Under the rules of the Common Transit Convention, the guarantee for a transit declaration is calculated based on the highest rates of taxes applicable to such goods in the country of departure.
According to Articles 18 and 74, Appendix 1 Convention and Articles 148 and 155 1A of the Transit manual, the calculation should include all the customs duties and other charges, e.g. excise duties and value added tax that are applicable to those goods at import. Privileges, for instance, that are subject to the furnishing of proof at the time of release for free circulation, e.g. a preferential rate or a quota, are not to be taken into account.
The guarantee covers the payment of taxes and duties and guarantees that the relevant taxes and duties will be paid in case of irregularity.
Guarantee calculation UK
Under the Common Transit Convention, if a guarantee amount if unable to be sent to the local NCTS system, the NCTS system will enter a default amount in the declaration. This amount is set to 10,000 Euro for each transit movement.
In the UK many traders were “unable” to enter an accurate guarantee amount so HMRC temporarily reduced the default value of 10,000 euros to £1 so businesses could still make transit movements. This lead to possible market distortion since a trader with a guarantee of £500,000 could have 500,000 transit declarations open at the same time.
This was only a temporary measure until businesses and software developers could ensure that they were able to enter accurate Guarantee Reference Values into their declarations and HMRC will be resetting this value to the sterling equivalent of 10,000 euros on the 4th May 2021 which will bring a certain level of fairness back to the market.
It is the obligation of businesses and software developers to send the correct guarantee amount and HMRC will continue to monitor and ensure that the correct guarantee amount is being sent for all transit declarations from the UK.
SGS TransitNet and transit guarantee
SGS TransitNet from day 1 and for every transit declaration submitted to HMRC calculated the guarantee for each transit as per the articles referenced above.
SGS as an approved Authorised Consignor with UK customs currently holds a customs comprehensive guarantee of £200 million in the UK.
SGS have the resources and the solution in place to support companies dealing with the fallout from these changes.
For more information about these changes and about SGS TransitNet, please contact your local client centre or use the contact form to get in touch with your local SGS affiliate.