Brexit Update – November 2017

Carol Lynch, a partner with BDO, is the Chambers Ireland nominee to Revenue’s Customs Consultative Committee and has kindly put together an update for the Chamber Network on the possible customs implications of Brexit, based on negotiations as they have unfolded to date and based on the UK Government’s recent White Paper on customs.

  • As the Brexit Negotiations restarted last Thursday (9/11/2017) there is increasing pressure to have agreement on a transition period concluded. This is necessary for many reasons, in particular.
  • Business will need a year to make preparations and introduce new Customs Procedures.
  • The Authorities need a significant increase in the number of customs officials both in the UK, Ireland and the EU. These are unlikely to be recruited and trained in time for March 2019.
  • The IT systems need significant investment to cope with the potential ten-fold increase in the number of declarations required.

The fact that there is still no concrete solution to the Northern Irish Border and how this will be managed. This leaves companies unclear as to whether to prepare for a worst-case scenario of a Hard Brexit in
March 2019 or whether to adapt a wait and see approach. The downside to the latter, however, is that as the months go by it leaves less and less time for the necessary work to be completed.

Also, the facts are that when we deconstruct the meaning of a Hard versus a Soft Brexit what this really boils down to is whether there will be customs duties applied. The customs compliance requirements remain mostly the same however in both scenarios.

The question we get asked the most at this point is whether there is anything a company can do when so little is known. While this is true to some extent, there is, in fact, lot more known than
unknown.

It is certainly still unclear whether a Trade Agreement leading to reduced /zero tariffs will be agreed. It is to be hoped an agreement will be reached, but a start on this will only be made this December
at the earliest.

Less unclear however is that there will be requirements for Import and Export Declarations to be lodged with the Customs Authorities once the UK is a Third Country for Customs Purposes. This is
the case with all imports and exports from non-EU countries and there is very little reason to believe that any different situation will apply to the UK. Indeed Pascal Lamy, the former EU Trade
Commissioner and former head of the WTO re-iterated this last week when he said that “There is no ‘no border’ solution”.

If we look at what is being suggested by the UK the most recent thinking is outlined in the Government’s White paper on Customs published in October 2017.

In summary, the White Paper confirms that:

1. It is necessary, in the interests of being prudent, to provide for the implementation of a Customs, VAT and Excise regime for goods moving between the UK and EU.
2. Traders who trade only with the EU will now be subject to customs declarations and checks for the first time.
3. EU Movements by sea and air will be dealt with broadly in the same way as they are dealt with currently for non-EU movements.
4. For roll on- roll off traffic pre-notifications to customs may be introduced with customs posts set back from the ports.
5. Trusted Trader status will be critical to enable simplifications in managing customs, cost savings in lodging declarations and avoiding delays – in particular at the N.I. Border.

  • Trusted Traders may obtain simplified options in terms of lodging customs declarations i.e the monthly reporting as we have discussed.
  • In addition to cross-border trade, the Trusted Trader arrangement would allow for aggregated returns and periodic duty payments.

This outline is therefore quite clear in stating that trade with the EU will be subject to customs requirements.

What should a company do therefore at this point to prepare for a Hard Brexit while still hoping for a soft Brexit?

We are strongly advising the following steps are undertaken:

1) Review your supply chain and map out imports and exports to and from the UK
2) Assess the impact of tariffs on a worst case and best case scenario
3) Identify the level of customs awareness within the Company
4) Assess the potential increase in the costs of customs compliance
5) Look at applying for Trusted Trader Status

Indeed both the UK and Irish Authorities have identified the Trusted Trader Status as a means for reducing burdens for companies and a prudent company would be well advised to start preparations for this authorisation as soon as possible.

The timeline between starting an application process and receiving an authorisation is on average one year which means that even allowing for a start date of January 2018 it would be unlikely that
authorisation would be achieved before January 2019. If Brexit occurred in March 2019 this would leave limited time for slippage.

We will be hosting workshops together with BDO during 2018 as the results of the negotiations become clearer and we will be issuing regular updates to our members to advise on the next steps.

 

 

 

 

 

 

 

 

 

 

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