Brexit: ‘We don’t know what the new normal will look like’
Things will settle down, over time, but businesses must get ready for initial chaos
“What would it mean to your business if a truck coming through Dublin Port were to take 24 hours instead of 10 minutes?” asks David McGee, Brexit partner at PwC Ireland
David McGee, Brexit partner at PwC Ireland, characterises the original Brexit cut-off date of March 29th as “B-Day”, which captures what is perhaps, from an Irish perspective at least, a very fitting homonym.
As decades of economic integration looks increasingly set to go down the plug hole, what happens next is concentrating minds.
“There is the period in the run-up to B-Day. After that there was going to be a period of uncertainty, of chaos even. At some point things will settle down to a new normal but we don’t yet know what that normal will look like, whether it will be Norway Plus, a customs union or WTO tariffs. But what people are most worried about now is what that period of chaos looks like,” says McGee.
“What would it mean to your business if a truck coming through Dublin Port were to take 24 hours instead of 10 minutes. What would it do to your business if they started stopping trucks at the Border. In a lot of our scenario plans, we’ve limited that chaos period to a matter of weeks because commerce will out – but during that chaotic period, what do you do?”
For a start, goods exporters who haven’t already done so need to get their EORI (economic operators’ registration and identification) number from Revenue.
“These are not hard to get, and Revenue and Customs have been doing a great job in encouraging businesses to come to them, but if there is no deal you won’t be able to trade with the UK without one,” he warns.
For those trading services, people may need to be moved around and possibly data storage too
Next, for larger companies, securing AEO (authorised economic operator) status while not mandatory, is well worthwhile. “If EORI is your passport to trade goods, the AEO is like fast-track at the airport,” says McGee.
For those trading services, people may need to be moved around and possibly data storage too. “If you are a service company storing data in the UK you might have a problem with GDPR,” he cautions.
Getting the requisite customs authorisations in place will be mandatory to allow businesses to continue to both import and export from what will shortly be a non-EU country, says Carol Lynch, partner BDO Customs and International Trade Services.
Prior to recent developments, it was advising clients to stockpile critical items for manufacturing and sale and avoid shipping or moving goods in the week of April 12th and, if they haven’t already done so, to apply immediately for customs registration (the EORI form).
It applies to both exporters and importers. Next “establish whether you need to obtain a deferred payment account and, if so, put in place a guarantee provision with your bank to cover the duties that are going to be suspended. A deferred payment authorisation will allow you to import goods into Ireland from the UK and defer the payment of Customs duties and import VAT to the month following import. If you export to the UK you should also now request a deferred payment authorisation from HMRC,” says Lynch.
Ensure your tariff classifications are 100 per cent correct and, from this, confirm the duty rates that may be payable. Then ensure you have a clearance agent to lodge Customs declarations on your behalf, she advises.
The clearance agent will act on your behalf to enter your import and export documents into Irish and UK Customs systems.
Even if the UK crashes out there are at least some reasons to be, if not cheerful, then at least sanguine
“The problem now is that there is a huge shortage of such agents,” she warns, advising businesses to talk to their suppliers and customers to confirm who is acting as importer and or exporter of record for their purchases and sales. “They are responsible for the payment of the import duties along with customs compliance,” she advises.
Even if the UK crashes out on October 31st, there are at least some reasons to be, if not cheerful, then at least sanguine. “It’s not in anyone’s interest to have chaos in Dover or Rosslare or at the Border Northern Ireland,” says Mark Kennedy, the managing partner of Mazars in Ireland, who speculates that commerce alone will encourage the EU, Ireland and the UK to minimise disruption.
At the same time, the regulatory environment is unlikely to diverge immediately and, for UK exporters who wish to continue accessing the EU’s 500 million market, possibly not at all. Even if they do, the simple fact of passing new legislation takes time – and right now more time than usual in Westminster. That will give Irish businesses some breathing space, he suggests.
And while so much of the attention has been on goods, both Ireland and the UK are massive exporters of services which will be much less affected by Brexit, he says.
Finally, just as the reunification of Germany led to massive EU transfers, the loss of the UK from the EU could give rise to a relaxation of current EU state-aid rules, which will also help mitigate damage to the Irish economy, at least during the short-term chaos.
“None of this is to make light of the big challenge ahead,” says Kennedy. It does, however, give comfort in that, once the initial chaotic period is over, “over time, solutions will be found”.