Trading with the EU in a No Deal Post Brexit World

In the second of our ‘No Deal Guidance Posts’ we look at how trading with the EU will change in the event of a no deal outcome and what this may mean for UK businesses operating in a post Brexit world.

Whilst the UK government is confident that it will agree a deal, as a responsible business it makes sense to prepare for all scenarios, including the unlikely outcome that the UK leaves the EU on 29 March 2019 without a deal.

The Government assures us that in the event of a ‘no deal’ scenario they are committed to prioritising stability for citizens, consumers and business alike. HM Revenue and Customs (HMRC) will work closely with industry to ensure its interventions are conducted in a way which minimises delays and additional burdens for legitimate trade, while robustly ensuring compliance.

We believe businesses should consider how a ‘no deal’ scenario could affect them, and consider steps to mitigate against such a risk, however unlikely.

What can a business do to help prepare?

  • Understand what the likely changes to customs and excise procedures will be to their businesses.
  • Take account of the volume of their trade with the EU and any potential supply chain impacts such as engaging with the other businesses in the supply chain to ensure that the necessary planning is taking place at all levels
  • Businesses should consider the impact on their role in supply chains with EU partners. In the event that the UK and the EU does not have a Free Trade Agreement (FTA) in place in a ‘no deal’ scenario, trade with the EU will be on non-preferential, World Trade Organisation terms. This means that Most Favoured Nation (MFN) tariffs and non-preferential rules of origin would apply to consignments between the UK and EU.
  • If necessary, put steps in place to renegotiate commercial terms to reflect any changes in customs and excise procedures, and any new tariffs that may apply to UK-EU trade, and familiarise themselves with the key processes of importing and exporting outside of the EU
  • Consider how they will submit customs declarations for EU trade in a ‘no deal’ scenario, including whether they should engage the services of a customs broker, freight forwarder or logistics provider to help, or alternatively secure the appropriate software and authorisations.

What is the current trading situation?

Currently businesses can move goods freely between EU member states. For customs, this means that businesses trading with the rest of EU do not have to make any customs import or export declarations, and their trade with the EU is not subject to import duty.

Certain goods are subject to excise duty. This is a tax charged on the importation and manufacture of alcohol, tobacco and oils. These goods are currently free to move between the UK and the rest of the EU with excise duty suspended.

How this may change in the event of a no deal scenario?

If the UK left the EU on 29 March 2019 without a deal there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation of goods between the UK and EU would cease.

The impact would be:

  • Businesses having to apply the same customs and excise rules to goods moving between the UK and the EU as currently apply in cases where goods move between the UK and a country outside of the EU
  • The EU applying customs and excise rules to goods it receives from the UK, in the same way it does for goods it receives from outside of the EU.
  • For movements of excise goods, the Excise Movement Control System (EMCS) would no longer be used to control suspended movements between the EU and the UK.

In summary the steps and obligations businesses will need to take to continue to trade with the EU if the UK leaves without a deal are broadly the same as those that apply to businesses that trade with countries outside of the EU.

HM Government have recently released a partnership pack entitled ‘Preparing for changes at the UK border after a ‘no deal’ EU Exit’. Which can be found here.

This brief is only a summary of how a no deal scenario will affect this area of business and is for guidance only. For full details please visit www.gov.uk/government/publications/trading-with-the-eu-if-theres-no-brexit-deal/trading-with-the-eu-if-theres-no-brexit-deal