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Untangling the complications brought about by Brexit

Britain’s EU exit is already delivering its fair share of trade disruption and there is more to come. Barry McCall reports.

The collective sigh of relief among Irish exporters which greeted the news of the latest delay to UK import customs checks was almost audible.

Irish companies exporting goods to the UK faced a cliff edge imposition of sanitary and phytosanitary (SPS) checks on all goods of plant and animal origin from April 1st and full customs checks on all other goods from July 1st this year.

For businesses already struggling with the burden of export declarations the new requirements, which amount to an effective doubling of the administrative load, would have been challenging to say the least.

In March, UK Cabinet Office minister Michael Gove announced that physical SPS checks on animal products, as well as foods and plants considered high risk will not take place until January 1st, 2022. Checks on live animals and low-risk plants will only take place from March 2022 at border control posts.


In further good news for Irish exporters, traders will be able to continue submitting deferred customs declarations until January 2022. This allows paperwork to be submitted up to six months after goods have been imported.

But this is merely a stay of execution. Irish exporters still have to prepare for the new rules, they just have more time to do it. In the meantime, however, they have to contend with all the complications that Brexit has thrown up since it became a reality at 11pm on December 31st, 2020.

"The problems are not going to go away," says BDO customs and international trade partner and director of customs agent Declaron Carol Lynch. "The UK will be introducing controls as the time goes on."

But the good news in relation to deferred customs declarations doesn’t necessarily apply to Irish companies, she explains.

“UK based companies are allowed to take advantage of the simplified rules,” she says. “They don’t have to lodge declarations until six months after the goods have been imported. But you need authorisation to use the simplified declaration procedures.”

That authorisation is similar to trusted trader status, according to Lynch. Otherwise known as Authorised Economic Operator Status (AEO), approved traders can demonstrate that their customs controls and procedures are efficient and compliant and their role within the international supply chain is secure. Trusted traders can enjoy a range of benefits including self assessment for customs declarations and waivers of certain customs procedures.

Simplified declaration

The UK system is even better than that, according to KPMG tax partner Glenn Reynolds. The UK Customs Freight Simplified Procedures (CFSP) allows authorised traders to gain accelerated removal or release of most third country imports by making a simplified declaration containing the minimum of details at the frontier.

“But you need to go through an agent to avail of it,” says Reynolds. “Irish companies can’t use the CFSP. It’s better than AEO status and simplifies the whole import process. You do a simplified declaration and supply supplementary information after that.”

If you do need to establish in the UK it takes a few months to do that

The difficulty for Irish exporters is that each trade involves two transactions – the export from Ireland and the import to the UK.

“Exporters have been making declarations to Revenue up until now,” says Lynch. “They will have to do all that for the UK as well at the other side. It’s not so bad if you are the importer and the exporter and have a presence in both countries, but you still need to prepare.”

According to Lynch, Irish companies have two options when it comes to making UK import declarations, do it themselves by getting the software and training up their own customs staff or by getting an agent to do it on your behalf.

But neither of these is as straightforward as it might first appear.

“If your company is not UK established you can’t act as customs declarant,” Reynolds points out. “We have seen companies setting up UK companies or already have UK sister companies to do it for them.”

And getting an agent may not be as easy as it sounds.

“Most UK agents will not act on your behalf if you are a non-established entity,” says Lynch. “That’s because they are jointly and severally liable.”

In essence, that means they are left carrying the can for Irish customers who may default on customs payments or make erroneous or even false declarations.

That will leave many Irish companies in the situation where they have to establish in the UK regardless of whether they want to handle the declarations themselves or not.

“If you do need to establish in the UK it takes a few months to do that,” Lynch warns. “You can’t just turn it on overnight. We are already dealing with a lot of UK companies establishing in Ireland for the same reason.”

The paperwork

Of course, this headache can be removed if the UK customer is willing to act as the importer and make the declarations at their end.

“We are seeing Irish suppliers selling to customers in the UK and those customers doing the imports,” says Reynolds. “That’s the plain vanilla level. What Irish suppliers need to do is make sure the customs statement of origin on declaration is correct. But a lot of UK businesses don’t want to do that for commercial and other reasons. They don’t want to do the paperwork and that is going to make things more difficult for Irish companies.”

Lynch advises Irish customers to talk to their UK customers before the problem arises.

“Ask if they are prepared to act as importers. That would remove a lot of pain and stress. They will look after declarations and VAT and so on if DAP (delivered at place) terms. Talk to customers, ask them to provide.

In many cases it simply comes down to convenience.

“Customers in the UK want to continue doing business on the same basis as in 2020,” says Lynch. “They don’t want change.”

They are increasingly demanding delivery duty paid (DDP) terms of trade. This means the seller has to look after all customs declarations, tariff and VAT payments and so on. For Irish companies it means they have to register for UK VAT, ensure the customs codes on all their goods are correct, and apply for a UK Economic Operators Registration and Identification (EORI) number.

