How should businesses prepare for the switch from CHIEF to CDS?

Brexit | | MIC Customs Solutions |

UK-based businesses that import or export goods outside the EU need to prepare for the imminent introduction of a new system for declarations.

Businesses based in or trading with the UK have many significant changes to prepare for at present, as the full legal and regulatory implications of Britain's departure from the European Union gradually reveal themselves. However, in the midst of this Brexit-related upheaval, it is vital that an imminent reform of the way goods are declared does not get overlooked.

Indeed, the decision to introduce a new Customs Declaration Service (CDS) to replace the older Customs Handling of Import and Export Freight (CHIEF) system was actually made before the UK's vote to leave the EU, but given that Brexit is likely to put a greater focus on customs rules than ever before, there is considerable impetus for businesses to make sure they handle the transition smoothly.

As such, business leaders should take time to familiarize themselves with the basics of the new system and make sure they are clear on the timeline for its introduction, so as to ensure they are ready for the changes as they occur.

Why is the system being replaced?

The existing CHIEF system is known as one of the world's largest and most sophisticated electronic services for managing customs declaration processes, with all organizations that import or export goods outside the EU relying on the system.

CHIEF collects around £34 billion in tax and duty on imports from countries outside the EU each year, processing around 55 million customs declarations in 2015-16. However, it is now nearly 25 years old, meaning it can no longer be easily adapted to changing requirements.

As such, CDS has been developed from scratch to offer a new system for processing goods declarations, calculating the correct duty and taxes, and handling customs information electronically.

What can businesses expect from CDS?

When CDS comes online, users will need to sign in with their GOV.UK Government Gateway accounts.

Alongside the same features that CHIEF currently provides, a range of new services can be accessed via a centralized portal.

For example, traders will be able to view previous import and export data on predefined reports, check their tariffs, apply for new authorizations and simplifications, and review their duty deferment statements. Online help will also be available, including self-service tools, guides and checklists.

Some additional information will be required for declarations in order to align with the World Customs Organization Kyoto Convention rules, including an audit trail of previous document IDs; additional party types, such as the buyer and seller; and possible additional commercial references or tracking numbers.

Changes will also be made to a number of key metrics to better align the UK with international standards. These include the way location of goods data is identified, as well as warehouse type code lists, item tax lines, unit of quantity codes, customs procedure quotations, and the number of items on a declaration, which will rise to a maximum of 999 items for CDS, compared to 99 items on CHIEF.

The CDS migration process: key dates

Businesses preparing for the changes CDS will bring should be looking to bear a few important dates in mind:

  • February 2018 - This month marks the commencement in earnest of HM Revenue & Customs' push to promote the introduction of CDS, and engage the business community to make efforts to prepare for the new system. Importers and exporters should expect to hear from regulators about their compliance responsibilities
  • First half of 2018 - HMRC will be running trade tests until June 2018 to ensure CDS is fit for purpose and able to cope with the increased number of customs declarations that will follow Brexit
  • August 2018 - The phased launch of CDS will begin, with full functionality up and running, and all supplementary declarations moving over from CHIEF to CDS at this time
  • November 2018 - All remaining declarations will migrate to CDS. Although CHIEF will still be running, businesses will need to pay attention to notifications from their software provider when they need to provide additional information in order to start making CDS declarations.
  • February 2019 - Migration from CHIEF to CDS will be complete, meaning the new system will be in place ahead of the expected Brexit finalization date the following month