The issue of certification post Brexit

Cost-increasing tariffs and delays at ports are not the only headaches facing the construction sector as a result of Brexit.

A recent Brexit information briefing for the construction sector organised by the National Standards Authority of Ireland and the Department of Housing, Planning and Local Government heard that the issue of certification could pose even greater challenges and severe disruption to supply chains if not addressed in a timely fashion.

 

Compliance and Regulations

For manufacturers and distributors of all types of products looking to enter the European market, it can sometimes feel like there is so much to know about compliance, standards and expectations inside the EU.  The ‘New Approach Directives’ were adopted in 1985 to ensure product safety and consumer and manufacturer protection.  The directives set out the requirement of a CE Mark (for products) and an Authorized Body (for manufacturers).

The CE Mark is critically important. This certification mark indicates conformity with health, safety, and environmental protection standards and allows products to be sold without restriction within the European Economic Area (EEA).  By CE marking a product, a manufacturer is confirming that the performance of the product they are selling is the same as what they are declaring and that it has been obtained using the right European technical specification. It should be noted that the CE mark is not evidence of compliance or that it meets the Building Regulations.

 

The Construction Industry

The relevant EU regulation for Construction Products is Regulation (EU) No 305/2011 – Construction products (‘CPR’). The introduction of the ‘CPR’ was to overcome the technical barriers to trade which arise where different countries in Europe have different standards, testing and labelling approaches for the same construction products. CE Marking is mandatory for any construction product covered by harmonised European Standards which is placed on the EU market.

Many Irish construction products could lose their CE Mark following Britain’s departure from the EU, while imports could also be disrupted as a result of products originating in the UK and other countries losing their marking

This situation arises because of the very close interrelationship between the two islands when it comes to all aspects of trade. Fergal O’Byrne, Head of the NSAI Brexit Unit, explained that many Irish exporters actually have their products certified by UK bodies under current arrangements, but this will no longer be possible after Brexit.  Post-Brexit, UK will become a third country and UK Notified Bodies will lose their status as EU Notified Bodies. These “Notified Bodies” assess the conformity of products before they can be placed on the EU market. Once approved by the Notified Body, the CE Mark can be affixed to them. At present, there are 1500 Notified Bodies (NBs) in the EU, 174 operating in the UK including 50 NBs for Construction and only 9 NBs in Ireland 3 of which are NSAI.  NSAI is a Notified Body for Construction Products, Medical Devices and Non-Automatic Weighing Scales.

Products which currently rely on a UK Notified Body for CE marking will no longer be able to be placed on the EU market.

“Irish exporters have relied heavily on UK bodies up until now,” O’Byrne noted. “Those entities will automatically lose their designation as Notified Bodies once the UK leaves the EU. If you are relying on a UK Notified Body, you will have to find an alternative before you can continue exporting to EU countries.”

And, in another one of those strange conundrums thrown up by Brexit, companies with products certified by UK Notified Bodies will probably not be able to continue to export to the UK, despite the fact that the UK government issued guidance earlier in the year stating that the CE Mark would continue to be recognised for an unspecified period of time until the mark is replaced by a proposed new UKCA mark.

This is because the bodies which issued those CE Marks will no longer be authorised to do so by the EU.

 

Dealing with delays

Exports to the UK and other third countries could also be subject to long delays, according to John McAuley, managing director of Compliance Engineering International, Ireland’s only accredited electrical test laboratory. He emphasised the importance of the Declaration of Conformity, which is a legal document that must accompany all CE Marked products sold in the European Union and other countries which recognise the mark.

“While goods circulating within the EU move freely, the issue arises with trade with a third country,” he explained.

McAuley cited a permanent 16km queue of trucks at the Bulgarian border with Turkey as an example. “We have clients with products sitting in Turkish bonded warehouses incurring charges,” he said. “This is not a customs issue. It is a Declaration of Conformity issue. It is very difficult for manufacturers to keep pace with changing standards and keep the declarations up to date. You have to be aware of that as well.”

