Whether the recent comments from the EU and UK Government downplaying the likelihood of a deal really means that the future UK-EU relationship will not be based upon a comprehensive free trade agreement but third country status or if they are just positioning to try and pressure the other side into making concessions it doesn’t change the practical effects of the UK leaving the EU.
Free Trade Agreement or not, there will still need to be:
- Safety and Security declarations between the UK and EU, although the UK has waived this until July 2021.
- Import declarations on goods coming to the UK from the EU. The UK is allowing some simplifications/relaxations to allow deferral of customs declarations for imports the first six months for eligible traders and goods.
- Customs declarations for exports from UK to the EU will be required from 1 January 2021.
Not having a free trade agreement mean that duties would be payable on imports, making imported products more expensive affecting both importers and exports. Whilst this will likely cause importers to review their sourcing and pricing, not having a free trade agreement also means that businesses will have to try and analyse their products in a very short period to see if they would be eligible to receive reduced duty rates.
A Free Trade Agreement is not a Customs Union, just because goods may have paid EU or UK duty it does not mean they will be able to enter duty free unless they meet the specific origin rules supported by a certificate of origin or registered exporter process. Both of which take time to establish unless traders are already trading outside the EU with countries such as South Korea or other countries the EU has an established free trade agreement with. It also does not mean they can move goods freely, meaning Customs formalities will apply.
An updated version of the Border Operating Model has been published by the UK Government, attempting to clarify a number of areas. However, concern over capacity in the brokerage market continues and how many haulers have taken steps to be able to submit Safety and Security declarations into Europe.
It may still be possible to have systems in place to be able to submit customs declarations or security filings but it may be too late to be considering having systems in place for procedures such as customs warehousing or inward processing for the 1st January although HMRC have said that Temporary Storage facilities that are not part of an existing inventory-linked community will be able to temporarily operate without an inventory linked system in place until 1 July 2021. The most that can be planned for now is to reduce as far as possible delays at the border.
With Smart Freight being renamed “Check an HGV is Ready to Cross the Border Service” and inland customs locations to process documentation on export or have vehicles directed to for inspection this may reduce visible congestion at the port, but it is the hidden delays that should be considered and the increased lead times between order and shipping are likely to be extended, with goods sitting in distribution centres until all the documentation and customs declarations are ready.
Then we have the Northern Ireland Protocol.
To summarise what is currently proposed for goods moving from United Kingdom mainland to Northern Ireland (we still wait any formal Northern Ireland Operating Model with just a couple of months to go).
There will need to be:
- EU ICS Entry Notification Summary
- CDS Customs Declaration or NCTS Transit Movement
- Goods Vehicle Movement Service (GVMS) declaration for goods going via certain ports.
In relation to the import declaration, this is still planned to be using the Customs Declaration System (CDS) rather than the current CHIEF system. The main reason appears to be the need to charge EU or UK duty rates depending on whether the goods are at risk or not; something CHIEF cannot process apparently.
Whether this is a normal frontier declaration or using CFSP, on imports into Northern Ireland traders will need to declare if the goods are being imported from the rest of the world (directly or via procedures such as Customs Warehousing) or are imported as UK goods (UK duty paid or UK free circulation). Depending then on whether the goods are “at risk” of entering the EU will determine if the duty rate applicable is the EU or UK rate (which of course would be zero in the case of UK goods).
If EU duty is applicable there are two more possibilities, the declarant could claim “remission” on the basis they can prove the goods are not “at risk” or claim State Aid to cover those additional costs, the details of which are yet to be shared.
As well as these new systems, HMRC are also introducing Northern Ireland flavours of existing systems. For example, the system used for Entry Notification Summary declarations will not be the new GB Safety & Security system but the existing EU system, there will be a separate NCTS system and separate rules for EMCS although it is not clear at this time if this will be in the existing or separate system.
This is accompanied by traders using these systems needing to have Northern Ireland EORIs (particularly for ICS) or SEED IDs prefixed with XI. XI has been created along with XU to differentiate Northern Ireland from the rest of the United Kingdom (which will be also known as “XU” in the EU) to allow for the fact that Northern Ireland will continue to trade with the EU as if it were still an EU Member State with continued access to EU systems. For example, whilst a GB Excise warehouse cannot just use EMCS to move goods to an EU Excise Warehouse a Northern Ireland Warehouse would.
Unfortunately, there is still a lot to be clarified and organised with a clock that is ticking ever closer to zero. So how prepared are you?
- Have you arranged how your goods will declared on import and export?
- Have you arranged how they will be imported or exported in the EU?
- Have you reviewed what you need if you are moving goods between Great Britain and Northern Ireland?
For help and advice please check out the Brexit Resource Centre.