Time running out for bosses to Brexit-proof businesses and get head start

21 May 2018

The European chief negotiator for the UK exiting the EU, Michel Barnier, has stated that the solution to Ireland’s border issue must be found before June’s European Council summit, if there is to be any hope of completing the final Withdrawal Agreement by October. However, this now seems unlikely.

For quite some time, there have been mumblings from Westminster, Europe and Dublin that negotiations to resolve the future of the Irish Border are a long way from concluding and a finish date in June seems improbable.

Tánaiste Simon Coveney confirmed his feelings of the same on Thursday, stating that “if we’re going to have a crisis, we might as well have it now”.

It’s no secret that Theresa May is struggling to find a border proposal which her cabinet can unite behind; this statement of crisis from the Tánaiste is unlikely to ease matters.

At present, trading between Middleton and Middlesex is as easy as trading from Cork to Cobh. The only barrier is physical geography. However, this will change if the UK leave the EU Customs Union and Single Market. Regardless of the current ‘negotiation crisis’, time is limited and Irish businesses must act now to protect themselves.

The most important thing businesses can do right now is map out their supply chain, understand their UK purchases and sales, and assess the impact of both of these on  tax duties and logistics.

For example, if you buy plastic packaging from a UK supplier to import to Ireland to use in your production, you have a risk of 6.5% duty (if there is no Free Trade Agreement).

More importantly however, you will have to lodge an export declaration with Her Majesty's Revenue and Customs (HMRC) to export the product from the UK, lodge an import declaration in Ireland to import the product into Ireland, pay an agent to lodge these declarations, pay Import VAT on arrival to Ireland and face the risk of delays at the border.

Similarly, if you export your product to the UK, you now have to repeat the process. You also need to be aware that you are probably going to have to be the importer into the UK, as your supplier only wants your goods delivered to their door and does not want any involvement in getting them there.

The first step in identifying these costs and managing the potential impact on your business is to map out all of your purchases and sales in order to identify: what the duty and compliance costs will be, whether you need to re-negotiate your contracts or identify what the impact of potential delays, and what new Import VAT requirements will be.

Until you have done this, you cannot determine your next steps or how long it will take to address the issues that may arise from any trade agreement.

You will also need to consider obtaining "trusted trader status". Trusted traders will be the ones who keep documents on all their procedures and movement of goods and who will therefore be perceived as less of a risk by customs.

Trusted trader Status is used by 90% of companies who import and export outside of the EU. It enables quicker clearance through customs, minimises delays at borders, and allows you to qualify for a number of customs simplifications and duty saving procedures. It is therefore going to be an essential requirement for anyone trading with a non-EU UK.

We estimate that the vast majority of Irish businesses which trade with the UK do not have trusted trader Status.

This is where customs expertise comes in. There may be customs experts with direct knowledge of your products or your fields of business, who can provide tailored advice in order to reduce costs and delays.

Attaining trusted trader Status is a very comprehensive and time-consuming process, similar to that required for the International Organization for Standardization certification. In our experience, it takes six months to prepare an application and put in place the required procedures. Following the application, it can take another six months to actually obtain authorisation. Due to this you would need to start this process a year before you require authorisation.

Achieving authorisation for March 2019 will therefore be challenging for any company who has not started on the process already.

Brexit will present a myriad of challenges, and at present nobody is entirely clear what the final agreement will look like.

However, the forward-thinking businesses who start to prepare early will gain competitive advantage. If you can ensure you are better prepared than your competitors, you can identify new potential costs, and amend your strategy accordingly and on time, you may retain your UK market. 

Carol Lynch is a is a Partner in the BDO Customs and International Trade Services department.