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Import Terms – the X factor of VAT compliance

The EU legislation relating to cross-border importation of goods is very complex and varies considerably between the member states. These complexities are compounded recently with Brexit being thrown into the landscape as well. As a starting point, understanding the various import terms will assist your business to navigate customs clearance and VAT compliance.

Import Terms Glossary: 

Import Terms

Explanations of Import Terms

Exporter

The exporter is the business that is responsible for shipping the goods from non-EU jurisdiction to the EU. 

Consignee

The consignee is the party who is taking ownership of the products once the goods are cleared for free circulation. In the case of a standard import/export transaction – whoever is responsible for paying the import duties will be recorded as the consignee. In the case of a B2C sale, the consignee can be the private individual to whom you are delivering the goods. If a business is importing its own goods for storage, later distribution or internal use, then the importer and exporter is the same entity and therefore by definition it must also be the consignee.

Incoterms 

Incoterms are terms or agreements made between the parties based on the decision of whether the exporter or the importer is responsible for paying duties and taxes. 

Importer of Records

Also known as Declarant. As a non-EU based business, a key consideration would be to decide whether or not you will be the ‘Importer of Record’. This determines who will be responsible for the import charges. The rules around the importer of record differ depending on the jurisdiction and the nature of the import transaction. This is something that needs to be very carefully considered independently of your VAT compliance obligations. That’s because it can cause practical issues in the customs clearance process.

Declarant 

The declarant is the person “responsible” for the import. He must ensure the goods are legitimate, correctly valued and declared upon import. This includes customs debt, accuracy of the information given in the declaration, the authenticity of the documents presented and the compliance with all obligations.

EORI Number

Having an EORI is necessary in order to clear goods through customs in the EU. An EORI number is unique throughout the EU, assigned by a customs authority in a member state to businesses. By registering for customs purposes in one member state, an Economic Operator is able to obtain an EORI number which is valid throughout the EU. The EO will then use this number in all communications with any EU customs authorities where a customs identifier is required for example customs declarations.

Import VAT

If a company ships equipment DDP (delivery duty paid) to foreign countries, the seller bears all the costs in the destination country. As a result, a significant foreign tax charge known as import VAT is charged. 
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