Current Issues

Regular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.

Brexit: only 10 weeks to implement if changes are ultimately needed

The EU’s position on the withdrawal agreement and request from clarity from UK parliament remains a real risk that we could face a hard Brexit

18-Jan-2019
Brexit: only 10 weeks to implement if changes are ultimately needed
With the UK Parliament rejecting Theresa May’s deal; the EU’s position on the withdrawal agreement and request from clarity from UK parliament there continues to be uncertainty and there remains a real risk that we could face a hard Brexit. Therefore no deal planning continues and companies need to ensure they are ready for the UK leaving the EU on the 30th March.

This means that all goods to / from the EU will likely require some form of customs declaration.

Martin Meacock, Director Product Management Customs, Compliance & Global Trade Content solutions Europe, Descartes, outlines the current state of play and considerations for the UK-EU supply chain.

EU Contingency Planning
The EU makes it clear in its contingency planning that “Contingency measures should not replicate the benefits of membership of the Union, nor the terms of any transition period, as provided for in the draft Withdrawal Agreement.”

Naturally the EU is making clear any contingencies must be
  • Temporary (not beyond 2019) 
  • Unilateral and can be revoked by the EU at any time 
  • Be compatible with existing EU legislation and respect the lines where either action can be taken by the EU as a whole or by individual Member states 

And finally: “Contingency measures will not remedy delays that could have been avoided by preparedness measures and timely action by the relevant stakeholders.” This of course also refers to the UK Government.

For customs there is really nothing new and no apparent additional relaxations:
“The Commission calls on Member States to take all necessary steps to be in a position to apply the Union Customs Code and the relevant rules regarding indirect taxation on 30 March 2019, in case of a no deal scenario, to all imports from and exports to the United Kingdom. Customs authorities may issue authorisations for the use of facilitation measures provided for in the Union Customs Code, when economic operators request them, and subject to relevant requirements being met. Ensuring a level-playing field and smooth trade flows will be particularly challenging in the areas with the densest goods traffic with the United Kingdom. The Commission is working with Member States to help find solutions in full respect of the current legal framework.”

Common Transit and RoRo
Fortunately, The EU and the UK have agreed that the UK will remain in the Common Transit Convention. This will benefit trade to be able to start and terminate transit movements away from the immediate port of entry at inland clearance locations, customs warehouses or temporary storage facilities depending on national arrangements; in the UK for example the use of External Temporary Storage Facilities (ETSF) can allow traders to move goods away from the bottleneck of the ports, airports and border crossing by using a customs approved electronic inventory system.

So in addition to the ability to submit export declarations companies should also consider whether they will benefit from the ability to turn those export declarations into Transit movements.

The UK has proposed for Roll-on, Roll-off (RoRo) traffic that importers will need to arrange for pre-lodged import declarations to be lodged before the goods are loaded onto the ferry or rail services and be able to prove that to the carrier.

Carriers themselves may need to ensure they can provide the necessary pre-arrival safety and security information; for accompanied trailers this will be the responsibility of the haulier. Pre-lodgement of declarations could be important for all imports and in some cases the links to the necessary Port Community Systems both in the UK and in the EU.

French Customs have already made similar announcements that pre-arrival declarations can be made and that new loading messages can be sent to French Customs from the Channel Tunnel or Ferry operators to try and facilitate movement through key French ports.

Pre-lodgement of import declarations are also possible in the Dutch and Belgian systems, whilst to facilitate a hard Brexit we are also seeing a sudden influx in changes to Port related messages.

Take Action
For any movement there are two actions – an Export and an Import. Although organisations may have considered one, are you clear how and who will be responsible for the other? Do you have access to the systems to allow you to submit these yourselves? Many companies have already set up operations in the UK or another Member State to facilitate their UK-EU supply chain. While for those who have not already done so it may now be too late for a hard Brexit, the use of third party warehousing / fiscal representation services can offer a valid alternative.

Indications are though that if you do choose to use a broker to submit your declarations, they may not have the capacity in the case of a No Deal and would look for you to deliver data electronically to reduce data entry. If you are to be the first-time importer or exporter, you need to ensure you have an EORI registration in the respective territory.

Companies should check their ERP systems and integrations to ensure that any specific handling for UK/EU orders are adjusted to reflect the UK status as a third country – for example sales to the UK from Netherlands or from the UK to the Netherlands should be treated as exports and/or transit movements instead of release into free circulation, while goods imported from the UK should not be treated as free stock into a bonded warehouse.

Hopefully both the EU and the UK will be able to adjust their electronic tariff files within that period, but whilst the UK will maintain a unilateral GSP preference, it is not certain that UK exporters will be able to continue to raise preference certificates to countries currently covered by bilateral agreements with the EU, such as Korea or the EUR-Med area. This will clearly affect landed cost calculations and create more uncertainty for exporters to those markets.

For importers, whilst the UK tariff is likely to mirror the EU day one, there could very quickly be divergence, so ensuring your ERP systems are kept up to date is key.

Finally, the UK Government has admitted to the National Audit office that in the case of a No Deal the border would be “less than optimal”. That unfortunately may well be true for UK-EU supply chains and is something everyone should be prepared and make allowances for.

Next Steps
Of course, whilst this planning is underway, the UK continues to decide what type of Brexit it wants; if there is no withdrawal agreement then that would leave just weeks to implement if changes are ultimately needed.

No one can predict what will finally happen and the situation continues to remain fluid. Unfortunately, those companies that leave it to the last moment may find it is not possible to have systems in place or resources available to assist them should there be a No Deal scenario.

Whilst some traders may look to use a broker or forwarder to perform this on their behalf the opportunity to lodge your own declarations should not be overlooked. Using SaaS applications means that it is quicker and easier to implement and support, but you still need to act quickly.

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