Many of us shop online, and quite often the stuff comes from abroad and incurs certain customs charges. I don’t mean things like alcohol and tobacco: I mean ordinary consumer goods like DVDs, music CDs and electronics.
This article isn’t about HMRC and Customs either, or avoiding paying what you legally should pay; their website isn’t the most user-friendly around, but it gives a detailed run-down of what customs duty and import VAT are, and how much you should expect to pay for what. This is about the UK postal service’s part in this…and what we can – and can’t – do about their policy on delivering parcels sent from abroad.
Customs charges and postage
Import VAT is levied on most imported goods from outside the EU, and is usually charged at the standard 20% rate. When calculating how much import VAT you need to pay, bear in mind that HMRC charge a percentage of the item(s) AND the postage cost. When ordering stuff from abroad, you need to take into account both the cost of your items AND the shipping!
When you order from abroad, the sender attaches a customs note that indicates the contents of the package and their value. It is then processed by HMRC, the relevant charges levied, and is then passed on to a UK courier for delivery to the recipient’s address. This is where it gets problematic.
The Post Office and Parcelforce: delivery from abroad
Since a lot of overseas couriers, such as USPS, don’t have UK branches the final leg of your parcel’s journey is carried out by Royal Mail. The Royal Mail Group is divided into two delivery organisations: the Post Office and Parcelforce. I’m not sure if the overseas courier has any bearing on which one does the delivery: CDJapan parcels (from Japan, obviously) are delivered by the PO and USPS parcels from the USA are delivered by PF, in my experience anyway.
As I understand it, this means that RMG are the sole delivery organisation for all parcels that come into the UK via UK Border Control. You’ll see why this is significant later.
RMG and Customs charging
When collecting overseas parcels from HMRC and delivering them to their UK addressees, RMG act as a customs broker. This means that they pay the necessary charges on the addressee’s behalf but RMG charge their own additional fees for doing this. The PO website states:
“Letters or parcels from abroad sometimes have a Customs charge – for example VAT, or fees for tobacco or alcohol. Occasionally there’s an £8 handling charge.”
Parcelforce on the other hand have a more complex pricing system:
We have two levels of clearance fee for import parcels. There is a charge of £13.50 for express parcels imported through the EMS (i.e. International Datapost equivalent) and GLS (i.e. Euro 48 equivalent) networks and also for high value standard parcels (valued at over €1000). For all other import parcels, an £8 charge will apply.
The handling/clearance fee
An invoice with information on how to pay is sent ahead to the addressee and until you pay this fee, the PO or Parcelforce will not release the parcel and deliver it to you.
What if you don’t want to pay for this service? What if you would rather deal with HMRC yourself? In practice, there is no ‘opt out’; it’s a service that you receive, whether you want it or not. The handling/clearance fee is the result…and if the parcel’s contents are only a little more than the £15 threshold, it’s perfectly possible for the sum of the charges to be more than the value of the items themselves!
I’ve read of people contesting these charges for a service they neither asked for nor wanted in the first place, and in some cases resorting to disputing it in the Small Claims court. In the meantime, their parcel was delivered and they were invoiced. A common argument was the 2000 Postal Services Act, which outlines regulations concerning deliberate delays and interference; the reasoning being, the PO and Parcelforce have no legal right to hold parcels. As of October 2011 however, changes were made to the wording of the Act which means the PO and Parcelforce can in fact hold packages until the addressee pays the necessary charges.
I don’t know who changed the Act or why, but the end result is that RMG now have greater powers to seize and hold onto packages pending customs charges. They can effectively hold your property to ransom, and the law allows them to do so!
What are the fees, anyway?
Under the Freedom of Information Act, we can ask the RMG about their charges: What Do They Know? is your friend here. In certain cases the PO justifies their £8 handling fee by claiming it covers administration, staff training and other factors involved in processing the charges. £8 for filling in a form and paying HMRC on your behalf? Make of that what you will! Parcelforce on the other hand have responded by refusing to say why their charges are higher, or how those charges are spent; claiming that divulging such information would put them at a disadvantage alongside their competitors.
Remember that RMG are the sole delivery organisation for these parcels? There are two companies involved here: PF and the PO…two subsiduaries of the same organisation! Who, then, are they competing with in order to make them so reticent about their clearance fee pricing? I wonder what the Competition Commission would have to say about that…
Avoiding the fees
Customs and import VAT are of course a legal requirement for certain items but a customs broker is not. Although RMG have the law on their side when enforcing the collection of their customs charges, they do not in fact have a legal right to seize and process your parcel in the first place. There are two perfectly legal ways to avoid their intervention:
- Declaring the parcel yourself
- Paying the VAT at point of sale
There’s no reason why the addressee cannot pay the necessary Customs charges to HMRC directly. After all, you are expected to declare certain items to them when you enter the UK, such as returning from holiday, so there’s no reason why you can’t do the same for goods mailed from abroad. If the sender marks the customs note “goods to be cleared by importer” HMRC will contact you and ask for you to pay the VAT before they release it for delivery. In theory.
This little-known clause is perfectly legal, and after complaining to Parcelforce I was told that this would avoid their intervention and the associated fees. When ordering some guitar parts from the US I explained the situation to the sender, who kindly indicated “goods to be cleared by importer” in clear block capitals on the customs note. Soon afterwards I received an invoice from Parcelforce, demanding I pay the VAT plus a £13.50 clearance fee before it could leave their depot! Long story short, I was either lied to or PF are lousy at reading customs notes.
What about paying VAT at the point of sale? Again, this is perfectly legal. The seller includes the VAT on the price as a UK seller would do, and the parcel is marked with a reference number, along with an indication that the VAT has already been paid. Because the VAT is already paid HMRC have no need to process it upon its arrival to the UK and RMG have no need to clear it for you and charge you.
This method is straightforward and allows overseas sellers to list exactly how much your purchase will be. It does however require the seller to register for VAT with HMRC because you’re paying the VAT through them when you purchase something (hence the term “VAT at point of sale.”). If they do not deal with a lot of UK customers this form-filling and extra book-keeping probably isn’t worth their while, and of course foreign businesses may not be familiar with UK tax law anyway.
Conclusions
When importing into the UK from abroad, you have three options. You can declare it yourself and pay the VAT, customs and other duties directly to the HMRC…except, speaking from personal experience here, this doesn’t necessarily work.
The second option requires the person you’re buying the items from to register for VAT and add it to the cost of the item and its shipping at the point of sale. Some businesses do offer this, but understandably many do not.
Thirdly, you get your parcel cleared through customs by RMG and incur whatever charges they see fit. In real life terms there’s no practical way to stop them doing this, and once they have your parcel the law states that they can take their pound of flesh. In the unlikely event of anyone at RMG reading this and thinking of suing me, I should add that THEY ARE NOT DOING ANYTHING ILLEGAL. Legal? Yes. Fair? Most certainly not.
I’m not sure about whether I can make the e-mail I sent to Parcelforce – or the self-contradictory reply – public. Any links to that will be added at a later date if I do. Thanks for reading!