 

Disruption to Supply Chain

Importers too face challenges when it comes to supply chains. Fergal O’Byrne outlined the origins and advantages of the CE Mark to put this in context. “It’s an integral part of Single Market,” he said. “Up until the introduction of the CE Mark, standards had often been used as technical barriers to trade. EU standards level the playing field but that wasn’t always the case when you had countries using standards as non-tariff trade barriers. Slightly different standards meant multiple certifications were required. A decision of the European Court of Justice in 1979 said that if product was fit for purpose in one jurisdiction it was fit for all. But you can only have free trade if you have fair trade. You need to ensure that everyone plays by the rules with a system of third-party certification. The Notified Bodies give that certification in relation to the CE Mark.”

 

Change of status for Irish companies

The departure of the UK from the system will result in the dislocation of well-established supply chains. “As the UK leaves the EU many people are going to find that cogs in the supply chain have moved and they may have to take on responsibilities they didn’t have before.” according to Fergal O’Byrne.

This relates to the rules governing what are termed economic operators, which are defined as manufacturers, importers, distributors, and authorised representatives.

“Irish companies may become importers from a third country for the first time or they may become authorised representatives, they may even be treated as a manufacturer if they are marketing the products under their own brand,” he added. “They will have different rules to comply with and a duty under law to ensure that the manufacturer obeys the rules.”  This is particularly important for companies that currently import from the UK but are recognised as “distributers”.  Once the UK leaves the EU, many of these “distributers” will become “importers” which entails further legal obligations.  Other roles such as “authorised representatives” who are appointed by a manufacturer to act on their behalf in carrying out certain tasks will be impacted after Brexit as those established in the UK will no longer be recognised.

And where the product is being sourced from the UK or another country and no longer carries a CE Mark, other steps will need to be taken, said Sarah Neary of the Department of Housing, Planning and Local Government. “They will need to transfer the certification from a UK Notified Body to an EU27 Notified Body or apply for a new CE Mark for it.”

 

Gaining the CE Mark

Sean Balfe, Head of Sustainability and Built Environment with NSAI, outlined the six steps required to gain a CE Mark:

  • establish the CE directives that apply to the product
  • know the essential requirements for your product
  • determine if third-party certification is required
  • assess product conformity; create and maintain technical documentation
  • complete a Declaration of Conformity and affix the CE Mark

 

Archie O’Donnell of i3pt, the largest certifier of buildings under the Building Control Amendment Regulations in Ireland, advised construction companies to move now to engage with their supply chains to identify products which might be at risk of not having the required certifications post-Brexit. “Construction companies are responsible for managing their own supply chains,” he said. “They might have to find alternative suppliers. Companies should keep a register of the key products in use and make sure they keep track of their suppliers. They should also look at potential costs escalation as a result of new tariffs or enforced supply chain changes.”

Ralph Montague of building information modelling (BIM) consultancy ArcDox noted how the latest BIM techniques can be used to identify which products in use in a construction project may be impacted by Brexit and allow for timely action to be taken to deal with the issues.

 

Preparing for Brexit

During the panel discussion which closed the event it was noted that UK suppliers of some critical products remain unaware of the CE Mark issue and have made no preparations to ensure that their products can continue to be exported to the EU. This was a timely warning to Irish companies to contact their UK suppliers to establish their certification status in advance of Brexit.

“We are looking at the issues from the perspective of a hard Brexit scenario,” O’Byrne added. “The UK is going to leave the EU and become a third country regardless of when that eventually happens. Any work done in preparing for Brexit will not be wasted and construction firms should ensure they are ready for it.

 

What next?

If you currently use a UK based Notified Body, you will have to move an EU-27 Notified Body.  You should begin the process by taking the following steps:

  1. Check the EU ‘NANDO’ website for a Notified Body based in the EU-27.
  2. Contact the new Notified Body and find out what you need to do to transfer product certification.
  3. If you import from the UK, you will be required to hold additional information. Engage with your UK supplier to obtain this information as soon as possible.
  4. If you have businesses based in both the UK and EU-27 consider how to reorganise your processes to minimise disruption.

 

Support for Irish businesses

NSAI has developed a range of Brexit factsheets across the following sectors: Construction, Medical Devices, Food/Agri, Chemicals/Petroleum, Pharma, Automotive and Green Procurement.

Contact the NSAI Brexit Unit at BrexitUnit@NSAI.ie for any queries on standards and certification.

