Trading between Midleton and Middlesex is as easy as trading between Cork and Cobh. The only barrier is physical geography. We can no longer take this for granted.
After Brexit the world will present new obstacles and the time it takes for the EU and the UK to complete the new deal should be used by companies to Brexit-proof or Brexit-audit their firms. We are advising our clients to start preparing now for the myriad of problems that lie ahead.
Supposing you are a kitchen manufacturer on the border and you want to take your goods to Enniskillen, Co Fermanagh. Here is the likely scenario following Brexit you may face.
You will need to employ a customs clearance agent in the North and in the Republic. You will need to supply your agent with details about the product, the tariff code for customs classification, the origin of the goods, the seller, the buyer, gross weight, net weight, means of transport and packing details.
You will also need to supply a copy of your invoice and a packing list. Your agent will then lodge an export declaration with Irish Customs and an import declaration with UK customs. This needs to be lodged two hours before you leave your premises.
When the declaration is lodged and you have driven to the Border you may have got a green-routing permission signifying that the goods can travel on; or an orange-routing permission that customs are looking for further information; or a red-routing that customs want to physically examine the goods.
This can happen on both sides of the Border. Let’s say there is some sort of concern and the goods are examined. You will have to pull over in the south and possibly again on the northern side. Allowing for tailbacks, you’re probably now running four hours late. You have also had to pay your agent on both sides of the border for the clearance charge, at an estimated €100; you have had to pay customs duties on the kitchen arriving in the North, at an estimated €135 on a €5,000 kitchen; as well as import Vat in the North, at an estimated cost of €1,027. The Vat may be recoverable if you are registered for Vat in the North. This involves a lot of additional paperwork and returns.
Dealing with customs duties will be new to many. Apart from this sticking cost and the damage to the bottom line, you may have to work out what tariff classification your product belongs to. Tariff is the name given to the combination of the classification of goods and the duty rates which apply to each class of goods. Most products do not easily fit within a custom classification so you will need the assistance of customs which will be time-consuming. You will need to then check the duty rate that will be charged on your product and increase your sales price to account for this. This will have knock-on consequences for your supply chain which could well be highly disruptive to your current business.
Companies will also be required to know their supply chain like never before and potentially the origin of your components. If a new deal is struck, goods that can be designated as “originating” goods may receive a reduced duty rate but this means you need to determine whether your manufacturing process qualifies as goods originating in the EU and whether the components you purchased qualify as EU-originating. Companies will also be required to identify and account for the import Vat cost on the arrival of goods in Ireland and UK.
What will also change will be the contracts and terms of trade. How do you currently buy and sell? What are you responsible for in terms of delivery and where? Are your goods collected by your purchaser in Holyhead or Rosslare? Are there customs savings procedures you can implement in your business or with your suppliers?
Finally, you will want to consider obtaining trusted trader status. These will be those firms that keep documents on all their procedures and movement of goods and who will be therefore be perceived as less of a risk by customs. This is where customs expertise will come in.
There may be customs experts with direct knowledge of your products who can provide tailored advice to reduce costs and delays. Having a relationship with customs clearance agents with the expertise to understand your declarations will be extremely valuable.
Forward-thinking businesses which start to prepare early will gain competitive advantage by continuing to be able to access the UK market.
Carol Lynch is a partner in BDO Customs and International Trade Services.
Originally published by the Irish Examiner.
Learn more about BDO Customs and International Trade Services.