A short summary of the latest progress and suggestions on actions to take for UK traders.
The House of Commons voted in favor of the withdrawal agreement and the legislation is going through the final stages of its approval. As a result, there is now no doubt that the UK will leave the EU on 31st January. The withdrawal agreement also stipulates that the transition period will end on 31st December, which means that UK Government only has 11 months to negotiate a:
- Trade agreement with Brussels.
- Future relationship in a number of other key areas.
- New general border and customs administration.
- Border solution for Northern Ireland that has never existed before.
In parallel, it must prepare for operational implementation, including informing everyone concerned about what laws, procedures and processes will look like.
Transition period
The transition period of eleven months starts on 1st February. During this time, it is business as usual, from both a practical and operational perspective.
The transition period, however, is only 335 days long. It is important, therefore, for importers and exporters to act now if they are going to be prepared at the end of the year. Staff will need training, approvals may be required from HMRC and, most importantly, brokerage capacity should be secured.
During the transition period, the UK and EU will agree on future relations. The two parties will negotiate a Free Trade Agreement (FTA), which will regulate whether there will be customs tariffs. In addition, agreement on non-tariff barriers, such as customs and border procedures, will be required.
If both parties agree, the transition period can be prolonged. The first evaluation of this will take place in June 2020. It is likely that the EU would favor an extension, while UK Government has already said that this will not happen.
If there is no agreement or an extension, the UK will leave the EU on WTO terms.
Preparations
All of this is a clear indication that it is now time for all companies involved in trade between both the UK and the EU to make the necessary preparations for 1st January 2021. As a minimum, all companies should complete an EU-UK-EU trade analysis to identify Brexit gaps.
In particular, the following should be undertaken:
- Secure internal customs competence and capacity through training.
- Contact all partners involved in the supply chain to check on their preparations.
- Review all contracts and, especially with VAT in mind, change terms of trade as appropriate.
- Determine the correct customs classification of all imported/exported products and review other compliance issues, e.g. origin and valuation.
- Develop a plan for logistics and a contingency plan for any potential disturbance.
UK Customs Academy
The UK Customs Academy, funded by HM Treasury, is available to bridge the customs knowledge gap. It provides a professional pathway for those in the customs industry. Courses that are more basic are available for anybody working within UK trade. Whilst there are courses to masters level for individuals that specialize in international trade.
The best news is that the UK Government is financially supporting the education on the UK Customs Academy through a generous grant scheme.
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Lars Karlsson
MD/CEO KGH Global Consulting