Brexit – It’s Time for Businesses to Act

With Brexit fast approaching, CEO of Enterprise Ireland, Julie Sinnamon outlines why the time for planning has given way to the need for action

 

The good news is that many businesses have already taken action. Over 2000 companies have been supported, Enterprise Ireland has made over €125m available to Brexit exposed companies over the past two years.

For those that haven’t yet acted, there are a number of steps you need to take immediately.

 

Financial Management

First is financial management. It is vital that all businesses assess their exposure to sterling, not least because whatever decision emerges in the weeks ahead could give rise to exchange rate volatility.

Those most at risk are those whose margins are thinnest. As we saw in the immediate aftermath of the Brexit vote, an exchange rate swing in the wrong direction can have a negative impact, so take advice and develop a currency risk management strategy to protect yourself.

Stress test your cash flow projections. We are seeing client companies being required by their UK customers to increase their UK stockholdings, particularly for shorter shelf life products.

This puts pressure on cash flow so put adequate working capital solutions in place.

The SBCI’s Euro 300 million Brexit Loan Scheme, available through the pillar banks, can be used by qualifying businesses to fund working capital requirements.

 

Enterprise Ireland supports

Get to grips with customs. Enterprise Ireland’s Customs Insights is a free, 45-minute online course that includes key actions to prepare for customs, as well as the options from Revenue that are available to make the customs process more efficient.

Enterprise Ireland has a suite of wider solutions too, including our Market Discovery Fund, designed to support research into new markets.

Our Agile Innovation Fund is a fast track tool to help you redesign products or packaging for international markets while our new Operational Excellence Offer builds on our highly-successful Lean transformation programme.

 

Supply Chain

Assess your supply chain. Know clearly what you sell into the UK, what you source from the UK and what goods come to you via the UK. Understand the supply flow of goods.

In some cases, where goods come to Ireland from Europe via the UK – and therefore go from Euro to Sterling and back again – we are seeing clients source materials direct from Europe. In doing so, they remove the cost of the middle man plus two sets of exchange rates, becoming more competitive as a result.

 

Brexit Planning

Our client companies are increasingly being asked about their Brexit contingency plan by their UK customers. If you haven’t got one, get one.

Equally, if you haven’t already done so, talk to your UK suppliers about what they are doing in relation to Brexit. Some of our client companies are switching from UK to Eurozone suppliers. Others are bringing more of their supply chain back to Ireland. Whatever it takes, build resilience into your supply base.

Engage with your UK customers and suppliers. Have those conversations. Understand the implications and plan accordingly.

In the short term the most pressing issues relate to funding, currency, customs, supply and logistics. It’s vital that these concerns are addressed quickly, so that businesses can get on with their longer term strategies for post-Brexit success.

Since the Brexit vote, Enterprise Ireland has been delivering the same message in this respect – that Irish businesses should hope for the best but prepare for the worst.

In addition to the immediate actions needed for Brexit on the pressing issues, our advice is also to concentrate on innovation, competitiveness and diversification. Improving each of these is something no business will regret, regardless of Brexit.

That our client companies have heeded this advice was clearly demonstrated when more than 350 of them attended our major Eurozone Summit, which took place at Dublin’s Convention Centre.

They were there to hear from, and talk to, Irish businesses and senior European leaders about how best to take advantage of trade opportunities in the Eurozone.

These events and our resources play a vital role in increasing your knowledge base and capacity to prepare for Brexit. Start with the Brexit SME Scorecard which in a matter of minutes will help you identify your vulnerabilities, enabling you to prioritise the issues facing you in the short term and start dealing with them one by one.

 

Evidence of exporting strengths

The good news is that at Enterprise Ireland we see first-hand how strong the exporting base is. When we first developed our Irish Advantage export promotion campaign, for example, which is designed to promote Irish suppliers to international buyers, we talked to existing buyers all around the world about why they were buying from Ireland and Irish companies in the first place.

The recurring response was that it was because of Irish business’s innovation, client focus and commitment to delivering results. We are bringing the Irish Advantage to business partners across the globe and despite the challenges we need to ensure that we don’t let Brexit interrupt the key strengths we are recognised for internationally.

