Contingency planning in the event of a Hard Brexit

In this week’s edition of our Member & Expert Opinion Series, Carol Lynch; Partner, Customs and Trade, BDO & Member of the Chamber’s Agri-Food Committee and Brexit Subcommittee discusses Hard Brexit contingency plans.

As the Brexit negotiations stall there is increasing concern on whether a Hard Brexit will come into effect on 29 March 2019.

The EU Commission have issued a number of statements last week to the effect that a Transition Period to 31 December 2020 is not a given and there is, as Michel Barnier has stated, a lot of work to be done to allow a Transition Period to be confirmed.

One of the key stumbling blocks in this regard is how to resolve the situation regarding the Irish Border.

It was hoped that this would be done by the June Summit this week but it will now be October at the earliest.

Therefore companies and governments are being warned to make contingency plans for all eventualities. In essence, hope for the best but prepare for the worst.

The question we get asked the most at this point is whether there is anything a company can do when there appears to still be so much uncertainty. While this is true to some extent, there is in fact a 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 there has been little progress on outlining what type of future arrangement the UK wants to conclude with the EU.
  • 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 when he said that “There is no ‘no border’ solution”.

 Many companies are therefore now having to try to understand Customs and Trade legislation for the first time with the potential requirement to lodge Customs Declarations on purchases and sales with the UK. Added to this is the additional cost of customs compliance and the risk of penalties for supplying inaccurate information to Customs.

The first thing to remember is that Customs Duties and Customs Declarations are required each time you cross an International Border. Therefore for sales to the UK, for example, you will need to lodge an export declaration from Ireland and an import declaration into the UK.

You will also want to look at your type of imports e.g. whether it is capital equipment, raw material/parts or excisable goods. There can be different rules and cost-saving opportunities for each type of transaction and it is best to review this well in advance of importing as Customs Authorisations can take some time to secure.

In our experience the following authorisations are most typically required

  • A Deferred Payment Authorisation

A deferred payment account authorisation allows an Importer to pay one monthly payment to Customs rather than individual payments each time your goods cross the border.

A deferred payment account will however require provision of a Guarantee and we would recommend allowing three months to obtain this authorisation and guarantee.

  • Customs Warehousing
    This allows goods to be imported into Ireland duty free on a temporary basis once goods are re-exported.
    Again this requires a Bond to be lodged with Customs.
    We would recommend allowing for six months to obtain Customs Warehousing Approval

Time pressure is increasing however as:

  • Businesses often need up to a year to make preparations and introduce new Customs Procedures
  • There will be a requirement for a significant increase in the number of customs officials in the UK, Ireland and the EU
  • IT systems will need significant investment to cope with the potential ten-fold increase in the number of declarations required

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 (Authorised Economic Operator 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.

 

Carol Lynch; Partner, Customs and Trade, BDO & Member of the British Irish Chamber of Commerce Agri-Food Committee and Brexit Subcommittee. 

Carol is a Partner at BDO Customs and International Trade Services. Carol has more than 25 years experience in customs and international trade. Carol has significant expertise in customs, excise, export controls, anti-dumping, audits and investigations. She also has significant experience working with clients in the aviation and aircraft leasing, food and drink, pharmaceutical companies, consumer electronics and software sectors along with general manufacturing. Carol is currently heavily involved in advising clients on the impact of Brexit and is part of a number of Trade Groups focused on this issue. She is a member of the Chamber’s Agri-Food Committee and Brexit Subcommittee and has presented to the Oireachtas Finance Committee on this issue.

 

The views and opinions expressed by authors are their own and do not reflect the official position of the Chamber but are simply an illustration of the various opinions reflective of the diverse Chamber membership. Should you wish to contribute to the Member and Expert Series, please contact neil.dee@britishirishchamber.com for further information.

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