Duty Calls (Published April 2005)
We
all know that beer, wines and spirits are much cheaper in France and Spain,
whether the goods were originally sourced in UK or elsewhere. There will be
many of you who load your car boot to the gunnels when driving back from France,
or even embark on a special 'booze cruise'.
We love clients where we fund a scenario where we achieve something of real
use in the world, but in this case we are just funding an arbitrage market.
It might surprise you to know that some of that booze you picked up on your
last stop at that Calais supermarket was probably exported by a distributor
from the UK who bought the stock at UK duty paid prices.
We have assisted importers and exporters with innovative finance for many years.
funding VAT and duty on imports is simple, but it is much more technical to
fund and recover the input VAT and recoverable duty included in goods exported.
The Customs and Excise anti-fraud procedures are rigorous.
"Some of that booze you picked up on your
last visit in Calais was probably exported by a distributor
from the UK who bought the stock at UK duty paid prices!"
Take the example of a lorry load of Stella Artois that our client wants to
export. He is a distributor to wholesalers and licensed trade chains in France
and Spain. His margins are thin. We buy the stock for him from a blue-chip distributor
in the UK at a cost in excess of £30,000, including duty and VAT of about £24,000.
Our client arranges and we manage the export to a French or Spanish wet bonded
facility, where we pay the local duty before selling to a French or Spanish
trade customer.
The funding problem is that the sales proceeds are less than 40% of the UK
cost. The profit is available only after our successful drawback claim on customs
and recovery of the input VAT after the month end.
So why do the French and the Spanish want to buy UK stock? Excluding the VAT
and duty there is a pure commodity trade governed by the law of demand and supply,
obviously influenced by the high taxes on booze in UK. The principal consumers
are we Brits who want to drink the stuff when on holiday, or bring it all back
again on those British booze cruises.
We control the whole process, including liasing with customs, arranging for
freight and clearance at the port, obtaining credit from the French or Spanish
wet bond, and final delivery to the distributor. We then manage the reclaim
process for our client, several times a week.
Anyway, must go . . . duty calls!!!
Written by David Ross Director
Download
the Article 'Duty Calls' at www.fairfaxgerrard.co.uk/docs/BusMon 0405 Duty calls.pdf
<< Back to News Headlines