The United Kingdom is set to start the divorce from the European Union on March 29th, 2019. But with a year to go, what do we really know about Brexit?
Unfortunately, nothing is certain and final negotiations are ongoing with no imminent resolution in site. A 21-month transitional period has been generally agreed on both sides which will conclude on December 31, 2020.* Many items are still very uncertain but there are a few things we already know and plenty of issues our clients should be considering.
First of all, at the official start of Brexit, current trade practices will continue as they are. Any tariffs or new trade deals will take some time to be negotiated and come into effect. The most significant change will be that customs border will exist where an open border stood previously.
The concern for shippers and forwarders is the change from Her Majesty's Revenue and Customs (HMRC) current customs processing system, the Customs Handling of Import and Export Freight (CHIEF), which will be replaced by the Customs Declaration Service (CDS). The first Phase of CDS will be launched in August 2018 and HMRC hopes to have the system up and ready before Brexit starts. That is good news as CHIEF can barely handle the current volume of 55 million entries per year and after Brexit the UK National Audit Office estimates that volumes could well exceed 255 million per year, an amount CDS will be able to cope with.
The UK government has already "grandfathered" Authorized Economic Operator (AEO) into UK legislation and indicated that once customs formalities have been determined, AEO companies, like BDP UK, will receive special provisions pertaining to their own business requirements.
This is causing a surge of UK businesses to apply for AEO, however HMRC is very short staffed and does not have enough officers to process all the applications causing a backlog.
So, what are we advising our customers to do? Well, we suggest they should start making a list of the impact of Brexit on their particular business in preparation of firm regulations. For example, any company that currently ships into the UK to distribute across Europe will certainly need to take into account the additional costs of a clearance and potential duties. This will also apply for European companies doing the same and distributing to the UK. They will also need to ensure they have a division or company that will take on Fiscal Representation for their Shipments when they enter EU countries. There is also a question of whether current REACH approvals for chemical clients will still prevail in the UK after Brexit. The list can be long and arduous.
Having said that, it's not all doom and gloom. At the core of Brexit and the UK Government's stance is a deep-seated desire to foster UK trade internationally, including with the remaining EU Countries. Some in the government see that the UK will have more flexibility in establishing Free Trade Agreements (FTA) given CETA (the FTA between Canada and the EU) was significantly delayed by the Minister President of Wallonia.
No matter the outcome of the Brexit negotiations, the UK will remain a large trading nation and BDP will continue to support our clients with their international shipping needs. We all know that change is coming, and if we embrace it knowing that we will be impacted in some manner, we will continue to prosper.