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EU establishment and its implications


Forwarders and customs agents should be aware that they can only represent non-established businesses in the capacity of an indirect representative – which may change the relationship between the parties


Introduction The introduction of the Fulfilment House Due Diligence Scheme in April 2018 put the topic of the rules of establishment in the EU back on the forwarders’ agenda. The question of whether or not businesses


should register in the scheme is very much dependent on the establishment status of their customers and their modus operandi. But the establishment element has much


wider implications. It is, inter alia, crucial in defining your legal position as a customs representative. Forwarders and customs agents should be aware that they can only represent non-established businesses in the capacity of an indirect representative (Article 170 UCC), which in itself may change the relationship between the parties involved in the process (eg joint liability for customs debt). BIFA has received numerous queries over the past few months as many Members felt


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additional guidance and explanation were needed. The Secretariat has looked into this very important aspect of the operations once more in order to help Members establish their position in the supply chain. Definition The question about who is an established business in the EU may, on the face of it, seem an easy one to answer but the intricacies of establishment status can be confusing or misleading. The basic definition of an established person


can be found in Article 5 UCC: (31) “person established in the customs territory of the Union” means: (a) in the case of a natural person, any person who has his or her habitual residence in the customs territory of the Union; (b) in the case of a legal person or an association of persons, any person having his or her registered office, central headquarters


or a permanent business establishment in the customs territory of the Union;


(32) “permanent business establishment” means a fixed place of business, where both the necessary human and technical resources are permanently present and through which a person’s customs-related operations are wholly or partly carried out. Going further and looking at the UK specific


HM Revenue & Customs (HMRC) guidance, forwarders will find the following: A UK establishment exists if:


• The place where essential management decisions are made and the business’s central administration is carried out is in the UK;


• The business has a permanent physical presence with the human and technical resources to make or receive taxable supplies in the UK. Additional guidance from HMRC says that a


company which is incorporated in the UK would also normally be considered to have an establishment here as long as it is able to receive business supplies at its registered office.


Due diligence and establishment status These relatively straightforward definitions can be viewed as sufficient. However, the difficulty lies in their practical application. What freight forwarders should do to determine the establishment status of their customers becomes increasingly important. BIFA has always encouraged Members to


apply due diligence when onboarding new customers. Due diligence has also recently become the


September 2018


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