Showing posts from tagged with: Import

Brexit: FAQs

  1. When will the UK finally leave the EU?

At present it looks like this will be April 2019. Theresa May intends to trigger article 50 in March and, from this point, there are two years allowed to complete the exit negotiations. This can be extended if all Member States agree.

At the same time the UK need to negotiate a new form of Trade Agreement with the EU. It is generally believed however that this will be difficult to achieve in two years.

 

  1. What happens if there is no Trade Agreement in place in April 2019?

This is not fully clear. There is a view that a transitional agreement will be put in place however this will depend on whether the trade negotiations are proceeding well.

If not, the UK will revert to being a 3rd Country for the purposes of trading with the EU - essentially it will be treated similarly to the US in terms of imports and exports.

 

  1. What does this mean?

If there is no Trade Agreement then all imports from the UK will be subject to EU import duties.

These duties range from 0% to 14% for industrial goods, 8% to 50% for Agri-food products and 12% for clothing.

 

  1. Will there be a border with the UK?

As a non-EU country the UK will have a border with the EU.

 

  1. How does this differ from the current situation?

This differs from the present situation whereby all 28 EU Member States (which includes the UK) have a common border with all countries outside the EU.  This is called a Customs Union and means that all members of the Union (the EU 28 + Turkey and Andorra):

  1. Operate a common external tariff on all imports so that no matter which country you import into the duty rate applied is identical
  2. Negotiate Free Trade Agreements as a bloc.

 

  1. Why would the UK leave the Customs Union?

Theresa May has stated she wants the UK to have the ability to set its own tariffs and to negotiate its own trade agreements. This is fundamentally incompatible with the rules of a Customs Union.

 

  1. Will the EU and UK negotiate a preferential trade agreement instead then?

It is assumed that some form of trade agreement would be in everyone's interest however this will depend on the negotiations which take place over the next two years.

The most recent comprehensive trade agreement was concluded between the EU and Canada and would provide a good model. However this agreement took eight years to agree.

 

  1. How will this affect the movement of goods?

Regardless of whether, or if, a Trade Agreement is concluded all companies moving goods between the EU and the UK (and vice-versa) will be required to lodge import and export declarations with the relevant authorities. All goods moving across or through the borders therefore will be subject to customs controls and intervention in the same manner as applies to any non-EU import or Export.  If we look at the EU Canada FTA all imports and exports will continue to require import and export declarations to be lodged with Customs regardless of the applicable duty rate.  In addition goods will only qualify for the reduced (or preferential) rate if you can prove your goods qualify as "originating products"

 

  1. How do you qualify goods as "originating"?

This is a complex process. All goods have an applicable tariff code and each tariff code has a listed rule of origin.  Therefore you first need to determine the tariff classification and secondly to check the applicable rule of origin for that heading.

A good rule of thumb is that goods are generally required to obtain 60% added value in the EU (to qualify as EU originating) or undergo a change of tariff heading between imported raw materials and finished products. Minimal processing operations or simple assembly operations do not qualify.

 

  1. What if I move my goods through the UK to get to Europe?

The recent IEA survey found that 2/3 of exporters transit their goods through the UK to mainland Europe and further afield. Goods currently move freely as part of this process and do not encounter any customs requirements.  Going forward this will now be equivalent to goods moving out of the EU to get back into the EU.

It is hoped there will be transit agreements put in place to simplify the movement, however goods will still be subject to customs controls, transit requirements, and guarantees.

 

  1. What should I be doing now to plan for this?

There are several steps to take at this point. Primarily we would advise the following:

  1. Review your supply chain to determine where goods may be caught by customs controls and documentary requirements
  2. Determine the options for alternative routes
  3. Assess your company’s ability to handle these additional requirements
  4. Identify the additional information which will be required by Customs e.g. Tariff Classifications, Customs Origin, EU status of goods.

The additional time and cost involved in moving goods through a non-EU border are extensive and, unfortunately, there is no current scenario whereby this will not be a requirement for the UK if they leave the Customs Union.

