A Summary of the No Deal Brexit papers
Key issues from the document relating to export/import issues and actions business ‘may’ need to take.
Written by David Hooper, EMITA Director
Under a No Deal scenario businesses will need to apply the same customs and excise rules to goods moving between the UK and EU as they do to Non EU goods. Under a No Deal scenario will need to apply the same customs and excise rules to goods moving between the UK and EU as they do to Non EU goods. The Government stresses that a ‘no Deal scenario remains unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome’
What does this mean for imports to the UK from the EU?
- Goods entering the UK would be subject to any third country import VAT and Duties and a full customs import declaration would need to be made. The declaration can be organised though a freight forwarder or customs broker.
- Goods would need to be declared to the correct Tariff Code, using the existing customs framework to determine origin, valuation, procedure code (i.e. permanent entry, inward processing, returned goods relief etc). Paperwork will need to be presented prior to import.
- Your customer / supplier in the EU will also need to make customs declaration their side in order to ‘export’ the goods from the EU, this is something they may be familiar with or may never have done before.
- Any duties owed would need to be paid on import.
- Businesses should agree the Incoterms to be used with their suppliers / customers from the EU, similar to the agreements they have with Non EU suppliers, this will be very important in identifying issues such as who will be responsible for paying duties/taxes and landed freight charges, without these agreements in place items could be subject to delay at customs or incur additional or unexpected costs.
- Businesses will need to account for Import VAT, however, the Government has stated that it will introduce postponed accounting on import VAT this will be introduced for all Imports. More detail will be provided but it will mean that UK businesses will be able to account for import VAT on their VAT return rather than having to pay up front. As mentioned above duties will still be payable at point of import.
- Import VAT will need to be paid on vehicles bought from the EU.
What does this mean for Exports going to the EU?
Goods will need to be customs cleared before they can be exported; businesses will need to ensure they have the correct commodity code, paperwork and customs procedures using existing customs frameworks and correctly declare the origin and valuation.
- Customers in the EU receiving UK goods would also apply the same third country rules, meaning that they will have to pay customs duties and import VAT, you can use the existing tariff to identify what these duties will be (subject to the EU lowering or raising duties between now and March 2019), this may add the cost of your goods.
- Incoterms will need to be agreed beforehand to identify risk and responsibility.
- Businesses may need to apply for an Export Control License to move controlled items to the EU, this is something that currently only applies to Military goods and dual use items being exported outside the EU.
- UK businesses will be able to zero rate sales of goods to EU customers, EC sales lists will no longer be required, however, as with non EU sales businesses will need to ensure they retain evidence of export which may be subject to Audit.
Other Key Points
- For movement of excise goods the Excise Movement Control System (EMCS) would no longer be used for movement between the UK and EU. This would only apply to movement within the UK.
- Government will create a new independent body called the Trade Remedies Authority (TRA), this body will investigate complaints of unfair trading practices and unforeseen surges in imports and will have a similar role to that of the European commission.
- The Taxation (Cross Border Trade) Bill, will provide the UK Government with the necessary powers to set its own tariffs. Therefore at this stage it is difficult to know what the duties payable on import to the UK will actually be. The UK’s new tariff rates will be published before March 2019. Please note these tariff rates could be higher than the existing EU ones but could also be lower or duty free.
- The Government has stated that it will not change the tariff classification of goods under a ‘no deal’ scenario, therefore the current list of commodity codes will still apply for the foreseeable future.
- Under a ‘no deal’ scenario, trade with the EU will be on non preferential terms (WTO Terms)
- The UK will continue to offer preference to developing nations, therefore imports from these nations will still be duty free subject to normal procedures and paperwork.
- The UK intends to transition all EU Free Trade Agreements (FTA) from day 1, though the Government has stated that further information on preferential trade will be captured in the Trade Agreement Continuity technical notice which will be published in due course. For businesses to benefit from any future FTA Goods will probably need to be of UK origin. Any materials from EU member states will no longer qualify.
- The movement of dual use items from the UK would require an export license. This is not currently the case for movements to EU countries.
Actions to take
- Businesses will need to ensure they have UK Economic Operator Registration and Identification (EORI) numbers, if they are already involved in trade with Non EU countries they will already have this.
- Agree Incoterms with suppliers and customers in the EU for exports and import and where possible renegotiate terms.
- Ensure existing customs controls and procedures for Non EU trade are Compliant, to ensure these practices can be applied to movement of goods to and from EU countries.
- Ensure procedures are in place to identify the origin and commodity code.
- Check supply chains to see if preferential origin will still apply.
- Investigate whether the business should apply for a duty suspension scheme such as inward processing, customs warehousing, end use, if so they will need to ensure they have a customs comprehensive guarantee in place.
- Also consider whether they need to apply for outward processing – i.e. shipments being sent to the EU for repair or process and returned to the UK where duty may be payable.
- Check using the exiting preferential origin rules whether goods would still qualify as UK origin should you wish to use free trade agreements, exiting arrangement for use of FTA may no longer be applicable and you should check supply chains urgently.
- Check if your items may need an export control license
- Consider applying for Approved Economic Operator (AEO) status, the Government is keen to minimise delays and additional burdens for legitimate trade and ensure compliance and will give preference to businesses with AEO. The Framework can be used to ensure businesses are ready to cope with all eventualities and map and gap their internal procedures.