As the Brexit negotiations continue there is increasing concern on the time period which will be available to allow companies prepare.
Time pressure is increasing as:
- Businesses will need a year to make preparations and introduce new Customs Procedures
- There will be a requirement for a significant increase in the number of customs officials both in the UK, Ireland and the EU
- IT systems will need significant investment to cope with the potential ten-fold increase in the number of declarations required
This leaves companies unclear as to whether to prepare for a worst case scenario of a Hard Brexit, a best case transition period or whether to adapt a wait and see approach. The downside to the latter however is that as the months go by it leaves less and less time for the necessary work to be completed.
Also, the facts are, that when we deconstruct the meaning of a Hard versus a Soft Brexit what this really boils down to is whether there will be customs duties applied. On the basis that the UK leave the EU Customs Union and Single Market then the customs compliance requirements remain mostly the same.
The question we get asked the most at this point is whether there is anything a company can do when so little is known. While this is true to some extent, there is in fact a lot more known than unknown.
- It is certainly still unclear whether a Trade Agreement leading to reduced /zero tariffs will be agreed. It is to be hoped an agreement will be reached, but a start on this will only be made in March 2018.
- Less unclear however is that there will be requirements for Import and Export Declarations to be lodged with the Customs Authorities once the UK is a Third Country for Customs Purposes. This is the case with all imports and exports from non-EU countries and there is very little reason to believe that any different situation will apply to the UK. Indeed Pascal Lamy, the former EU Trade Commissioner and former head of the WTO re-iterated this when he said that “There is no ‘no border’ solution”.
If we look at what is being suggested by the UK, their most recent thinking is outlined in their Government’s White paper on Customs published in October 2017.
In summary the White Paper confirms that:
- Traders who trade only with the EU will now be subject to customs declarations and checks for the first time.
- It is necessary, in the interests of being prudent, to provide for the implementation of an Customs, VAT and Excise regime for goods moving between the UK and EU
- EU Movements by sea and air will be dealt with broadly in the same way as they are dealt with currently for non-EU movements.
- For roll on- roll off traffic pre notifications to customs may be introduced with customs posts set back from the ports.
- Trusted Trader status will be critical to enable simplifications in managing customs, cost-savings in lodging declarations and avoiding delays - in particular at the N.I. Border.
-Trusted Traders may obtain simplified options in terms of lodging customs declarations i.e the monthly reporting as we have discussed.
-In addition for cross border trade the Trusted Trader arrangement would allow for aggregated returns and periodic duty payments.
This outline is therefore quite clear in stating that trade with the EU will be subject to customs requirements.
What should a company do therefore at this point to prepare for a Hard Brexit while still hoping for a soft Brexit?
We are strongly advising the following steps are undertaken:
- Review your supply chain and map out imports and exports to and from the UK
- Assess the impact of tariffs on a worst case and best case scenario
- Identify the level of customs awareness within the Company
- Assess the potential increase in the costs of customs compliance
- Look at applying for Trusted Trader Status
Indeed both the UK and Irish Authorities have identified the Trusted Trader Status as a means for reducing burdens for companies and a prudent company would be well advised to start preparations for this authorisation as soon as possible.
The time line between starting an application process and receiving an authorisation is on average one year which means that even allowing for a start date of January 2018 it would be unlikely that authorisation would be achieved before January 2019. If Brexit occurred in March 2019 this would leave limited time for slippage.
For further information on Brexit and all customs queries please contact BDO.
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