Common storage
What to do when it is impossible to identify at all times the Customs Duty status of goods in a warehouse.
Common storage of goods can be authorised where it is impossible to identify at all times the customs duty status of the goods for example, grain stored in a silo that is to differentiate between domestic goods and non-UK goods. This is provided the goods have the same 8-digit CN code, the same commercial quality, and the same technical characteristics and the warehousekeeper cannot differentiate between the goods.
Commercial quality and technical characteristics can be defined as being that the goods are interchangeable and are able to be used for the same purpose and have the same marketability. Although price could be an indicator of commercial quality (commercial price rather than retail price), it cannot be regarded as the sole guide. The primary test would be the standard of the goods, which could include, for example, the level of workmanship and the quality of the product. Technical characteristics can be defined as:
- style
- colour
- size
- materials
It should be recognised that there are instances where, although theoretically, the goods can be stored together, there are legislative barriers preventing such storage taking place. For example, third country and UK sourced dried milk powder, although identical, cannot be mixed because of health restrictions placed on such activities by Department of the Environment, Food and Rural Affairs (DEFRA). That these goods cannot be mixed or stored together should not be taken as an indication that the goods are not the same.
The term ‘impossible to identify at all times the customs status of the goods’ can be applied:
- when the accounting system does not identify the duty status of particular goods even though it is physically possible to identify the goods — for example, machines that may have individual serial numbers, but these are not used to identify the goods within the warehousekeeper’s records
- to bulk goods like wheat and oil which are to be stored in the same silo or storage tank
Goods on which excise duty may become payable on removal to free circulation are excluded from the common storage arrangements.
Common storage can also be used for goods undergoing a process under inward processing using equivalence.
The use of common storage could prevent any entitlement to a tariff preference. If the goods are the same and have the same exporter in the same country, then common storage can be authorised without affecting preferential treatment. Safeguards should be in place to prevent the removal of goods for which a tariff preference is being claimed, without valid proof of origin being available to support the claim.
Before authorising common storage, the following criteria must be satisfied:
- the goods must be the same
- that common storage will not adversely affect assurance
- the warehousekeeper records must be capable of monitoring activities
Goods are the same if:
- they have the same 8-digit CN code
- they have the same commercial quality
- they have the same technical characteristics
- the warehousekeeper cannot, and does not, differentiate between the goods
It must be ensured that the granting of common storage will not adversely affect assurance, for example goods subject to anti-dumping duty.
The warehousekeeper records must be able to identify what goods are the same and be able to monitor them correctly. This includes ensuring that safeguards are in place to prevent removals to free circulation where restrictions apply, for example, that there is an appropriate valid licence available for goods subject to licensing.
From the information provided in the records, HMRC must be able to verify, on a risk assessment basis, that the goods are the same. Normally, criteria detailed in using similar goods to replace customs special procedure goods should be sufficient. This will avoid costly and time-consuming analysis of goods.
However, trade or independent analysis will normally be required for agricultural goods or bulk goods such as oils and chemicals. If there is any doubt about the identity of the goods, a sample must be taken for laboratory analysis. Further samples may be required, on a risk basis and at periodic intervals, to make sure that the common storage criteria continue to be met.
Where authority to use common storage is granted, the customs warehousing authorisation letter must reflect:
- the methods by which the eligibility of the goods will be established
- the method by which the use of common storage will be monitored within the warehousekeeper’s records
- any additional sampling requirements
When there are unexplained variations between amounts recorded in the system and physical stock, adjustment of records is necessary. It applies to unexplained variations so the warehousekeeper should have investigated the cause of the variation beforehand. HMRC will need to make sure that the discrepancy has not been caused by a weakness in the warehousekeeper’s system and controls.
When common storage is used and there is a high amount of returned goods, such as a mail order business, the goods cannot be re-entered into customs warehousing (after being released to free circulation) as duty suspended stock, regardless of whether a declaration was made to CDS using simplified procedures.
While common storage is primarily applicable when goods are removed to free circulation, it may also apply where goods are removed for re-export or to other customs procedure such as inward processing. Controls should be in place to prevent gains occurring due to under shipment of re-exports or the transfer of the incorrect amount of goods to the next procedure from duty suspended stock.
If there has been an irretrievable loss or destruction of goods, the warehousekeeper must be able to produce evidence of the actual quantity of domestic goods or non-UK goods lost or destroyed, for this figure to be accepted in place of any assessed figure. More information can be found at losses in warehouse.