Import and export firms urged to act now ahead of Brexit, says David Miller (left), customs and authorized economic operator consultant and co-founder of The Customs People.
As news broke last week about the UK and EU reaching an agreement on a Brexit transition deal, it was confirmed that Britain would remain in the Customs Union for 20 months after it leaves the European Union in March 2019. However, what remains to be seen is the extent of the impact that Brexit will have on trading for businesses involved in international supply chains in the less immediate future, and whether any plans are in place to make life easier for these once Brexit is finalized.
These statements certainly make for interesting reading, and any business involved in international trade – especially with EU countries – should at least consider the impact it will have on their operations. The concept of authorized economic operator (AEO) accreditation is at the heart of the proposals, so any businesses that import and export will be affected by this.
In her speech on March 2, 2018, Prime Minister Theresa May put an end to speculation by confirming that a Customs Union will not be workable when Britain leaves the EU, and both the EU and UK have unequivocally confirmed the UK will also leave the single market. Not much detail is certain around Brexit, but this element is, so there is no time to waste in preparing for the potential ramifications.
The EU Commission has advised that movement of all goods between the UK and the EU will require interaction with a customs system. That is in addition to the HMRC’s (Her Majesty’s Revenue and Customs) confirmed plans to introduce a new customs declaration system in January 2019 to replace the 25-year-old method.
However, the prime minister also confirmed that the UK does not want tariffs and quotas to apply between the UK and EU following Brexit, so a system of comprehensive mutual assistance will be sought.
The prime minister is seeking a ‘customs arrangement’ and has suggested this be based on one of two models, which businesses can begin to prepare for:
(1) A customs partnership whereby EU duties are paid at the EU duty rate when goods are imported into the UK, but are bound for the EU. UK-bound goods can be subject to UK set tariffs, which would seem to give rise to a new level customs reliefs.
(2) A streamlined system in which:
(a) There would be no entry or exit declarations for goods moving between the UK and EU. This would, however, seem to be dependent on some kind of ‘trusted trader’ system given the EU’s stance.
(b) There is a mutual recognition of the UK and EU’s ‘trusted trader’ systems to reduce delays at ports.
(c) There is a reduction in the cost of the burden of customs administration.
I would advise businesses who import and export goods to begin preparing for both of these eventualities now, as it seems reasonable to assume that one of the two outcomes will occur to some extent once the transition period ends at the end of 2020.
One way to begin preparations is to consider AEO, which is an internationally-recognized quality mark indicating that your role in the international supply chain is secure, and that your customs controls and procedures are efficient and compliant.
This is particularly relevant given that one of the customs arrangements is dependent on the use of a ‘trusted trader’ scheme. AEO is that scheme. It therefore seems reasonable to conclude that businesses that have AEO accreditation will be better placed to enjoy the outcomes the prime minister wishes to achieve than those who do not.
The first step businesses should therefore take is to fully understand their import and export process and their relationship with EU customs and, more importantly, how these will be affected by Brexit. While AEO in itself may not be for every business, by taking this first step, a business can make an ‘informed decision’ as to how Brexit could affect its supply chain and what considerations it should at least make in addressing this.
While there is still little hard detail as to how the government’s objective will be achieved, coming up with a solid plan for both eventualities will stand businesses in good stead for what is likely to involve some changes to how businesses are required to operate.
March 27, 2018