"So many UK companies have the economic power to insist on a change to DDP," says Mick Curran, chief executive of the Chartered Institute of Logistics and Transport.

“That will prove costly for Irish suppliers and bring additional administrative responsibilities. They will need to have an economic entity in the UK. A lot of the freight forwarders have set up UK branches for that. If firms don’t have the preparations put in place now, they will have difficulty later.”

And there is still the not insignificant matter of the Rules of Origin to consider. The importer has to be sure the goods are of EU origin before they can be brought in without attracting a tariff. These are the same rules that have hit Irish bakers through the application of what amounts to a double tariff on flour.

Because the flour imported from the UK consists of more than 15 per cent wheat from North America the product is no longer regarded as being of UK origin meaning that the it attracts the same tariff as if it were coming from a third country, despite the fact that the UK miller has already paid a tariff on the imported North American wheat.

Percy Pig

To be able to self-certify the origin of their exports, Irish companies need to register with REX, the EU Registered Exporter System. This allows the origin of goods to be declared by economic operators themselves by means of statements on origin. To be entitled to make out a statement on origin, an economic operator has to be registered in a database by competent authorities in their home country and the destination countries for the goods.

Even with this registration, things can get very complex as demonstrated by the storied case of Percy Pig.

The Marks & Spencer confectionery issue was ultimately solved by Returned Goods Relief. The Trade & Cooperation Agreement (TCA) between the EU and UK provides that where a product originating in one party is exported to a third country then returns to the original party it can retain its origin status as long as the returned product is the same as that exported and has not undergone any operation other that what was necessary to preserve it in good condition.

“This allows you to re-import goods without payment of customs duties where those goods were and can be proven to have been originally exported from the EU are in the same state as when they were exported,” says Lynch.

But it’s not all that straightforward in all cases, according to Reynolds.

“If you are buying from an EU supplier and importing them from the UK, the goods lose their free circulation status unless they move through the UK under transit. Even though they are still of EU origin you need proof that the goods are the same ones that left the EU. You need to have a process in place to get the paperwork from the EU supplier to prove that. Returned Goods Relief may not automatically apply otherwise.”

He says it will be very important for procurement departments to be aware of this when dealing with UK suppliers who are selling goods of EU origin.

“The need to ask the UK suppliers for a statement of origin in advance. They could have bought the goods pre-Brexit and the paperwork mightn’t exist. Anyone buying from the UK needs to ask for the statements to present to customs or have on file for later. That will become a big factor for Irish companies trading with UK suppliers.”

The Rules of Origin also work in the other direction, Curran points out.

"If I bring in gods from China and export them to the UK, tariffs have to be paid on them a second time. That's not good news for the UK or anyone else. It's going to take 12 to 24 months for people to get their heads around it and change the way they trade."

Unintended consequences

He is confident that people will learn to deal with the new situation.

"We haven't encountered thee full implications of the CTA yet, but things are changing already. Twelve months ago, there were 12 direct ferries a week to mainland Europe. Now there are 42 and the number keeps increasing. Companies have found a way around it and are adapting to the new world. We are going to see more of that.

"From the day Brexit was proposed, we have always known that it was going to mean higher costs and bureaucracy

“Back in 1991 we were all making customs declarations to the UK and EU. We didn’t expect to push a button and get something delivered two days later back then, but we were able to deal with that situation. Companies will get used to it again. In fairness, when any agreement is reached you are going to have unintended consequences with goods losing preferential status, but companies are finding ways around that already.”

There will be some bumps in the road, however.

“Trade is not going to be frictionless,” says Reynolds.

“There is a different dynamic now. There are additional rules and additional expenses to take into consideration. There are no short cuts. We are in a Single Market, we signed up for that. The rules are there, and they have to be applied. If you don’t have the paperwork in place, your goods won’t get into the UK.

“The key part will be finding an agent. That’s difficult at the moment but UK agents will start taking on Irish clients, they will just charge more for it. That will make trade relatively straightforward as long as you are VAT registered.”

And there is help at hand in the form of the Enterprise Ireland Ready for Customs grant, the Chartered Institute of Logistics and Transport Skillnet Clear Customs training course, as well as from business organisations like Dublin Chamber.

“From the day Brexit was proposed, we have always known that it was going to mean higher costs and bureaucracy,” says Aebhric McGibney, Dublin Chamber director of public and international affairs.

“That’s what leaving the Single Market means. Our response has been to support companies by guiding them step by step with the latest advice on this bureaucracy and helping them diversify to other markets through the Enterprise Europe Network.

“Where we can, we have simplified the documentation process. Our ATA Carnet service, for example, provides a single form that can be used for multiple trips for temporary exports to the UK, everything from racehorses to Cheltenham to musical equipment for concerts. The alternative customs process requires four separate declarations.”

It may not be easy, but there are ways of untangling the Brexit complications.

Barry McCall

Barry McCall is a contributor to The Irish Times