NEWS

Major changes to customs legislation to impact toy market

Published on: 4th February 2016

The changes will start to come into force on 1st May.

Customs-480The EU will be introducing significant changes to customs legislation with the new UCC (Union Customs Code), which it is feared could add significant cost to the importation of toys, and in particular character licensed goods.

Toy World understands that the BTHA has been lobbying against the new regulations since 2014, believing that they would have a major impact on the UK toy industry. However, the EU has now decided to press ahead and implement the new regulations.

There are two main areas of concern for toy suppliers and retailers: the first relates to the point at which goods are taxed. In the past, toy companies often paid import costs on the first point of sale (i.e. the factory price). The new legislation will eliminate that option, as in the future, it will be the last point of sale which applies. While the additional cost will vary according to the product category and the specifics of the supply chain, Toy World understands that it could add significantly to importation duty.

The second area – one which is shrouded in confusion – concerns royalties and licence fees. Experts suggest that while the wording has changed from the previous legislation, it remains ambiguous.

Currently, for a royalty fee to be liable to duty it must:

  • relate to the imported goods and
  • be paid as a condition of sale of those imported goods

Under the new wording in the UCC, royalties and licence fees will generally be paid as a condition of the sale of the goods irrespective of the relationship between the manufacturer and the licensor and should be included in the customs value.

Essentially, the value of the licence is now embodied in the goods: the suggestion is that there is now a value ascribed to having a licensed toy as opposed to a non-licensed one, and this will now be reflected in the amount of duty payable. However, confusion potentially arises when taking into consideration how and where a licence is paid. Many believe that until there is a test case, it is unclear precisely how the new regulation will be interpreted. Nevertheless, it is plausible that licensed goods may face an increase in importation costs relative to non-licensed goods after May 1st.

Toy companies are advised to check with a customs advisor or logistics company so they can fully explore the potential implications of this new legislation. The BTHA has been working with Barbara Scott to advise its members on this issue: BTHA members can email barbara@customs.co.uk or call 020 8866 0950 with any specific questions that would help them understand their position.

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