What should my business concentrate on in the run up to Brexit?
If you’re conducting international trade, read on…
Frances Fawcett evaluates the cornerstones of Brexit preparation
Mike Court and I have recently delivered events for Devon Chamber of Commerce as part of the UK Government’s programme of activities to prepare businesses for Brexit. The first was held immediately after the historical Saturday sitting of parliament and we therefore sat, poised at our keyboards, watching the news during the day, ready to update our slides. As we now know, updates weren’t needed because no decisive steps towards certainty were taken. We therefore went into the events with our pre-prepared information and had many hours of presentations, questions and discussions. We aimed to help guide our audiences about the tasks they had to undertake but it was difficult. As a presenter I generally feel it completely inadequate to answer a question with “it depends, in scenario A do this, in scenario B do that, in scenario C get ready to do something else, but either way I can’t tell you definitively.” But that’s what we found ourselves doing.
However, themes emerged, and the days and companies gave us the opportunity to build a list of the top issues. First, it’s worth a point of clarity about the stages of this process. As I write this, the potential for a hard Brexit on 31st October still exits. That means we just leave without any “deal” or arrangement for trading with 27 countries that will remain as members of the EU. This is the so-called “hard Brexit” or “no-deal Brexit” or sometimes referred to as “crashing out”. This will send companies down one path of actions. However, a deal is also still possible that will take us into a transition period until December 2020. That sends companies down another course of actions and, essentially, maintains the status quo until December 2020. The question of what happens at the end of December 2020 looms but since (at time of writing) we don’t have clarity on what’s happening at the end of this month, I’m leaving that one for now!
So, let me share the issues that emerged over two days of events with multiple companies…
I don’t know if they are the government’s Top Six, but they were the Top Six from the cross section of companies we met. They were all based in the South West, and some were small and some were part of multinational organisations. They came from many varied sectors, so our sense is that their Top Six is probably reflective of businesses all over. Here they are, in no particular order:
Step 1: Tariff Codes – you can do this now
Check the Tariff Codes you use for the products you buy and the products you sell. These should always be correct but as we face the prospect of new import duties, ensuring you have the right codes is important. Today there are no import duties on products bought from countries in the EU. If there’s a hard Brexit, you may have new duties to pay. Check also that you’re classifying using the UK system if you are UK based. See https://www.gov.uk/trade-tariff
When it comes to import duties, the government has announced a temporary tariff regime designed to help businesses in the event of a hard Brexit. It is there to help reduce costs while also protecting vulnerable industries. More information can be found HERE. This is a link to the original announcement made in March and is useful to see basic information, but make sure you check the updates that have been published since.
Step 2: Check and monitor certifications such as the CE mark – you will need to monitor this
If your products carry any certifications, i.e. the CE mark, check whether they are EU certifications. If they are and there is a hard Brexit, they may become meaningless for your products. This generally won’t impact goods you have already sold but it will impact goods you have in production or in transit. The first step is to be aware of all the certifications you have in use, and then monitor them for changes as we leave the EU.
Step 3: Check you have your EORI number and know what to do with it – you can (and should) do this now
If you are importing or exporting goods into or out of the EU (which currently includes the UK), you need a EORI number and should have one already. The government issued EORI numbers to every VAT registered company that didn’t have one already. However – here’s the catch – if you didn’t know you needed one before it was issued to you, it’s highly likely you may not know what to do with the number when the letter arrives! You will need a EORI number that starts with “GB” if there’s a hard Brexit. Go looking if you don’t have one – perhaps the letter went to your Finance department, or register for a EORI number. It’s free and takes minutes. Register for a EORI number HERE
Step 4: Check the Incoterms you are using with customers and suppliers – you can do this now
As if you don’t currently have enough to do, Incoterms have just changed, and a new 2020 version has been published. The good news is that there is no mandatory requirement to adopt the new rules by any specific date, but you should be aware of them. You should be using the correct Incoterms all the time and using them correctly. We find there is often some gap between use of the terms and understanding of the terms. We find many instances of terms being handed from one administrator to the next without an understanding of whether they still reflect the trading relationship you have with the particular customer or supplier. Look particularly carefully at your sales under the DDP term – this means Delivered Duties Paid. If there is a hard Brexit, you will be responsible for any new import duties that your customers in EU countries may find apply. Learn more about incoterms HERE
Step 5: Do you need to use TSP (Transitional Simplified Procedures) – you can do this now
You need this if you are importing goods from the EU and there is a no-deal Brexit. As members of the EU, the goods we import can move freely between countries in the EU. When we leave the EU, that will change. This process was announced by the government in February 2019 and is designed to ease the impact of a no-deal Brexit. As with EORI numbers, the government have proactively issued TSP numbers to 85,000 companies who imported goods during 2018. As with the EORI number however, if you didn’t know you needed a TSP number before receiving the letter, it’s unlikely the letter helped with that understanding. And it could be languishing in your Finance department awaiting some enlightenment about what it is and what it’s for. If you haven’t received a letter, registration is free and simple. Read more on the government website HERE
Step 6: Get your documentation right – you can do this now
Having your international trade documentation correct is another one of those tasks that should be in place and correct all of the time. However, this is now even more critical. As and when we leave the EU – which could still happen in a matter of days – there will be 27 more countries that need correct documentation for every sale and purchase you make with them. If you’ve only traded with EU countries, you will need new processes. If you already trade outside of the EU, you will need to replicate your documentation processes for all the countries in the EU. This is therefore an excellent time to review your processes, and the storage and accessibility of your documents to ensure it is robust and provides what you need. If you were subject to an audit, would you be able to produce all the documents (electronically or physically) for a sale or purchase selected at random from those made in the last 7 years? If not, give us a call and we’ll show you how. The companies we meet who have been audited – and it could happen to any company at any time – are grateful that they have robust processes in place and work hard to preserve them into the future.
And finally it would be remiss of me not to direct you to the official information that is available. You should visit www.gov.uk/brexit and work your way through the questions to receive personalised guidance and links. The process works well and the information is, of course, official. However, the information provided is only as good as the information you give in response to the questions asked and does assume you can answer everything accurately.
We don’t make any of those assumptions – we can work with you to understand your organisation and help you provide the information needed to build a picture of the measures you need to take so let us help you if you need to. This is real, people!
Get in touch with International Trade Matters Ltd today:
Frances Fawcett has worked both within, and with, large global corporations and small businesses and frequently internationally. She regularly delivers coaching and mentoring in business and international trade. Read more: You can find an informative series of blogs and a white paper by Frances HERE