The UK government is confident that it will agree a deal with the EU prior to leaving, but in order to take a responsible approach, the UK government are also taking steps to prepare for a no-deal scenario. The UK government’s technical briefing notes outlining their ‘no deal’ planning confirm that it is committed to applying a sophisticated customs model when the UK leaves the EU.
There are steps that businesses can consider in the lead up to Brexit to understand how their trade operations will be affected in the global trading aspect of import and export arrangements.
As an initial step, businesses should consider the volume of their trade with the EU. Where complex supply chain arrangements exist, contact should be made with other businesses in this supply chain to ensure that planning is going on at all levels.
If there is no Free Trade Agreement negotiated between the UK and EU, trade with the EU will be on non-preferential World Trade Organisation (WTO) terms. The principle of most favoured nation treatments means that the same rate of duty must be applied for the same type of good to WTO members equally for goods moving between the UK and EU.
What to do at this stage
Existing commercial contracts should be carefully considered to understand whether such non-preferential terms would impact on the commercial relationship. Steps can be taken even now to negotiate new commercial terms to ensure a smooth transition between business partners post Brexit. Agreements should be updated to reflect new customs and excise procedures where possible and to try to pre-empt any new tariffs that might apply.
A costly change in the event of a no-deal scenario would be the change to treatment of goods that are moving between the UK and EU in the same manner as is currently applied to goods moving from the UK to countries outside the EU, so called third countries. Customs duties may also apply on goods being imported from the EU where they haven’t been to date.
When the UK is regarded by the remaining EU Member States as a third country, businesses which import from the EU or export to the EU will be advised to:
- Register for an Economic Operator Registration and Identification number;
- Ensure that their contracts and International Terms and Conditions of Service (INCOTERMS) reflect that they are now an importer/exporter;
- Consider whether to appoint a customer broker, freight forwarder or logistics provider to submit import/export declarations; and
- Correctly classify and value their goods to be able to enter this on the customs declaration (for imports only).
The UK has applied to re-join the Common Transit Convention when it leaves the EU. This convention aids the movement of goods cross border between contracting parties to the convention. This means that charges due on such goods are only paid in the country of destination.
Whether a deal is reached or not, steps can be taken now to minimise disruption post Brexit.
If you would like some assistance in considering the steps your business should be taking in this space, please contact a member of our Commercial team.