. Quota based preference
   This type of preference is where HMRC will allocate a quota to imports of a certain product as part of a trade agreement, which allows a reduced rate of duty. Once this quota is reached, the normal rate of duty would apply
2. Free trade agreement
   A free trade agreement is a straightforward, reciprocal agreement between two parties that provides relief from UK customs duty for all movement of goods between the two parties. To apply this, proof of origin must be provided. Each FTA has its own requirements for proof of origin. EU to UK imports require a statement on the commercial invoice or document from a registered exporter. That registered exporter must quote their registered exporter number (known as a REX Number) within the preference statement on consignments exceeding €6,000.

Proof of preference varies. More information can be found on the government Website.

Excise

Excise is a tax applied by the HMRC, a UK government department. This applies to any alcohol import. It’s divided into bands.

Here's an example for wine, using an ABV of 12.5%

• A 0.75cl bottle x 12.5% ABV = 0.09375 litres of alcohol. 0.09375 litres of alcohol x the duty rate of £29.54 = £2.76 excise duty per a bottle. Based on a case of 6, it would be as follows:
• o   6 x 75cl bottles = 4.5L x 12.5% ABV = 0.5625 litres of alcohol
• o   0.5625 litres of alcohol x the duty rate of £29.54 = £16.61 excise duty per a case

Import VAT

Import VAT (value added tax) is payable, again, on all imports. You can choose to pay this upon the shipment's arrival or postpone it until the wine, beer or spirits are released into free circulation. This is the point at which they can be sold. To pay these fees, you must have a deferment account. Most importers choose to use the deferment account of their logistics provider, like Hillebrand Gori.

Ways to clear UK customs

There are a few different ways you can customs clear your shipments into the UK:

1. Fully duty paid
   Using this method, UK customs duty, excise and import VAT are all paid on your shipment's arrival at a UK port.
   
2. Customs duty paid
   Often referred to as CCT (Common Customs Tariff) and known as UKGT (United Kingdom Global Tariff). You may also opt to initially pay UK customs duty only. This is paid upon your shipment's arrival to the UK port, but the VAT and excise is not. It’s referred to as duty suspended (under bond) and only payable when you remove your wine, beer or spirits from the warehouse it is stored in. This procedure will require a UK eAD (electronic administrative document) which contains a unique ARC (Administrative Reference Code) number. 
   A UK eAD document covers the movement of your shipment from the UK port to the UK warehouse. It acts as a guarantee to customs that the VAT and excise will be paid if anything was to happen to the shipment on its journey to the warehouse.
   
3. Fully bonded
   The third option is to suspend UK customs duty, excise and import VAT (under bond) until the wine, beer or spirits are ready to be released from the warehouse into free circulation for sale. The duties and taxes must be paid before they leave the warehouse.

Need more information on UK customs duty?

Customs duty is just one part of importing wine, beer or spirits to the UK. You will also need to consider what permits or licences you require, as well as regulations on biosecurity, packaging and labelling. There’s a lot to get to grips with - if you need support, get in touch with our team of logistics experts. We have offices worldwide, with local knowledge of customs duty and import regulations for alcoholic beverage importers.

Reviewed by Hillebrand Gori