How to Mitigate Risk While Navigating the Switch from CHIEF to CDS
Aug 24, 2022 8:30:00 AM
The supply chain has seen its fair share of dramatic changes over the past few years, from the pandemic to Brexit and beyond. The shifting landscape has forced companies to adjust quickly to new processes and systems, but the effects have remained obvious; large-scale changes will always lead to delays.
We expect to see a similar ripple effect with the upcoming transition from the UK’s existing electronic system for handling customs declarations to the new Customs Declaration Service (CDS). In this post, we’ll detail risks associated with CDS migration and how you can mitigate them.
What is the Customs Declaration Service (CDS)?
The CDS replaces HMRC’s existing declaration system, the Customs Handling of Import and Export Freight (CHIEF), and the National Export System (NES).
Even if you’re not directly involved in submitting customs declarations, if you move goods internationally, you’re likely to be impacted by this shift. As the HMRC’s CHIEF system is phased out, imports will be affected first, followed by exports.
Key migration dates
- Companies will no longer be able to submit import declarations on CHIEF after 30 September 2022.
- Companies will no longer be able to submit export declarations on CHIEF/NES after 31 March 2023.
For a breakdown of key differences between CHIEF and CDS, see Transitioning from CHIEF to CDS: What You Need to Know.
Potential risks of the CDS shift
The implications of moving to CDS are more significant than that of a simple IT implementation project — the transition will also require business knowledge and business process changes.
Although the system has been live since January 2021, as of July 2022, only about 20% of CHIEF declarations have been migrated to live CDS. It will take time for everyone to become familiar with the new system, and this learning curve will almost certainly result in customs processing delays. Most companies do not yet have much trade experience with CDS customs declarations.
Here are some of the key risks involved:
Customs declarations complications
The last major change to customs declarations in the UK was in 2008 when SAD Harmonisation (SAD-H) rules were implemented. Since then, the data content and format required to be presented to customs through CHIEF have remained largely the same.
With the introduction of CDS, which operates under Union Customs Code (UCC) rules, both the data content of the customs declaration and the format in which it must be supplied will change. For example, the current CHIEF declaration data set consists of 68 multi-use boxes. The new data set for CDS requires more information, with 91 single-use data elements for each declaration, so companies will need to key in about one-third more data elements than they did with the CHIEF system.
Many fields required for CHIEF — such as shipper, consignee, and method of transport — will still be necessary for CDS, but may need to be organised differently. For example, data provided in just three boxes in CHIEF may now have to be provided across seventeen separate data elements in CDS.
HMRC has issued a document containing guidance for “tariff workarounds” to address cases where CDS is not functioning in line with customs rules. Combined with the increased data elements, each customs declaration will take longer to complete.
Additionally, the CDS training environment — trade dress rehearsal (TDR) — sometimes responds differently than the live CDS service. Declarants will therefore have to dedicate time to fixing certain declaration rejections on the fly.
Impacts on service-level agreements (SLAs)
Because customs declarations will be more challenging and time-consuming to complete, customs clearance will also take longer. That may impact existing SLAs, particularly in terms of meeting deadlines.
Cargo owners and freight forwarders may switch to a new haulier or customs broker if they experience degraded service with their existing providers. If there’s a significant shift toward specific companies that are more prepared for the switch, there may be slowdowns as they onboard new clients.
There is also a risk that third-party IT service providers may have service outages or delays as declaration volumes increase.
In a 2021 survey, 47% of respondents indicated they needed additional staff to assist with post-Brexit changes, like unfamiliar paperwork. We expect a similar trend in response to the CHIEF-to-CDS transition. There may be a shortage of declarants as companies hire more employees to maintain efficiency.
Because CDS is a paperless system, HMRC has not sanctioned equivalent CHIEF-style reports. Any reports produced by third-party customs software will have no legal status.
Are you prepared for the switch from CHIEF to CDS?Ask yourself the following questions to assess your preparedness:
- Do you primarily handle imports, exports, or both? Imports have different transition timelines than exports; CHIEF import declarations will cease after 30 September 2022, while CHIEF export declarations will cease after 31 March 2023.
- Which countries do you serve? The countries where you transport goods also matter. For example, CDS declarations have been mandatory for all imports into Northern Ireland since October 2021.
- How do your existing customers currently submit customs declarations to clear their goods? Do they submit declarations directly to customs as an importer or exporter? Do they use a customs agent or intermediary? Do you provide customs clearance services for them?
- How prepared are the other parties involved in the supply chain for which you transport goods? Have your customers taken the necessary steps to make the switch? Have they informed their suppliers and vendors that they will need extra information to clear their goods? If you operate groupage/LTL services, how confident are you that all cargo owners on a groupage trailer are ready for CDS?
How to mitigate risk during the transition periodOnce you have a better picture of your overall situation, you’ll need to complete the following steps:
- Complete your CDS registration.
- Coordinate with your software provider to ensure that they’re authorised to make declarations on your behalf within CDS and that your applications are compatible with the new system.
- Familiarise yourself and your team with new procedures — don’t wait until the last minute to start training.
- Carefully consider whether you’ll need to hire additional staff to manage new processes (and if so, consider working with a strategic partner to expand your team’s capacity).
Large-scale changes like the switch from CHIEF to CDS can be stressful and overwhelming, but your organisation can succeed through the transition period with thorough preparation.
Questions about making the switch from CHIEF to CDS? Contact us.
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