BREXIT - The Cat is Out of the Bag

Posted Feb 12, 2020

The cat is out of the bag  – Frictionless trade between the UK and EU will end after the Brexit Transition Period

The UK Government have recently stated that there will be no frictionless trade with the EU after the end of the transition period. Customs declarations and checks will be the normal process on goods moving between the two customs territories.

In his recent speech to the Border Delivery Group the UK Chancellor gave the following reasons:

• to keep our borders safe and secure so we know who’s coming in and how often, what they are bringing in, and why
• to ensure we treat all partners equally as we begin to negotiate our own trading arrangements with countries around the world
• to collect the right customs, VAT and excise duties
• the EU has said it will enforce checks on our goods entering the Eurozone. We will likewise enforce our own rules for goods entering the UK

In addition, hopes that the range of simplified procedures that were on offer for a no deal Brexit would remain an option for traders have been dampened, stating that businesses now have enough time to prepare. “The UK will be outside the single market and outside the customs union, so we will have to be ready for the customs procedures and regulatory checks that will inevitably follow,” said Michael Gove at the BDG conference.

To summarise this in principal means:

• No Transitional Simplified Procedures (TSP), therefore anyone authorised for TSP (which was pretty much anyone) would need to hold regular simplified procedure authorisations.
• No special arrangements for imports at RoRo locations where goods were to be allowed to move freely either under TSP or on submission of a pre-arrival declaration, with arrival notification within 24 hours. This means that Import declarations or transit movements must be presented on arrival to a Customs Office or via a Port Inventory System.
• EMCS (Excise Movement and Control System) movements would need to start at the port of import and not within 24 hours as was proposed.
• No special arrangements for exports at RoRo locations where goods would have been “accepted” inland and moved freely on exit of the UK; instead goods will need to be presented on exit of the UK as happens for exports to non-EU countries.
• No VAT Postponed Accounting? The UK could still allow this, but it was one of the no deal measures to reduce the burden on trade paying Import VAT for the first time rather than simply accounting for it in their records.
• No deferring of the need for carriers to submit safety & security declarations from the EU; timelines vary depending on the mode of transport from wheels up for short haul air movements, 1 hour prior to arrival for road or 2 hours prior to arrival for short sea and rail movements.
• No Brexit Tariff with 80% of goods being imported duty free, instead the Department for International Trade consulting on the future tariff and potential removing nuisance tariffs (those under 2.5%) and rationalising others but at the same time protecting indigenous industries, promoting inward manufacturing while not undermining any negotiated free trade agreements.

Considering that most UK traders are were looking at normal border processes how is it best to minimalise those effects:

• Determine your approach and processes for declarations, secure contracts now with your solution vendors to enable readiness in time for both CDS and the end of the transition period. Don’t get caught in the bottleneck at the end of the transition period it’s bound to happen.
• Apply for import and export simplified procedures
• Move goods under Transit to Inland locations
• Obtain Transit authorised consignor and consignee status to start and finish transit movements at your own premises.
• Obtain Temporary Storage authorisations to receive goods inland
• For hauliers and carriers ensure that you have processes in place to submit import safety & security declarations both in the UK and in the EU.

Of course this is no change to what importers and exporters in the EU were facing with the EU never making any temporary simplification measures, but any hope that a free movement type of arrangement could be met must now surely be gone and businesses need to act quickly to ensure they can operate their supply chains as smoothly as possible while accepting that the timelines between the UK and EU will now mirror those coming in from Switzerland, Norway or Turkey regardless of any trade agreement.

Still unknown is what will happen on freight movements between the UK and Northern Ireland to ensure goods can move freely North-South and how any checks or taxes due under the Irish protocol will be managed. We have already seen ports and carriers working on the possibility that this could be done at the time of leaving the UK mainland rather than on arrival, but of course that is yet to be determined.

Finally, no one should forget the two other big changes that will affect Customs in 2021 and beyond.

• Implementation of UCC Compatible systems from, for example CDS (Customs Declaration System) currently being rolled out in the UK, to DMS ( Douaneaangifte Management System) in the Netherlands, changes in Belgium, and new systems planned in Denmark, Sweden, and Finland.
• Changes to VAT rules on low-value parcels entering the UK and EU, extending changes already experienced in some countries such as Sweden and Norway and putting the responsibility not only on the seller but also on the express carrier industry and specialized brokers.

For help and advice to be Brexit ready see, our Brexit Resource Center or email info@descartes.com

Written by Martin Meacock

Director, Product Management