Supply Chain Risk and Optimisation – the effect of Brexit on import, export, tariffs and customs

Whatever shape Brexit eventually takes, businesses importing or exporting goods to and from the UK and the remaining EU member states will need to prepare for changes to borders, tariffs, customs and VAT.  Some changes have happened already following the UK’s legal departure from the EU, such as the need to make customs declarations.

Helpfully, the EU, the Government and HMRC have guidance on some of these areas (see below “where can I find out more?”), aimed to help businesses understand what may happen in the event there is a “no-deal” Brexit – and it’s still worth businesses taking a look at these given the continuing uncertainty over the shape that Brexit will eventually take.  Our advice below therefore assumes a no-deal/”hard” Brexit, where we leave the Single Market and Customs Union and have no binding commitment to close regulatory alignment (no “level playing field”).

Some changes have already happened from 1 February 2020, but most effects are still uncertain and will depend on the outcome of the negotiations for UK/EU trade after the end of the Transition Period.  If this ends without a negotiated trade deal (so a “hard-Brexit” where trade is on WTO rules going forward), then the following will happen.  The UK will become a ‘third country’ in terms of its trading status with the EU. Import and export licences issued by the UK will no longer be valid in the EU, and vice versa.  

Border Crossings

Border crossings may become more time consuming, with a potential for delays, especially if those crossing do not have the correct documentation. Be conscious of other “non-tariff barriers”  – such as product standards, safety regulations and rules pertaining to your particular industry – such as sanitary checks on food and animals for example.

Tariffs and duties

Duty-free trade between the UK and the EU will end and World Trade Organisation rules will apply, meaning that, under the principle of most-favoured-nation, the EU should charge the same rate of duty to the UK as it does to every other country with which it hasn’t got a separate trade deal, and vice versa.  The Government has published a new temporary UK customs tariff (which will be in place for up to 12 months post Brexit).  It is estimated that this will reduce duty on 87% of UK imports to nil (compared to 80% pre-Brexit), but some “sensitive” sectors will still be subject to import tariffs such as farming and automotive.

Customs and VAT

The Government has advised that in the event of a hard Brexit, with no agreement on customs and VAT, the rules on customs and VAT currently applicable to trade with non-EU countries will apply to EU countries.  Therefore customs declarations and safety/security declarations will be required. Authorities may require guarantees for potential or existing customer debts.  Rules will change in relation to declaring and paying VAT for suppliers of electronic services as well as cross-border VAT refunds.

Businesses should already be able to deal with the need for customs declarations on import and export of goods and should be thinking about how they would prepare for changes to the UK’s VAT system.   If you haven’t already done so, audit your current processes to see what may be affected, get on top of the information you have and any additional data you may be required to have, and make a plan. Keep abreast of changes in regulations and licensing requirements.

Consider obtaining an Economic Operator Registration and Identification (EORI) number, which is required to make customs declarations and for applying for authorisation to use simplified customs procedures. Consider whether you should use the Common Transit Convention and become an authorised consignor.

Consider registering with HMRC to use transitional simplified procedures (TSP) to declare EU goods to customs. Consider registering for the VAT mini-One-Stop-Shop in an EU member state.

Look into whether there are any government schemes that apply to imports/exports to non-EU countries which may be useable going forward. Consider options such as customs warehousing in the UK, or Inward Processing schemes and potentially getting up to Authorised Economic Operator standards.

Improvements to processes could provide benefits in terms of efficiency and profitability in any case, whatever may eventually happen with border controls.

If you wish to understand more about the impact of Brexit on import, export, tariffs and customs, please get in touch with Tom Trowhill.

Government advice can be found on-line at https://www.gov.uk/topic/business-tax/import-export and see also the EU’s Customs guide for businesses

Help from HMRC can be found at here The online application process for an EORI number can be accessed here and applications to register for the TSP scheme can be submitted online here.

Check the UK-only tariff for any changes to the classification or duty rate on the goods you import.

CBI recommendations on preparing for Brexit generally at: https://www.cbi.org.uk/articles/what-comes-next-the-business-analysis-of-no-deal/