An export obligation you are not going to meet

Export obligation proceedings are the most avoidable category of work in this practice. Nearly every one of them turns on a single decision taken, or not taken, several months before the notice arrived.

The obligation runs from the authorisation, not from the first shipment

An advance authorisation carries an export obligation period running from the date of issue Handbook of Procedures 2023, paragraph 4.42. An EPCG authorisation carries an obligation of six times the duty saved over six years from issue, with half of it required in the first block of four years Handbook of Procedures 2023, paragraph 5.14.

Businesses habitually count from when production started or from the first export. The authority counts from the date on the authorisation. That gap is where a large share of shortfalls originates.

Month fourteen and month twenty are different worlds

Extension of an obligation period applied for before it expires is a routine administrative step, on the terms the handbook provides, generally against a composition fee. Regularisation after the period has lapsed is a different thing entirely: proportionate duty saved, with interest, and a proceeding to close.

The gap between the two is usually several multiples of cost, and the only variable is whether the application went in before the date. There is no other decision in this area with a return like it.

Establish whether the shortfall is real

Before treating a shortfall as real, check whether the exports were actually linked to the authorisation. For exports to count, the shipping bill has to carry the authorisation details. Exports that were made, realised and shipped, but declared without reference to the authorisation, are the commonest cause of a shortfall that is not a shortfall.

Amendment of shipping bills is possible, subject to the conditions and the period the law allows for it, and it is dramatically easier close to the export than years later. Reconstructing the position from the shipping bills and the bank realisation record, rather than from the authorisation file, is what surfaces this.

Two proceedings, one set of facts

A shortfall produces two things. The Regional Authority proceeds under the foreign trade law, and Customs raises a demand for the duty forgone on the imports made against the authorisation.

These are separate proceedings, before different authorities, with different periods and different appeal routes. They read each other's records. An explanation offered to the Regional Authority to justify a shortfall is produced by Customs as an admission, and an admission made to Customs to close a demand is produced in the policy proceeding.

They are handled as one position or they are lost twice. Where an appeal is needed, note that an order under the foreign trade law is appealable within forty five days of service Section 15, Foreign Trade (Development and Regulation) Act 1992, which is a shorter window than most people assume.

What regularisation actually costs

Where the shortfall is genuine, the cost of regularising is generally far below what an opening notice proposes, and it is computable. Proportionate duty on the unfulfilled part, interest, and the applicable fee. Doing that computation early does two things: it tells you whether to fight or to close, and it gives you a number to hold in the discussion instead of a position.

The habits that prevent all of this

1. Diarise from the authorisation date. Every authorisation gets the obligation end date, the block date and the extension application date in a calendar on the day it is issued.
2. Reconcile quarterly. Shipping bills against authorisation, with realisation, every quarter. Not annually, and not when the notice arrives.
3. Check the shipping bill declaration at the time of export. One line on a document, checked while the consignment is still on the dock, prevents the single commonest problem in this practice.
4. File the annual report. An EPCG holder reports on fulfilment to the Regional Authority by the thirtieth of April each year Handbook of Procedures 2023, paragraph 5.15. A file with the reports in it is treated differently from one without.
5. Apply for extension at the first sign, not the last. Nobody has ever regretted an unnecessary extension application.

If the notice has already arrived

1. Reconstruct the export position from the shipping bills and the realisation record.
2. Identify exports that were made but not declared against the authorisation, and check whether amendment is still open.
3. Compute the regularisation cost on the genuine shortfall.
4. Diarise the appeal date against any order, at forty five days from service.
5. Take one position, and use it in both the policy proceeding and the Customs demand.

The whole of this area rewards the same behaviour: look at the obligation before the period ends. Everything after that date costs several times more and buys you less.