Back in our March issue this year and with the UK in the Brexit transitional period, we ran a feature where we caught up a number of business representatives to find out their views on our post-EU Sheffield City Region.
As we edge closer to January 1, next year, the UK leaving the EU single market and customs union and the end of the transition period will affect citizens and businesses, as well as travel to and from the EU – travel that is already facing restrictions due to the global pandemic.
Along with the prospect of a ‘no-deal’ Brexit and the uncertainties and impact of COVID-19, businesses that deal with Europe will have to follow a number of new rules from January 1 2021.
With our international focus in this month’s magazine, unLTD’s Joe Bamford, Mike Durham and Jill Theobald chatted to a number of leading industry figures from sectors including legal, accountancy, data security, insurance, and international trade to find out more about those new rules – and to explore the markets and wider potential opportunities beyond the EU and across the globe.
Nick Patrick, head of Sheffield International Trade Centre
Back in the March issue of unLTD, I warned that by August ‘companies all over the UK are going to be smelling the Brexit coffee and scrambling to HMRC and won’t be ready by the time January comes.’
As we’re now into November, the Brexit coffee smell must be overwhelming and the pot nearly boiling over for businesses – but my concern is that many still aren’t prepared and ready.
Sheffield Chamber is running a series of online Q&A sessions for Sheffield City Region (SCR) importers and exporters post EU transition period and so here I will outline a few key areas to consider.
While the Q&A sessions are very helpful for companies to understand how the UK leaving the EU Customs union and single market will affect them in general, each organisation, their products, values, customers and countries they sell to differ.
To address these issues, we are running bespoke ‘End of Transition’ audits on companies which looks at their individual activities and calculates exactly what they need to do in preparation for themselves, their customers and their suppliers.
How do I export goods to the EU from January 1?
Firstly, International Commercial Terms (Incoterms) which are legally binding will be implemented and secondly declarations will have to be submitted to UK Customs for the export of the goods and the import into the country they are entering.
If an exporter to European customers and you deliver the goods to their warehouse on the continent, the Incoterm will change to a DDP term (delivered duty paid) and the exporter will have to submit the export declaration to UK Customs then submit the import declaration to the customs at the border point of import. You will need to pay VAT and duty and may not be able to reclaim VAT.
Our recommendation is to speak to your European customers now and explain that from January deliveries to them will need to change to a DAP (delivered at place) Incoterm meaning that while you can still deliver to their warehouse, the buyer is responsible for the import declaration, and paying any duty and VAT.
If your buyer has agreed to arrange the goods to be picked up from your UK warehouse, please do not use Ex Works, ensure the incoterm used is FCA (Free Carrier), in this way the exporter of record (you) must do the export declaration.
How do I import goods from the EU from January 1?
A very similar process, but the other way around. Explain to your suppliers from January if they are delivering to you in the UK, declarations will be needed, both for the export out of their country and the import here.
The EU supplier will need to do the export declaration when the goods leave their country as well as the import declaration when the goods travel through UK customs , paying VAT and duty and will not be able to reclaim that so they will need to use DAP (delivered at place) Incoterm.
The UK importer will do the import declaration, pay the VAT and duty and claim back through quarterly VAT returns – you can read more about VAT and duty in the article later in this feature by BHP Accountants.
If you as the buyer have agreed that you will send your vehicle to pick up the goods in Europe, then ensure the incoterm used is FCA (Free Carrier), in this way the exporter of record (your supplier) must do the export declaration.
How will my relationship with my EU customers change after January 1?
For 47 years we’ve been able to export to, for example, Germany as if it was Birmingham or Cardiff. But from January there will be Customs procedures which will create disruption to your European customers.
I want SCR exporters to understand that impact and contact customers now. I am seriously concerned if they don’t explain all of the above and the difference in costs, come mid-January once the European customer receives deliveries and discovers they’ve got to pay more and there is increased paperwork involved, too, they will simply find a European supplier and our businesses will lose out.
Bear in mind, too – if your customers only trade in Europe they will know even less about what’s going to happen to them than we do. This is a really serious issue that I don’t think all UK exporters have taken on board.
Can you explain what Customs Declarations means?
Goods that travel around the world need to have customs control procedures, part of which are the import or export declarations. Anything that leaves the UK must be declared to Customs so you must complete the necessary forms to clear the goods for export.
Import declarations are required as well and that’s where customs make their money – the duty. While we were in the Customs Union any goods that came into the EU from outside Europe had to be declared at point of entry but could then have free circulation around Europe. But from January, we will be regarded as the rest of the world – anything we ship into Europe will need to be declared at the point of entry.
Businesses need to speak to the freight forwarders to confirm whether or not the freight forward will be able to undertake the customs declarations from January 1. Currently around 55 million import and export documents are submitted to HMRC every year.
Once declarations are needed for all European trade, by the end of 2021 that will be in region of 300 million – a startling statistic and a massive amount of work for freight forwarders who may have to increase their administration staff numbers significantly to accommodate.
How will Incoterms work with European trade?
If nothing is discussed with customers and suppliers, then in January the Incoterms will automatically become DDP or Ex Works (EXW) – and neither of those will be suitable for European trade, unless you, your customers or suppliers are aware of the responsibility and consequences.
If you’re exporting (and delivering) to customers in Europe, we recommend DAP instead of DDP. If you’re picking the goods up from your EU supplier or if your EU customer is picking the goods up from your warehouse, we recommend FCA (Free Carrier) instead of Ex Works (EXW).
Sheffield Chamber of Commerce is an authorised Customs Intermediary and also an approved economic operator (AEO) – we have a fully trained team of Customs brokers so we can handle the import and export declarations for any company that wants to use us as their broker.
For more information please contact email@example.com or call 0114 201 8888