BFPA and EURIS offer Brexit Advice for UK SME’s and BFPA Members
29 Oct 2018
BFPA and their colleagues in EURIS recognise that our membership comprise of both ‘Remainers and Leavers’ so we don’t take a political position on this emotive issue. However, we can all agree that a ‘No-Deal’ scenario will not be in anyone’s best interests so we are offering members our top tips for preparing for the worst!
Whilst we continue to warn Government against a no-deal Brexit, given that this result is a possibility, BFPA and our colleagues in EURIS are issuing advice to allow for early planning for this undesired outcome. We believe that all member companies need to be plan for this scenario and would advise members to review our checklist and act on the recommendations set out below – particularly as many of the points will be valid whatever the outcome of Brexit.
1. Map and Audit your Supply Chains
Supply chain mapping is an essential early step in Brexit planning. Knowing where your inputs come from, and what product category they fall into can help assess the possible tariffs that might apply. Even if a company is ready for Brexit, it will be disrupted if a supplier is not prepared and cannot meet its contracts.
Recommendation: Discuss Brexit readiness with your critical trading partners and ensure they have contingency plans in place. It is also worth considering alternative transit arrangements in case your existing transport routes become blocked or bottlenecked.
2. Consider Authorised Economic Operator (AEO) status
This status allows faster clearance at borders if a company’s procedures are deemed as compliant by authorities in both countries. More than 6,000 German companies have qualified and France has more than 1,550. Only 606 British companies are officially registered as a “Trusted Traders” of goods across external EU borders.
Recommendation: Consider applying for AEO status which entitles simplified customs procedures and faster clearance at borders The Institute of Export and International Trade cautions “achieving Authorised Economic Operator status is a time-consuming and often daunting exercise”. The process, which involves filling out a complex form, takes a long time, so if you want to be ready for March 2019 this is an urgent priority.
3. Know your employees’ nationalities and immigration status
While existing employees who are EU nationals can be expected to receive the necessary residency status, it is important to plan for cut-off dates and any differential status that might apply to new arrivals to the UK.
Recommendation: Consider upgrading your IT system to be able to track the nationality status of employees. Doing so may not only help with compliance, it could also help to assess the extent to which the business has historically been reliant on EU workers.
4. Ensure adequate cash flow for VAT and additional inventory
Brexit poses a cash flow problem for trading companies because VAT will be charged at the border when importing goods and services plus more complex port procedures could mean businesses need to be prepared to carry more inventory, tying up additional working capital.
Recommendation: Ensure you will have adequate cash flow for VAT and tariffs and consider whether you will need to hold more inventory to buffer against potential delays at the border.
5. Establish your corporate customs infrastructure
HM Revenue & Customs estimates the number of customs declarations will rise from 55m to 255m annually. British companies will need to fill in customs declarations for all goods crossing the EU border if the UK leaves the single market.
Recommendation: If you are not yet familiar with them, prepare to use Import/Export Declarations for trade within Europe. In a no-deal scenario, the Single Administrative Document is likely to be applied to all trade between the UK and EU. Detailed guidance is available here: SAD Guidance Also review your customs internal infrastructure and consider how to increase its capacity and understand whether you have time-sensitive deliveries that could be impacted by additional customs procedures and plan for what you might do to mitigate this
6. Decide whether to make use of an EU free-trade agreement
Using a bilateral trade agreement can save costs on tariffs but will increase bureaucracy because businesses must prove each good is sufficiently British to qualify for zero rates. With the trade-weighted EU average tariff of only 2.3 per cent for non-agricultural goods, some exporters will decide to pay rather than face compliance costs, so companies will need to take a strategic decision after auditing their processes.
Recommendation: Understand the EU’s Rules Of Origin (for ‘third nations’ outside of a trade deal) and how they would apply to your products Rules of Origin Guide e.g. the evidence you would need to provide to gain customs clearance. Speak to your trade association representative about this as they will be able to help.
7. Audit all international contracts, renegotiate them as necessary
The legal provisions for importing and exporting that define who is responsible for shipping goods across borders is important and has significant tax implications. It is particularly important that contracts adequately clarify the terms for trade across EU borders, including how VAT is dealt with. In the event of no deal, you will need to ensure that contracts and International Terms and Conditions of Service reflect that they are now an international exporter or importer.
Recommendation: Audit all your international contracts and consider whether there is any need for renegotiation. Note: Some intra-EU contracts will not include incoterms, the legal provisions for importing and exporting that define who is responsible for shipping goods across borders. This is especially important for VAT.
8. Understand your Intellectual Property rights
Intellectual property protection, including patents, trademarks, registered designs and copyright could all change after Brexit. The British Government’s Brexit IP website seeks to reassure companies that such protections will still apply in the EU after Brexit (News Item), but it says it cannot give the same assurances for the UK. The Government says European patents will still apply in the UK but, according to the website, the UK is “exploring options” in other IP areas, such as trademarks and designs, because in many cases these will lapse after Brexit.
Recommendation: Understand whether your IP rights might change after Brexit and take protective steps.
9. Check your CE Marking status
In a no-deal scenario, the testing and certification applied by your UK Notified Body may not be recognised by the EU as validating a CE mark on your product.
Recommendation: Your UK Notified Body may have opened an EU27 operation and made arrangements to transfer and re-issue this certification to ensure EU-validity but check this. If they have not, consider options for transferring to an EU Notified Body. Appoint a Nominated Person in the EU For CE Marking to be valid in the EU, the technical file must be accessible from a ‘nominated person’ physically located in the EU. Without this your CE Marking may cease to be valid in the EU. Assess whether you have an EU27 base where this file can be held and a suitable nominated person willing and able to take on the responsibilities involved.
10. Stay in touch with your trade Association
The BFPA continues to work with Government regulators, negotiation teams and other lobbyists to try and ensure the best possible outcome for our members. Staying in touch with us and responding to surveys and questions throughout this process will help us to help you.