Select Committee on Scottish Affairs Minutes of Evidence

Second supplementary memorandum from the Gin and Vodka Association of Great Britain

  In response to a question by Mr Bill Tynan (Q 350) at the above session I agreed to respond in more detail about the annual cost of complying with certain Excise Duty liability obligations.

  Prior to April 1993 spirits producers (warehouse-keepers) were responsible and liable for Excise Duty until goods were accepted by UK customers or until exported. Either way the control and the transport of goods in the UK and related documentation meant that the warehouse-keeper's responsibility and liability was discharged at the same time as their responsibility for the physical goods. Delivery Advice Notes, Airway Bills or Bills of Loading served as proof of discharge of the Excise Duty responsibility and liability.

  From April 1993 the AAD (Accompanying Administration Document) was introduced and the Excise Duty responsibility and liability is now only discharged after the principal copy of the AAD is returned to the originating warehouse-keeper. The AAD goes with the goods until these are exported outside the EC or accepted by another designated registered warehouse-keeper within the EC. This system places additional burden on the warehouse-keeper.

  1.  It must attempt to control the movement of goods throughout their transit within the EC, despite the fact that title to the goods may have passed to a third party at the UK port.

  This increases the resources required and costs incurred by the warehouse-keeper.

  2.  It must maintain a system of control of AADs, ensuring their return within 6 months of original despatch, despite the fact that the goods may be the property of a third party who may divert the goods, legitimately or illegitimately, to ultimate destinations different to that originally designated on the AAD.

  This increases the resources required and costs incurred by the warehouse-keeper in monitoring and controlling the transit of goods or incurring additional transit costs in transferring title to the physical goods at their end destination, rather than at the UK port.

  3.  If AAD's are not returned within 6 months or the goods are lost or stolen in transit, the warehouse-keeper becomes responsible and liable for the Excise Duty (UK Duty rate unless it can be shown that the goods were lost or stolen in another EC territory).

  This results in irrecoverable Duty costs that are a direct charge against profits and/or additional insurance premiums for transit insurance to cover the additional Duty risk and additional risk of overseas transportation.

  It is difficult to ascertain a definitive and reliable cost incurred by the Industry. Most players I have talked to do not segregate these costs and either do not publish or are unwilling to publish them. For most players, the additional risk and liability tends to be covered as part of a block transit insurance policy which will be composite covering all products (incorporating whisky, rum and other spirits, as well as gin and vodka).

  In 2000 my own company suffered duty losses of £125,000 and wholesale goods losses of £120,000 on stolen/lost/diverted goods in transit within the EC, emanating from two principal thefts. Our company policy is to insure the value of goods and duty, therefore the actual cost of these incidents is reflected in future insurance premiums reflecting the levels of losses sustained in previous years. A specific actual or estimated cost is therefore not available to directly and fully answer the question tabled.

Mr Fraser Morrison

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