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Incoterms

by | Nov 26, 2019 | Brexit, Customs and Logistics, Prepare for Brexit

When the UK leaves the EU it will become a third country. This means that there will be an extra administration burden on those who trade between the EU and the UK.

Import and export declarations will have to be completed for all shipments, and duties may have to be paid. But who is responsible for carrying this extra burden and cost? Is it the buyer or the seller? This is where Incoterms come in.

What are Incoterms?

International commercial terms, or ‘Incoterms’ as they are often called, define where the responsibility lies between the buyer and the seller. Incoterms set rules for the delivery of goods between trading partners and are recognised globally. These rules help to clarify; who is responsible for the costs involved in the delivery of goods, such costs include insurance, freight/shipping and duty and who is responsible for the import/ export declarations and the associated filing costs.

 

Negotiating Incoterms

Brexit IncotermsCompanies should try to negotiate the best terms, ensuring that they strike the right balance of keeping buyers satisfied while also ensuring that they are not taking on any extra expenses which they cannot afford or that would make their sales unprofitable. It is important to consider how you will process any declarations and if you can afford to take on the extra costs associated with any of the methods available.

This article on processing customs declarations can provide you with an insight of what processing customs declarations would mean for your business.

When agreeing on Incoterms, it can often be the case that the buyer has the greatest say and may dictate the terms. Some companies may take on responsibility for the declarations and duties in order to avoid passing the burden on to their end customer especially where it could be easy to find an alternative supplier locally.

 

Incoterms in Practice

There are currently 11 categories of Incoterms but we will look at two to understand how they work in practice.

EX Works (EXW) typically involves the buyer taking on the majority of the risk and costs involved. The seller agrees to have the goods available for collection at an agreed location. The buyer collects the goods and is responsible for both export and import declarations, shipping costs and the payment of duties.

Take for example, a French car manufacturer selling cars to a UK car dealership, under the term ‘Ex Works Paris’. The car manufacturer (the seller) will have the goods available for collection at their factory in Paris. The UK dealership (the buyer) will collect these goods. They will bring them to the port, ensure that they have the correct export documentation submitted. They must pay for the shipping and insurance cost. When they reach the UK, they are responsible for having the correct import documentation completed and that duties are paid. Finally, the UK dealership must pay for the transport from the point of entry at the port to their premises.

Delivered Duty Paid (DDP) is another term that is used regularly. Many large supermarket chains, for example, have stipulated to their suppliers that they must continue to supply goods under DDP terms post- Brexit. This term requires that the seller accepts all responsibility and costs for delivering the goods to the named place of destination. The seller must pay for both the export and import declarations along with taxes, duties, insurance and transport costs.

Take for example, an Irish vegetable producer supplying a supermarket in the UK under the term ‘DDP Birmingham’. The Irish supplier will now have to submit an export declaration for the goods to leave the country. They will have to pay for transport costs and insurance to get the goods to the UK. In order for the goods to be allowed into the UK, the supplier must ensure that they have the correct import documentation and that all duties and taxes have been paid. Once the goods have been imported, the Irish supplier must deliver the goods to the premises of the supermarket (the buyer) in Birmingham.

It is important that all companies are aware of the potential impact and extra cost that an Incoterm may have on their business before agreeing terms with their supplier or buyer.

For companies that feel that their customers could easily find an alternative supplier, it is vital that they take the necessary steps to increase their competitive advantage. Through continued innovation and engagement with their UK customers, companies can ensure that they provide not only a superior product but also better quality service than that of their competitors, making customers less likely to switch.

Further information on incoterms, can be found on the International Chamber of Commerce’s website.

If you would like to learn more about trading with a third country and the customs processes involved, register for Enterprise Ireland’s online Customs Insights Course.

 

 

Getting your data ready for Brexit

by | Nov 5, 2019 | Brexit, Prepare for Brexit

Getting your data ready for Brexit

The General Data Protection Regulation (GDPR) came into force on 25 May 2018 and unifies data protection law throughout the EU. It gives individuals control over their personal data and requires businesses and other organisations to put in place processes that protect and safeguard that data. The regulation also addresses the transfer of personal data outside the EU and EEA.

