Time to get accustomed to customs
For years the words Brexit and ‘uncertainty’, have gone together. While there is still much that is unknown about what future trade arrangements with the UK will look like, some things are certain.
On 31st December 2020 the current EU/UK transition period ends. It will not be extended because the agreed deadline for doing so, 1st July, has passed.
For now the EU and UK are continuing to negotiate their new relationship, including how trade will be done from 1st January. If there is no agreement by that stage there will be a ‘no deal’ Brexit.
Regardless of whether or not a trade agreement is reached, there will be change.
Irish businesses that import from, or export to, the UK will have to contend with new checks and administrative procedures, including customs declarations.
Understandably the pandemic has seen many businesses switch focus, and resources, from Brexit to managing the Covid-19 crisis. However, as the UK will leave the EU’s single market and its customs union on 1st January, businesses must now prepare for it.
“Everybody is focused on Covid but this is happening on 1st January. Because talks are still going on, people might still think ‘they will sort something out’. They won’t,” says Carol Lynch, a partner at professional services firm BDO.
Even though businesses already have “enough on their plate”, they have to get ready, she says.
Supports to help
There are a number of supports available to help, including the information available on this website and dedicated Brexit grants, advice and training from Enterprise Ireland and Local Enterprise Offices.
These include Enterprise Ireland’s Be Prepared Grant, which is worth up to €5,000 and helps businesses to avail of external expertise to develop action plans.
This can be used to investigate the potential to diversify into new markets, invest in innovation, improve operational competitiveness or enhance strategic financial capability. “All that help is there so sign up and start learning, and working out what you need to do,” says Lynch.
The fact that customs clearance agents are in short supply makes it even more important that business owners and senior managers have as much customs knowledge in-house as possible. “Don’t panic, you have four months left, just don’t leave it to the last minute,” she says.
Don’t let uncertainty around tariffs stop you either. “In the absence of certainty, look at compliance principles,” recommends Dr Andrew Grainger of Trade Facilitation Consulting.
“At the moment, the EU is in a transition period so there is nothing to comply with. It will never be as good as it is now, with as few hurdles. Normally the direction of travel is towards trade facilitation, making trade as easy as possible.” Brexit has reversed this long term trend.
He recommends businesses start by revisiting their commercial relationships, to see how much of the customs burden might be taken on by suppliers. For example, some may consider establishing a base in Ireland, which would help.
Getting up to speed on Incoterms, the international commercial terms published by the International Chamber of Commerce, is vital. “If you are to revisit your commercial relationships, it is going to require informed conversations,” he explains.
As a market of more than 65 million people, right on our doorstep, the UK will remain an important trading partner for Ireland’s businesses.
However, they must now consider trading further afield too, to make the most of EU membership. “From the Netherlands to Germany or Sweden, there are opportunities galore, as members of one of the world’s largest markets,” he says.
In the meantime, to facilitate UK trade, decide how you will clear your goods, either in-house or through a third party. If the latter, you need to find and appoint a customs intermediary, agent or freight forwarder.
When you do, be clear about your instructions and about where responsibilities and liabilities lie, he recommends. Be ready to introduce performance monitoring systems and make sure all data, such as invoices and transport documents, which form the basis for customs declarations, is accurate, says Grainger.
Look at ways to derive advantageous customs treatment, either for yourself or via your agent, such as through the use of deferment accounts, customs warehousing or inward processing relief, for example.
The fact that previous Brexit deadlines came and went, leaving some Irish businesses overstocked, may leave some reluctant to prepare again. “But this is a firm deadline,” cautions Ronan McDonnell of The Logistics Consultant.
Moreover, with the UK able to determine its own trade policy, it is “highly unlikely there will be any soft landing” come 1st January, he says.
While the Northern Ireland protocol has sorted many issues for those businesses trading with NI, “for businesses trading with GB, it’s going to be a whole new world,” he says. Getting to grips with issues such as customs classifications and commodity codes will be key.
“Most businesses know now it’s inevitable. We don’t know whether or not tariffs will apply but the paperwork will be there regardless,” he says. “Even if we have a trade deal, that doesn’t mean you won’t have to process customs declarations.”
It’s why businesses that haven’t done so already should talk to Enterprise Ireland and the Local Enterprise Offices. They don’t have to go it alone. “There is help available,” he says.