It is also advisable to:

  • Assess the impact of additional EU Import duty costs if introduced
  • Assess the impact of WTO rates on any UK imports

While this would be worst case scenario planning it is important to be prepared for these costs. Customs duties are "sticking taxes" and, once paid, are generally not recoverable. They will therefore be a direct hit to your bottom line.

 

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Iran and Russia – markets to consider for Irish exporters

In previous years Russia and Iran have been highlighted for a number of negative reasons including Russia’s annexation of Crimea in 2014 and Iran’s nuclear program which resulted in embargoes and sanctions being imposed on both countries. EU restrictive measures can be imposed to further foreign and security policy, to uphold respect for human rights, democracy and the rule of law.

So why consider Iran or Russia as a potential market?

With the current protectionism stance in the US, together with developments in the EU with Brexit and the upcoming elections in the Netherlands, France and Germany, it is becoming more important for companies to seek out new and developing markets and opportunities to grow their business and limit their exposure to a dramatic change in trading terms imposed on a prime market such as the UK leaving the EU.

With a population of 80 million and a GDP of €372billion, Iran has great potential as a high-growth marketplace. Its economy is second in the Middle East behind rival Saudi Arabia. In 2016, imports from the EU included; agricultural products €728m, food and raw materials €781m, chemicals €1,829m, machinery €3,807m and textiles and clothing €75m.

Russia the world’ largest nation by area and with a population in excess of 140 million people, imported over €200billion worth of goods in 2016. The principle imports included; machinery, pharmaceuticals, medical instruments, steel/metal semi-finished products and consumer goods.

Since many of the EU sanctions on Iran were lifted by the signing of the Joint Comprehensive Plan of Action (JCPOA) which was implemented in January 2016, many EU companies have been taking advantage of the resulting trading opportunities. Some of the more high profile examples of this include; Siemens AG’s investments in the Iranian energy sector and rail network and Airbus signing a contract to supply aircraft to Iran Air.

What checks are needed?

While companies should not entirely be put off doing business in countries where sanctions exist, extra vigilance is required to ensure that they do not fall foul of control or licencing requirements as the penalties for non-compliance can be severe.

While it should be clear whether or not your product is “specially designed for military use” what may not be clear is if your product has both a civilian and a military version and therefore falls into the “dual use” regulations. Dual use items are listed under a number of categories including; Materials processing, electronics, computers, telecommunications and information security and navigation and avionics.

A comprehensive know your customer review needs to be performed. Many of the checks required here are common to the standard practice for anti-money laundering procedures and know your client risk analysis which most companies are familiar with. The current EU restrictive measures in place against Iran are contained in Council Regulation (EU) 2015/1861 and Implementing Regulation 2015/1862. If your customer raises end use concerns, i.e. listed as a denied party, requests unusual terms of business or any number of other red flags, you should consider if dealing with this customer will expose you to an end use risk. Following your due diligence you should be able to confidently say that you “did not know nor had reasonable cause to suspect” that you were dealing with a denied party.

An examination should also be carried out of the financial or economic sanctions are in place. Both Iran and Russia have been subject to economic sanctions in recent years. Therefore, while many of these sanctions have been lifted, it is important to discuss payment terms with your customer and agree this with your bank to ensure that they will accept payments from the named bank and currency. After all, you will want to get paid for providing your goods or services!

What US considerations are required?

It is also important to consider if US sanctions will have an impact on the deal. Common things to look out for here are; US subsidiary companies involved, key employees of US citizenship, sales agent or broker involved who is a US citizen, payment to be received in US dollars or if the product supplied contains any US origin materials. In the case of US origin materials a “de-minimis” rule often applies whereby a licence may not be required if the product contains less than 10% by value US materials.

As the legislation in relation to these issues is often long and complex and is subject to change, it is important to seek professional advice when determining if your product or market will be subject to control or licencing obligations.

 

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