According to data from the UK's Department for Business and Trade, which includes both goods and services trade, as of the third quarter of 2023, the total trade volume between the UK and China over the past four quarters reached approximately £100.9 billion (equivalent to around ¥910.89 billion), marking a historic high. This has made China the UK's fifth-largest trading partner. Among this, UK exports to China were about £37.5 billion, representing a year-on-year growth of 11.9%, while UK imports from China amounted to approximately £63.5 billion. According to Chinese customs data, although the value of goods imported from China to the UK has decreased, the import of service trade has been rapidly increasing.

1. Development of UK Tax Reform

The tax reforms between the UK and the EU have had a significant impact on compliance, with different customs clearance scenarios emerging post-reform.

The UK was the first country to implement tax reforms related to "Delivered Duty Paid" (DDP) services, which led to discussions with various platforms.

On January 1, 2021, the UK implemented the new Postponed VAT Accounting (PVA) clearance system, deferring the payment of import VAT to the output tax reporting period, reducing the upfront financial burden of prepaying input VAT. Under this system, customs brokers must bear joint liability for the movement of goods until e-commerce companies complete the corresponding declarations and transfer the tax responsibility.

In simple terms, this system allows e-commerce companies to gain some liquidity by shifting the potential risk of non-compliance with later tax declarations to logistics companies. This policy sparked debates between logistics providers and tax agents during its implementation. The root cause of these issues lies in the lack of an effective data transmission and monitoring mechanism to establish new industry standards.

According to industry insiders, in 2022, UK customs pursued tax payments from sellers for underreported customs declarations between 2018 and 2020. Over a dozen customs brokers faced additional tax penalties exceeding RMB 100 million, with most penalties related to DDP tax numbers. Notably, 60% of the penalized brokers were Chinese companies, and 40% were UK-based, indicating that UK customs enforcement targeted the entire industry, not just China.

Additionally, after implementing stricter regulatory policies, obtaining a UK VAT number has become increasingly challenging. Previously, applying for a VAT number took only two weeks; now, it can take three to four months, requiring more documents and forms, with longer review times and lower success rates. This suggests that the UK tax authorities are paying closer attention to the details of VAT number applications.

It is foreseeable that in the future, UK authorities will increasingly focus on the import records associated with platform VAT numbers, whether deferred payment is used, whether sales occur on platforms, and the relationship between customs clearance and tax declarations.

2. UK Airport Customs Clearance Process

3. UK Airport Supervised Warehouse Procedures

After submitting pre-arrival information, goods arrive at the airport, are sorted by the airline, and then extracted and distributed in bulk by the public supervised warehouse at the airport. The customs broker is then notified to clear the goods. Once customs clearance is complete, the customs broker dispatches a vehicle to the public supervised warehouse to pick up the goods.

However, public airport supervised warehouses often face inefficiencies. The timing for cargo extraction and distribution is determined by the public supervised warehouse. Generally, for flights arriving in the morning, cargo extraction is scheduled for the afternoon, while flights arriving in the afternoon or evening may have their cargo extracted the next morning, with the latest extraction occurring in the afternoon or evening of the next day. Regardless of whether a supervised warehouse is present or another warehouse is rented, customs brokers must wait for the goods to enter the supervised area and be distributed before customs clearance can proceed.

Furthermore, if any goods are subject to inspection, and additional goods are flagged for inspection, the goods processed at the public supervised warehouse will incur high storage and handling fees. Once the goods enter the supervised warehouse, the following situations may occur:

If goods enter the public supervised warehouse for customs clearance, the customs broker must send personnel to assist with inspections, which can be time-consuming and lead to high storage and handling fees. Typically, customs will transport goods to the customs inspection warehouse, where storage fees are not required. However, due to the involvement of multiple operations such as transport and return, inspection times may be extended, leading to inefficiencies in customs clearance and increased storage and handling costs.

Return procedures involve the customs broker assisting the cargo owner in communicating with customs, and once the reason for detention is resolved, arranging for the return of goods to the origin. The return requires the cargo owner to have import rights, and they must pay return shipping and storage fees. Destruction procedures involve the customs broker assisting the cargo owner in communicating with customs, paying destruction fees, and coordinating with a customs-designated destruction company to destroy the goods. The inspection rate tends to be lower during off-peak seasons, and higher during peak seasons. The UK's off-peak season typically runs from after Christmas until July of the following year, with the peak season from August to Christmas.

In summary, when shippers or freight forwarders choose UK customs clearance and transfer services, whether the customs broker has its own supervised warehouse is crucial, as it significantly impacts the efficiency and cost of customs clearance for imported goods.

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