Happily too, I can categorically state that Enterprise Ireland has never dealt with as strong a client company portfolio as it currently has. Irish companies are achieving international global sales at record levels.

The quality of innovation we bring around the world to trade missions and events is simply outstanding.

 

Diversification

Rest assured Enterprise Ireland is innovating too; opening new overseas offices, introducing new supports and increasing staff numbers to support Irish businesses expand internationally.

Significantly one of our new overseas offices has opened in Manchester. This is because the UK, which is currently worth Euro 7.6 billion, is and will remain the number one market for Irish goods.

But with no currency volatility, total regulatory alignment, zero customs headaches and a market of 340 million people, it’s little wonder that diversifying into the Eurozone is now a priority for many of our client companies.

Our role is to facilitate them.

Our PrepareForBrexit.ie website, which was cited by the European Commission as an exemplar of advanced Brexit contingency planning by a Member State, has provided insight and guidance to thousands of companies.

More than 7000 SMEs have completed our Brexit Scorecard, while our Irishadvantage.com campaign, which showcases Ireland’s supply capability to a global audience, is live in 17 markets, actively promoting Irish companies across 14 sectors to international buyers.

Over 1400 companies are live on the website in a campaign that has already reached an international business audience of over one million people – and counting.

In the long term innovation is of course what will determine success and is something Irish businesses have a strong track record in. We just have to make sure we can deal with the implications of any potential Brexit induced customs, logistics, currency and funding challenges.

That is why the time for planning has given way to the need for action.

The supports you need are available and I would urge all companies to have a No Regrets approach to Brexit .While we don’t know what the outcome of the negotiations will be, if you become more competitive, more innovative and more diversified, irrespective of where the Brexit negotiations end up, your business will be in a stronger position for the years ahead.

 

This article was originally published in the Sunday Business Post.

 

 

 

Building resilience into your supply base

Every Irish company needs a plan to deal with the impact on supply chains once the UK withdraws from the EU.This is the advice of Mike McGrath, managing director of specialist procurement consultancy ARVO.

 

“With the advent of Brexit the UK will become a third country in terms of trade with the EU,” he explains. There is a huge level of interdependence in the supply chains between the two countries, and with no Brexit deal done yet it is difficult for businesses to plan for what it will mean. It is not like Y2K, food and mouth disease or GDPR, where we had defined problems to deal with which meant businesses could prepare. Brexit is different.”

 

Understand your Brexit exposure

While some businesses will be less exposed than others to the impact of Brexit, he argues that every company still needs to understand it. “It is certainly the case that some sectors are more exposed, whereas IT and services are less so, as they do not have products crossing borders,” he notes.

 

Increased administration post Brexit

“There will be logistics issues, there will be customs declarations, there will be VAT and possibly duties, as well as a huge amount of bureaucracy to contend with,” he adds. “Businesses are busy at selling and generating profits but will have to make time for the increased administrative burden and the costs that will entail.”

 

Analysing your Brexit risk

McGrath warns against the concept of “Brexit fatigue”, the condition which first emerged as people became tired of the slow pace of Brexit negotiations. “Companies still need to make their own strategic arrangements and contingency plans. Every business should have a Brexit plan, whether that’s one page or 100. There is good support available from Enterprise Ireland for companies wishing to analyse their risk and regardless of the size of the business or the resources available, they should have a plan which prepares them for the worst while still hoping for the best.”

 

Planning for Brexit

McGrath advises businesses to go through everything, product by product, offering by offering and component by component to establish if there is a Brexit risk associated with any of them. “For example, UK suppliers won’t necessarily have a CE mark or REACH approval for chemicals anymore. You have to understand the risks and the cost implications for everything.”

Once the risk assessment has been complete, it is time to start contingency planning. “If there is to be an increase in costs, you have to ask if customers can take a price increase. Or can you reduce costs in other areas? Many Irish companies are currently going through this process.”

 

Supply chain

In some cases, it might be possible to secure alternative sources for products, but this may not always be possible. “The UK still has considerable strengths in particular industries, and it might not be possible to find an alternative supplier. Even if the supplies are coming from other EU countries, there could still be delays. The landbridge through Britain currently takes about 20 hours. After Brexit, that might be 40 hours and that could present problems for products with a short shelf life.”

