BREXIT – HOW SHEFFIELD CHAMBER CAN HELP YOUR BUSINESS!
As the country approaches the deadline date of 31st October 2019 the risk of leaving the European Union without an exit agreement is increasing. If this is how our relationship with the E U will end, then there is unlikely to be a 2-year transition ‘soft landing’ agreement and many companies will wake up to a very different business landscape on Friday 1st November 2019.
The vast majority of business sectors will be subject to duties being implemented on their imported and exported products. An average duty fee will be between 2.5% and 3.5% of the value. This will include many products important to Sheffield like animal feeds, raw material alloys, chemicals and pharmaceuticals. Some materials and products however will have a higher duty level applied e.g. cars at 10%: and foodstuffs may range from potatoes at 11.5% and beef at 84% for exports and 0% and +45% respectively for imports.
20% VAT will be applied for the first time to imports but can be reclaimed on submission of the quarterly VAT return. It will however have a serious negative effect on cash flow because the 20% must be paid before the goods can be cleared into the country. Any European customers will be charged VAT and duty on importation of goods from the UK.
Many customers are likely to request a change of delivery incoterms to a delivered duty paid basis (DDP), in which case a registered European VAT number will be needed in-order to reclaim the VAT, albeit this will also have cash flow implications.
There could be delays at border crossings and customs points as the free movement of goods through the EU will no longer apply to goods moving to and from the UK. The UK government has sought to ease the delay effect of goods coming into the UK (See Below).
Circa 138,000 businesses in the UK trade only with Europe. For the past 45 years these businesses have not had to complete any normal customs documentation at all apart from Intrastat. This will change overnight BUT most of those businesses will not know what their legal obligations are for international shipments.
CUSTOMS DECLARATIONS: There are currently approx. 55 million import and export declarations submitted to HMRC every year for trade outside the EU but after Brexit this is projected to increase to over 200 million per annum from 1st November 2019. The capacity implications from this needs no explanation.
CERTIFICATES of ORIGIN: Overnight the Free Trade Agreements (FTA) the UK has with European countries and those the UK currently has with 45 individual countries or FTA Blocs by being a member of the EU will disappear. After 31st October it is likely that most of those countries will require Certificates of Origin. The UK will no longer be able to supply EC Certificates of Origin and have already printed UK Certificates of Origin which are in stock at the Chamber. The preferential trade documentation, called EUR1’s will completely disappear, however for those few markets with whom the UK will have agreements after Brexit, the name of the document will change to UK1’s. Printing of these documents is in hand and they will be available from the Chamber.
THE VALUE OF STERLING
Since the referendum sterling has dropped approx. 16% and may fall further in a hard Brexit situation. On a positive note this will largely negate the application of duties and additional costs for our exports, BUT it will make our imports even more expensive.
Businesses should try to reduce their imports as much as possible by sourcing in the UK but should also talk to their customers currently covered by free trade agreements. The discussion re prices is not easy but better to be had up front rather than leaving to the last minute or after the event. Businesses should model the effect of World Trade Organisation (WTO) tariffs and currency changes into their business remembering to anticipate both import and export changes.
INTERNATIONAL REQUIREMENTS – WHAT THE CHAMBER CAN DO!
The Reality is that even if the UK leaves the EU on the 31st October with an agreement, or doesn’t leave the EU at all, import and export procedures will change. Brexit may alter the pace of change by driving the changes more quickly, but they will come.
For the past 18 months Sheffield Chamber International Trade Centre has been preparing to assist companies to mitigate the effects of Brexit (whether a hard or soft exit from Europe), and to help company’s prepare for imminent changes to export and import procedures internationally as driven by the World Customs Organisation and the World Trade Organisation.
The Chamber has invested substantially in new staff, training in areas like import/export recording and declarations on the new international computerised CDS system (which will replace the UK specific CHIEF system), and gaining new approvals like REX, AES and AEO. It has also enlisted the services of an HMRC VAT and Customs Compliance specialist, on a retainer contract. Under consultancy agreements the Chamber has been helping companies audit their current procedures, upgrade them as necessary, apply for and obtain the approvals they may need in the future.
The Sheffield International Trade centre can now offer a program and support package called MUST DO’s – PREPARATION FOR BREXIT AND BEYOND. We have been asked by government to ramp up our offer to business as the deadline date is fast approaching.
This practical assistance falls into four areas:
A. Legal Understanding
1/. Running a customs compliance audit / training to ensure the companies understand that they will have to start a documentation trail following the same rules and regulations as they would for exporting and importing from Non-EU countries.
2/. Issuing Standard Operating procedures covering each aspect of the import and export process from order placement to receipt and the subsequent documentation which must be retained for customs purposes.
3/. Explaining the requirement for import and export customs declarations, the impact and effect on all business and the mitigating circumstances SCCI are putting in place.
4/. Understanding the responsibilities and liabilities of the exporter, the importer and third parties such as forwarding agents, clearing agents etc.
B. Cost Liability
1/. Looking at the vulnerable aspects of the business from the point of view of added cost at point of purchase and/or sale in the form of Tax, Duty, (dependent on commodity code) freight delay and calculating the net result to the bottom line.
2/. Close explanation of the VAT liability and the need to mitigate risk of non-proof of export therefore inability to Zero rate VAT
C. Cost Mitigation and Border Delay
Depending on the above analysing ways to reduce the cost assessing each of the following systems
1/. Inward Processing Relief (IPR). Primarily for Raw materials bought into the UK from both EU and Non-EU countries and offsetting this against Outward Processing Relief (OPR) by calculating the added value to the raw material thus reducing the dutiable cost liability significantly. Ensuring their customers in the EU (and internationally) are familiar with the OPR application and control procedure.
2/. Ensuring the companies understand the Transitional Simplified Procedures for import laid out by HMRC in April 2019 and this leading into Customs Freight Simplified Procedures (CFSP) meaning there will be a summary clearance at the port and full declaration must be made at the trader’s premises in the preceding 72 hours.
3/. Bringing goods into the UK using a customs warehouse so tax and duty need only be paid on the incremental values rather than the whole consignment thus assisting cash flow.
4/. Building stocks on the European mainland by using a customs warehouse thus assisting cash flow and reducing risk of delay at border points.
5/. Explaining about the benefit and cost of consignment stock.
D. Trusted Trader
1/. Full explanation of the importance of trusted trader standards REX; AES and AEO as laid out in the changes to the Union Customs Codes May 2016 and the impact for companies when the UK leaves the EU. (although this extends to the rest of the world as well).
2/. Offering a full service to help businesses achieve REX, AES and AEO approvals.
3/. Offering a one stop shop for businesses (and particularly SME’s) to handle all their documentation, customs and export procedures. Sheffield Chamber is an approved Customs Broker.
Please note that this document and the service it describes is focused on companies that trade in goods abroad. Every Business, and every individual is likely to see cost and price changes from Brexit. Businesses offering or buying services will probably see implications in the future albeit this is less well defined.
SHEFFIELD CHAMBER CANNOT STOP BREXIT OR THE IMMINENT INTERNATIONAL CHANGES BUT IT CAN HELP YOU THROUGH THEM.
For further information please do not delay. Book an appointment to see one of our specially trained staff ASAP.
Call 0114 201 8888 or contact firstname.lastname@example.org