CFSP14300 - Processing the application: security and payment

The provision of adequate security and payment facilities is a fundamental aspect of CFSP. It is therefore essential that officers ensure that:

• the security provided is of a sufficient monetary level
• it adequately safeguards the revenue
• Customs have the appropriate authority to ‘collect’ against the security and
• the authorised trader has authority to use the form of security/ payment provided.

As a result DMB Banking Southend undertake in-depth assurance checks on the DAN before traders are authorised. This should highlight any past instances of accounting non-compliance and therefore identify any potential risks to the collection to the revenue, eg banks have refused to pay direct debits, the trader’s deferment account level is frequently exceeded, there are inhibits placed upon the DAN, etc

Form CDO1 (see CFSP14750) must be completed with the trader’s details and emailed to DMB Banking Southend as soon as possible after receipt of the CFSP application form. Officers should complete only the trader details at the bottom of the CDO1. DMB Banking Southend will complete the top section. One form is required by DMB Banking Southend per deferment account, not per trader/ TURN.

Officers must not issue the authorisation until they have received the completed CDO1 back from DMB Banking Southend . Any risks identified by this check must be addressed by the authorising officer before proceeding any further with the trader’s application. For example if the DAN is frequently exceeded then the trader must increase its level to a satisfactory amount. If direct debits are frequently rejected then the officer should take additional security in the form of a single guarantee (C&E 250). Please refer to CFSP12000 for further information regarding CFSP security and payment requirements.

Types of security

On the acknowledgement section of the covering letter accompanying the General Authorisation, the authorised trader must give details of the method of security that they have provided. More details on the types of security provided can be found at CFSP12000.

Reduced security option

• Traders who wish to operate the reduced security procedures must be authorised by their local office to do so and must comply with the operating procedures outlined in CFSP12150.

Security requirements for Indirect Representatives

IRs are required to provide adequate security to cover all goods declared using their CFSP approval (ie sufficient to cover their own and their clients importations). Please refer to CFSP12200 for further details regarding the security requirements of IRs.

IRs using their clients DANs for security will need to adhere to the following conditions and hold the required approval (as explained below).

Conditions of approval to use client’s DANs for security

In order to use the client’s deferment guarantee (DAN) as security, the traders must:

• be authorised for CFSP as an IR
• obtain written approval from each of their clients prior to using their DAN as security
• be given written approval from Customs prior to using these procedures
• regularly monitor that the client’s security is adequate and take immediate steps to inform the client that they must amend/ increase the DAN/authority where it is found to be insufficient
• have a system in place to:

• obtain written authority from any new clients as per Letter 7, prior to using their DAN as security. This authority must be sent to the CFSP authorising office prior to using the new DAN. Their new client’s DAN may not be used until it has been agreed by the CFSP authorising officer.

Failure to adhere to these conditions will result in the level of security provided by the CFSP authorised trader being increased to a sufficient level to cover the full customs debt.

Both the authorised CFSP trader and their client must be aware that they are jointly and severally liable for the debt and that Customs may claim against either of these parties to collect any outstanding revenue.

Application procedures to use client’s DAN for security

The CFSP trader must make formal application to their CFSP authorising office prior to operating this facilitation. This application must include:

• a list of the client’s DANs that the IR wishes to be used as security
• written authority from each client (on their company headed note-paper) approving the use of their DAN as security. The format this authority must take is specified in Letter 7
• a worksheet showing the total (average) monthly revenue throughput of the CFSP authorisation
• a worksheet showing the amount of security to be provided by each clients DAN
• details of how the balance of the security (ie total throughput minus client’s provisions) will be secured by the CFSP trader (eg their own DAN or a single guarantee).

The written authority to be provided by each client must specify the following information:

• the financial amount of security they will provide
• assurance that their DAN will be maintained at a sufficient level to cover this security in addition to any other deferment transactions (eg security provided = £20,000, other DAN transaction = £150,000, DAN must be maintained at £170,000 or above)
• an acknowledgement of their awareness that they are held jointly and severally liable for the customs debt as a result of their use of an IR.

Authorisation action to use client’s DAN for security

The CFSP authorising officer will then need to:

1. perform a satisfactory CDO1 check
   
   
2. be assured that the IR has a satisfactory system in place that will monitor the monthly throughput against each DAN to ensure its continued adequacy. In the event that the security limit is reached the authorised trader must immediately increase the security level accordingly.

Once the officer is satisfied that:

• the DAN’s are sufficient
• both the authorised trader and their clients have a good compliance record with DMB Banking Southend and
• that the revenue is satisfactorily safeguarded

the CFSP authorisation should be amended to reflect the changes to the security arrangements and an approval letter should be issued to the trader.

The officer must then ensure that they receive a signed acknowledgement back from the trader. If this acknowledgement is not received then the trader should be given a time limit for its production or this facility must be withdrawn.

If at any time there are found to be problems with the security provided or it’s monitoring by the trader, this facility will be withdrawn and the authorised CFSP trader will be required to provide the full security.

Aggregation across the tax point

Any traders wishing to operate aggregation across the tax point will need to apply for formal approval, either by indicating this on their application form or by writing to their authorising office and requesting an amendment to their authorisation. More details on this procedure can be found at CFSP06300.

Authorisation is not required to aggregate data on a daily basis.