David Miller looks at the practical implications of Brexit on international trade for small businesses.
The government’s recent release detailing its plans for businesses trading with the European Union in the “unlikely” event of a no-deal Brexit brings with it further uncertainty for those small businesses that are part of an international supply chain. Despite the fact that the report attempts to provide assurances that negotiations are progressing well, businesses of all sizes continue to question what the future holds for their trading operations once Brexit is finalised on 29 March 2019.
While the government report certainly makes for interesting reading, the real takeaway is that any business involved in international trade -- and particularly with EU countries -- should consider the impact that Brexit is set to have on their operations, and start to make plans accordingly.
The government’s guidance papers say that in the event of a no-deal Brexit, businesses will have to lodge customs declarations and potentially pay customs duty on goods imported from EU countries. The guidance also says that companies “may wish to consider taking professional advice”, but there are a number of key omissions from the guidance that allow small businesses to carry out some risk mitigation.
One factor the government has failed to mention is that the concept of Authorised Economic Operator (AEO) status is a way that importers and exporters can ensure they are in the best position ahead of Brexit. AEO status can help speed up customs processes, standing firms in good stead, whatever the outcome of the Brexit negotiations. Even if the UK does negotiate a deal, AEO accreditation may be advantageous in addressing existing Brexit concerns.
Why the government failed to mention AEO in the guidance papers remains a mystery. One can only imagine that it comes down to a lack of resources to process a huge number of applications that could follow such widespread advice. Businesses should seriously consider this option in order to be in the best possible position next year.
AEO is an integral part of the Union Customs Code legislation, which will be replicated in UK law as a result of Brexit. It is an internationally recognised quality kite mark indicating that a business’s role in the international supply chain is secure, and that customs controls and procedures are efficient and compliant.
In simple terms, AEO status means that items can pass through customs as quickly as possible, avoiding delays in the supply chain being a key risk mitigation factor for companies.
AEO status also means:
● It is quicker and easier to obtain customs simplifications
● The business is subjected to fewer physical and document checks at borders
● If the truck is selected at controls, it will be given priority as an AEO consignment
● The business can request that a control is held at a different place
Some key benefits of AEO status include:
● More efficient transferring through borders
● Less risk and more effective checks on the reliability of third parties
● Potentially lower insurance premiums in the future
● More efficient import/export systems
If a Brexit conclusion is not reached, businesses importing goods from the EU will be required to follow customs procedures in the same way that they currently do when importing or exporting from and to countries outside the EU. This means that for goods entering the UK from the EU, an import declaration will be required, customs checks might be carried out and any customs duties must be paid.
The government release states that before importing goods from the EU, a business will need to:
● Register for a UK Economic Operator Registration and Identification Number
● Ensure their contracts, and international terms and conditions of service reflect that they are now an importer
● Consider how they will support declarations, including whether to engage a customs broker, freight forwarder or logistics provider. Engaging a customs broker or acquiring the appropriate software and authorisations from HMRC will come at a cost
● Decide the correct classification and value of their goods and enter this on the customs declaration
Limited warehousing capacity
Customs warehousing has been presented as a means of safeguarding operations in the event of a no-deal Brexit. However, if everyone rushes to carry out this approach, demand will likely skyrocket and could lead to delays.
At present, I understand that there are more than 800 customs warehouses authorised within the UK, and even before considering Brexit, 750 of these will need to be re-authorised by the end of April 2019. This means that there could easily be a huge rush on the authorities to action these requests in time, particularly if demand for such warehouses rises at the time of Brexit.
All things considered, it is essential for businesses working across all industries to consider the impact of their imports and exports in the event of a no-deal Brexit. Also, with suggestions from some cabinet ministers, including Liam Fox, that a no deal was the “most likely outcome” for Britain, it is highly likely that firms will need some safeguards in place, whatever the eventuality.
About David Miller
David has more than 25 years’ experience in the Customs and VAT industries and has previously worked for HMRC before joining The Customs People and sister company The VAT People almost 20 years ago. The Customs People is one of the only businesses of its kind in the UK and assists British businesses with negotiating import VAT and import duties and the complexities of HMRC legislation.