 

Dealing with third countries

This aspect of GDPR is now coming into sharp focus as a result of the UK’s decision to withdraw from the EU. GDPR still applies in the UK, however, once the transition period ends, the UK will become a third country subject to the GDPR rules governing the transfer of data outside the EU and EEA.

For Irish companies transferring data to the UK, it will be the same as if they were transferring it to India or Brazil. This will require them to put in place additional safeguards in accordance with GDPR requirements.

 

Key steps to ensure you are GDPR compliant

The first thing for firms to do is to establish exactly where their data goes. They should already have done this following the enactment of GDPR, but it is worthwhile taking another look in light of Brexit.

Companies may not realise that their cloud storage provider is actually located in Britain or Northern Ireland. Their pension schemes, payroll, healthcare plans may all be run out of the UK and involve the regular transfer of personal data. Workplace benefits databases could also be held in Britain or Northern Ireland. Even translation services might be covered if personal data is included in the material to be translated.

Having established that data is being transferred to the UK, the next step is to decide if that needs to continue. There may be options to look for another service provider in Ireland or another EU Member State and these should be explored.

 

Standard Contractual Clauses

If it is not possible or if it is too difficult to take this option, there is a ready solution to hand. There is a tool that can be used to solve this problem and it is available on the Data Protection Commission website. It is known as the standard contractual clauses (SCCs). This is a set of off-the-shelf clauses developed by the European Commission and which are recognised as an appropriate safeguard to ensure that firms remain compliant with GDPR.

The SCCs are already written and only require firms to fill in the blanks with their details. They can be appended to existing contracts and come into force when both parties sign them. Once signed, this enables firms to continue transferring data to the UK in full compliance with GDPR, and people still have their rights.

The data subject is also given certain specific rights under the SCCs even though they are not party to the relevant contract.

Firms are also advised to update their privacy statements to indicate that the data is transferring to the UK under the terms of the SCCs.

For a detailed  explanation of the standard contractual clauses, visit the Data Protection Commission website.

The SCCs will cover most situations, but there are certain more complex cases where they may not apply. These are relatively rare, but firms in doubt should consult the Data Protection Commission website or seek their own legal advice  to check out their particular situation.

There are also certain situations where the data transfer is not covered by contract. These include cases where data is being transferred from a UK Controller to an Irish processor for processing and then transferred back to the Controller. This has been a relatively routine process up until now, as the data remained within the EU at all times. The best advice for firms based in Ireland who find themselves in this situation is to look at the clauses within the SCCs and insert them into the service level agreement governing the activity. This will demonstrate an intention to be GDPR compliant in the new situation.

The same will apply to Irish shared services centres carrying out global back and middle office functions for multinational parents. They should update the terms of service to UK-based affiliates to include the SCCs.

 

Data Protection Policies

Most larger companies will already have systems in place to deal with the data implications of Brexit, while companies accustomed to sending data outside of the EU and EEA will also be prepared for it.

Some very large organisations use what are known as Binding Corporate Rules (BCRs). These are legally binding internal codes of conduct operating within a multinational group, which applies to transfers of personal data from the group’s EEA entities to the group’s non-EEA entities. The approval of BCR’s can take a significant period of time and also, given the cost and complexity of BCR’s, they are not a suitable transfer tool for most Irish companies.

The only remaining questions for Irish firms transferring data to the UK concern adequacy. Certain ‘third countries’, such as Japan, have received what is known as an ‘adequacy decision’ from the European Commission. This allows a crossborder personal data transfer from the EU to that country, because it has been determined to have an adequate level of data protection safeguards compared to the EU. If the UK does leave with ‘no deal’ after any transition period, it could take some time before the European Commission completes its negotiations with the UK Government in order to deem the UK adequate as a jurisdiction to which data can be transferred under GDPR. Therefore, companies need to explore the options available to them when transferring data to the UK either immediately in the event of a no deal or at the end of any transition period.

Learn more about getting your data ready for Brexit with our webinar with Nicola Coogan from the Data Protection Commission.