Trade: what should businesses be doing to prepare for Brexit?
In the fourth of our practical guides to preparing for Brexit, Jim Fanshawe founder of Your Export Department, looks at the implications on trade.
When the first article was published in the Spring issue of Suffolk Director on Brexit and its impact on business, we demonstrated that it touches many aspects of a company’s activity.
It should be remembered that in this period of political upheaval, it is just the withdrawal bill that is being discussed and the signing of this then paves the way for the trade negotiations to start in earnest. It is therefore an appropriate time to examine the trade implications of Brexit.
When it comes to trade it may be tempting to say that as we do not know what the future arrangement looks like yet there is no point planning. However, there are certainly things that companies can and should do.
The way to approach it is to look at the most likely outcomes and then do some scenario planning for each possibility. A no-deal scenario is a likelihood which business needs to plan for. The government has set out some guidelines for this situation. In a no deal scenario there would be no more free movement of goods to and from the EU and the UK. So when carrying out your Brexit impact analysis take the no-deal scenario as the extreme case to plan for. If you do that you will be able to cope with any of the alternatives that we could end up with.
The following points become critical under a no-deal scenario but regardless of the outcome an understanding of these points will benefit any company trading internationally. Once a company understands the issues below and how or if they currently use them, they can monitor the impact of the future agreement between the UK and the EU.
The key things that companies should be looking at are:
Get an EORI number. If you have only traded with the EU previously this may be a new requirement for you. You need to apply to HMRC for this.
Confirm you have the correct classification (Harmonised Tariff Codes) for your goods. If necessary, you can apply for a binding tariff agreement from HMRC. There is a link to a database which will help you search for your product’s code at the end of this article.
Find out what duties your imports and exports would be subject to under Most Favoured Nation tariffs. If there is no deal, then trade between UK and EU would revert to these MFN tariffs under WTO terms.
Talk to your freight forwarder (if you have one) about customs clearance procedures and the cost implications for you.
Review your knowledge of documentation such as Certificates of Origin, Customs Invoices, as well as the documents your forwarder may be handling for you such as customs declarations and single administrative documents. Do you need to book training for your staff or bring in staff with these skills?
Ensure you are using appropriate Incoterms®. No export should be traded under ex-works terms and this will become even more important as you will have to have proof of export for HMRC.
Review whether you need an export licence or any other product specific documentation to prove that your products meet the standards required to be sold in the EU.
The government has released a decision that under a no-deal Brexit scenario import VAT due can be dealt with under a postponed accounting system. This enables UK VAT registered businesses to account for import VAT on their VAT return. The government has gone further than many anticipated and said that this postponed accounting system will also be applicable to import VAT from non-EU countries.
Talk to a specialist about what customs procedures may be appropriate for your business. Wherever possible and appropriate use customs procedures such as Inward and Outward Processing Relief, Customs Warehousing, Authorised Economic Operator (AEO).
Inward and Outward Processing Reliefs are systems that allow the suspension of duties and taxes which are temporarily imported or exported for further processing before being returned. Companies currently just moving goods around the EU will not need to use these systems. Depending on the outcome of negotiations these processing reliefs could become more important post Brexit and save companies significant costs. HMRC authorisation is required for using these systems. Flow charts for applying for these processes are in the links box below.
Authorised Economic Operator (AEO) is a system that demonstrates the holder’s attention to security and trustworthiness throughout the supply chain. Companies with this status are less likely to be subject to lengthy customs checks on their products in countries that have mutual recognition of the system. In addition, it can result in reduced customs guarantee bonds demanded by customs. There will be increased emphasis on these trusted trader systems, regardless of Brexit, as a means of making customs movements more frictionless. They do however take time to attain.
The government and HMRC have prepared what they call a ‘HMRC Partnership Pack’ in preparation for a no-deal Brexit. This can be found in the links box below.
Even if the UK completes some type of trade agreement with the EU many of the issues highlighted above will still be important to understand. Rules of Origin will undoubtedly become more relevant as a trade agreement would mean that preferential rates could be claimed if origin can be proved.
The recommendation for all companies is to review the points mentioned above in relation to their business and put plans in place to mitigate the impact Brexit will have.
1. Get an EORI Number – https://www.gov.uk/eori
2. Look up product Tariff Codes – http://madb.europa.eu/madb/indexPubli.htm
3. Download the HMRC Partnership Pack – https://www.gov.uk/government/publications/partnership-pack-preparing-for-a-no-deal-eu-exit
4. Read up on Inward and Outward Processing Reliefs – https://www.gov.uk/government/publications/notice-3001-special-procedures-for-the-union-customs-code
5. Consider working towards AEO status – https://www.gov.uk/guidance/authorised-economic-operator-certification
Jim Fanshawe is Director and Founder of Your Export Department and IoD Suffolk Ambassador for Brexit. Contact Jim on E: email@example.com M: 07853 107433 or visit yourexportdepartment.com Twitter @JimFanshawe