The answer to many of these issues lies with the development of closer and better relationships with key suppliers. “We will still trade with the UK after Brexit, and if a product from the UK is unique, we will still need it. Building close relationships with suppliers and reaching formal agreements to secure future supplies is crucial.”

In cases where security of supply is an issue, there may be alternatives. “Companies need to look at their suppliers and see which are the most important and what the impact of Brexit might be on them if they can continue to supply. They might be able to find alternative suppliers elsewhere in the EU. If supplies are coming through a UK distributor, there is always the option for SMEs to come together to group buy directly from the source and bypass the Brexit risk.”

While companies may resent having to spend time on resources dealing with Brexit, McGrath contends that it is far from wasted. “Even if Brexit wasn’t happening, it is always good for a business to have the most resilient and efficient supply chain possible. Ash clouds, foot and mouth disease, Trump-inspired trade wars – these are all business risks that companies have to navigate their way through, and preparing for Brexit can only help with that.”

Mike Mc Grath has published an eBook Supplier Risks through Brexit. A copy is available here https://arvo.ie/go/ebook

 

Enterprise Ireland support

 

There are many supports available to Irish businesses, including Enterprise Ireland’s Act On Initiative which provides an independent consultant to analyse your business and develop a specific Brexit action plan.

Learn more about how Enterprise Ireland can support your business to strengthen its capabilities and best prepare for Brexit.

 

To learn more about building stability into your supplier relationships watch Mike’s webinar:  Building Resilience into your Supply Base.

Minimise delays at customs with AEO status

The UK has long been the most important market for the Irish farm and food sector. With Brexit, while diversification is important, it is still vital Irish companies can ensure fast, steady delivery into Britain. One method to help minimise customs delays is authorised economic operator (AEO) certification. While not the solution for every company, it can provide some real benefits.

 

The main advantage of AEO is priority treatment at physical checks. It’s a security standard, which was introduced by the World Customs Organisation in 2008. The concept was to create a set of internationally recognised safety and security standards that companies could implement in their facilities so as to minimise customs delays. With the help of Enterprise Ireland, bacon producer Oakpark Foods is in the process of acquiring this certification. Financial Controller Danny Madigan said it is crucial: “Considering the nature of our product, which is chilled, delays in the supply chain could have detrimental effects on shelf life and product quality”.

 

Oakpark Foods meat products

Oakpark Foods

Oakpark Foods was originally a bacon curing house and moved into sliced retail bacon packs in 2008. As part of its diversification efforts, the company recently opened a new facility in Clonmel, Co. Tipperary, which produces white meat products. Currently when exporting to Britain, only one docket is required but after Brexit: “You’ll have to talk to Irish Revenue and Inland Revenue [UK] and make declarations on both sides”. For Oakpark, it is not enough for the freight company they are using to have AEO status: “It is the responsibility of the company to ensure that the correct safeguards and checks have been carried out before the product leaves the site to ensure it has not been tampered with in any way. AEO-certified companies need to have these safeguards in place, which is why there are fewer checks required at port level”.

 

The steps to gaining AEO status

To become an AEO, a self-assessment questionnaire (SAQ) is required by the Revenue Commissioners. Revenue then carries out an onsite assessment within 120 days, after which, AEO status will either be granted or rejected. For Oakpark, there is a specific business case for getting AEO status: “We basically weighed up the effects that delays in our supply chain would have on our products and decided that everything that could be done to avoid this should be explored”.

 

Support from Enterprise Ireland

Danny said Enterprise Ireland is providing extensive support: “They’ve supplied R&D supports to help us diversify into other markets and improve our product. They’ve provided advice and guidance through their Brexit Act On Initiative, which formed the cornerstone on which our Brexit plan was formulated. We’re also hoping to complete a Lean programme in the coming months, which will help the company to become more competitive, and alleviate the extra costs that will invariably be incurred as a direct result of Brexit”. The Brexit: Act On Initiative is broken down into three categories: strategic sourcing, which reviewed Oakpark’s supply chain and identified strengths and weaknesses, customs and logistics, which identified the pressing need to register as an AEO, and, thirdly, financial and currency management. Help determine the case for AEO in your business through the support of Enterprise Ireland’s Brexit: Act On Initiative.