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The UK may have formally ended its membership of the European Union on January 31st 2020, but companies in Britain and Europe have seen few practical changes in the way they do business so far. On December 31st, that is set to change, and organisations across the continent need to be ready.

Up until this point, the UK has been subject to a transition agreement that has kept the country subject to EU laws and customs regulations. This is due to end from the first day of 2021, and the British government has now confirmed that this deadline will not be extended.

As such, the post-Brexit future of international trade between Britain and Europe is slowly starting to take shape, as new measures and agreements are put in place to replace the outgoing standards imposed by the EU’s single market and customs union rules. Although many of the new regulations are yet to be decided, a clearer picture is now emerging - and businesses need to take heed in order to ensure they are ready to comply.

How will tariffs and duty rates apply under Brexit?

One of the most important implications of Brexit are the new tariff and duty rates that will be introduced as a result of the UK no longer operating as part of the EU single market and customs union.

The government has announced a new UK Global Tariff (UKGT) scheme, which will replace the EU’s Common External Tariff, and is set to be applied to imports from outside the UK from January 1st 2021. Under UKGT, duty rates will be amended in the following ways:

  • Liberalised - in which positive duty rates are reduced to 0%, as is the case for goods such as aircraft parts
  • Simplified - in which complex tariffs and “nuisance rates” are rounded down or otherwise simplified, such as a 2.7% rate being changed to a 2% rate
  • No change - in which the new UKGT rate is the same as the existing EU trade tariff

Further details on how the UKGT scheme will work can be found on the official GOV.UK website. These tariffs will be used for imports into the UK, while existing EU duty rates will apply for exports from the UK to the EU.

It is important to note that these duty rates will not apply if the UK has agreed a new trade deal with a particular country or trading bloc. The GOV.UK website also features information on which trade deals have been signed or are in progress, meaning businesses can keep track of ongoing negotiations to see how these agreements will affect their costs and processes going forward.

How will import and export declarations work under Brexit?

Brexit also brings with it new systems and obligations in terms of import and export declarations, which will be introduced in phases. The current timeline for import border protocols is due to unfold as follows:

  • From January 1st 2021 - declarations will be required within six months of importing goods, with duty to be paid after this period has elapsed. Import declarations will not be required at port, as full border controls will not have been implemented yet
  • From April 1st 2021 - full border controls at port will potentially be necessary for certain high-risk sectors and categories of goods, including plants, high-risk foodstuffs and excise goods
  • From July 1st 2021 - border controls will be fully implemented, so full import declarations will be required thereafter for all industries

Export declarations, meanwhile, are not expected to be streamlined in the same way as imports. However, applying for Authorised Economic Operator (AEO) status could provide access to simplified processes and priority support, where available.

HM Revenue & Customs estimates that the number of customs declarations it processes each year will rise from 50 million to 250 million after the Brexit transition period ends, meaning there is currently a shortfall of around 50,000 customs brokers needed to handle this increased workload. As such, the government has launched a new grant scheme to bolster the UK’s supply of customs intermediaries to address this issue.

What can businesses do now to prepare?

Although many details about the UK’s future trade relationship with the EU are yet to be fully negotiated, the information released thus far shows that significant changes are to be expected. As such, all businesses that trade with the EU need to be planning for December 31st 2020 in the following ways:

  • Engage with suppliers and customers to identify and plan for potential changes along the entire supply chain. This process should be thorough and comprehensive, accounting for all related costs and changes to Incoterms, and determining who needs to be responsible for each specific action
  • Exporters should be exploring all of their available options to ensure that European customers are not put off from trading with the UK by these new rules. This includes considering the cost of the new duties and working out who will be responsible for declarations, as well as considering alternatives such as overseas VAT registrations
  • Look to appoint business partners to help you manage your post-Brexit customs declarations. Demand for freight forwarders and clearance agents is likely to be high, so you should engage with them proactively, or make plans to undertake these processes internally, bearing in mind that grants are available for this purpose
  • Think Brexit in all of your future business planning. Big changes are just around the corner for international trade, but help is available, and these challenges can be negotiated with the right support

Find out more

If you are still unsure about how best to prepare your business for its post-Brexit future, it may be best to speak to a qualified customs and VAT consultant to find out what you need to do.

By getting in touch with The Customs People, we can help you to redesign your customs processes to be Brexit-ready, while also identifying whether your business is eligible to apply for a grant. If so, these grants could potentially even be used to cover our consultation fee.

Speak to one of our customs consultants by calling our free helpline on 0161 826 8926, or fill out an online enquiry form and we will get back to you.

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