Deal or No Deal: Bracing Businesses for Brexit

Posted: Nov 13, 2018
Expert:

David Miller, director at The Customs People, outlines some key considerations businesses trading with the EU should be thinking about to brace themselves for a deal or no deal Brexit scenario: 

deal or no deal: bracing businesses for brexit

Although there may be a transition period in relation to how the UK deals with customs matters between March 29 and December 31, 2020, this is reliant on there being an agreement in place by the Brexit date.

This is not the case currently.

Given the situation, there are key planning considerations which are worth looking at, especially given that the government itself has issued a series of ‘No Deal’ Brexit papers. As recently as late October, a ‘partnership pack’ was also issued on how businesses need to plan for a ‘No Deal’ Brexit. It recommends that any company trading with the EU should plan for a ‘No Deal’ Brexit and take advice as appropriate.

Even if a deal is reached, many of the planning considerations will apply. For example, the requirement for customs declarations to be submitted, on the basis that the UK will have left the Customs Union and Single Market.

Key points to consider: 

Whilst we cannot provide answers to all the questions surrounding ‘No Deal’ in such an article [this being by discussion with businesses], the following are key points that every company trading with the EU should consider, including those that already import and export:

  • What could happen under Brexit?
  • Is there a Brexit plan?
  • What are the effects of Brexit to the supply chain? 
  • What would happen if the supply chain slows post-Brexit? 
  • Would AEO be a countermeasure to supply chain delays?
  • Would WTO duties be payable? 
  • Are duty-saving measures available to prevent double duties becoming payable if WTO duties apply….e.g. Customs Warehousing or Inward Processing? 
  • Are the key suppliers aware of what the Brexit plans are, including:
    • EU suppliers – they will have to lodge export declarations out of their country – have they planned for this?
    • Does the fact that the UK is becoming a 3rd country change the way in which the business buys from the EU? For example, if trade terms are that the supplier delivers door-to-door, will they be happy to do so post-Brexit? If they are, consideration should be given as to who will lodge import declarations into the UK.
    • Given customs clearances may be required for imports from / exports to the EU, is a clearance agent in place?
    • If so, do they have a Brexit plan to cope with the increase in clearances required, bearing in mind customs clearances are set to rise from 55 million per annum pre-Brexit to 255 million post-Brexit - a five-fold increase.

Similarly, does Brexit change the need to look at terms of business for UK exporters? After all, businesses don’t want to be responsible for clearing goods into EU countries!

If it’s a B2C business, what impact will there be on consumer customers? Is the business aware of other Brexit impacts, such as;

  • Additional staff costs;
  • Costs of mitigating Brexit – AEO;
  • Costs (and benefits) of operating duty-saving measures e.g. Customs Warehousing and staff costs for doing so, additional software, outside advice?

Some suggested action points on the above considerations: 

  • Identify supply chain on imports from EU countries – Intrastat currently undertaken will be replaced by customs declarations whether there is a deal or not
  • Understand what a ‘No Deal’ Brexit means: The Government has issued No Deal Brexit papers and recommends businesses seek advice

Some technical points: 

  • Under a ‘No Deal’ Brexit, WTO Tariffs will apply from 23:01 on March 29. It is vital to understand what these are – they are available in the trade tariff section on the UK government website;
  • The level of declarations will increase, and it needs to be understood how;
  • Who will do these? Ensure key trade partners can handle an increase in volume. So, consider the following:
    • Are trade partners Brexit-ready? 
    • What does an increased volume in trade mean in terms of cost and numbers of declaration? As stated above, HMRC’s own figures currently show 55M pre-Brexit declarations, rising to 255M post-Brexit. 
  • Establish and understand the basis of importing re: incoterms with key suppliers and customers on exporting. 
    • Are they Brexit-ready re: export declarations from the EU? It could slow the supply chain if they are unprepared. 
    • What trade terms are sought? Consider the impact on shipping.
    • Who will be the importer of record? Will the supplier want to be responsible for customs clearance of stock? Does the business want to be the importer of record in the EU? Likely not…
  • Consider the ports used. The National Audit Office (NAO) has advised seeking alternatives to Dover-Calais, for example.

Whilst a ‘Deal’ Brexit is likely, there is still a need to plan for increased customs declarations. It is also important to ensure all relevant staff are aware of Brexit implications and the impact of the points above. Business-wide education to identify those staff and their awareness is required.

All in all, whilst a ‘Deal’ Brexit is still likely, there is much to consider and plan for.

To speak to David about how best to prepare for the changes ahead, you can click here or call 0800 077 4604