Back to Brexit Basics

Brexit

Last week, we looked at what’s contained in the Brexit Omnibus Bill published by the Irish Government.  This week we look at the practical steps you can take to prepare for trade after Brexit; applying for an EORI number. To move goods into or out of the EU you need an Economic Operator and Registration Identification (EORI) number.  Therefore Irish and UK traders who trade with each other will need to apply for an EORI number. HMRC and Revenue use this number to identify you and collect duty on your goods. The number is also used when traders interact with customs authorities in any EU Member State. A short eLearning tool for EORI is available to download from the European Commission website. Applying for an EORI number in the Republic of Ireland You can register for an EORI number on Revenue’s EORI online registration service through My Account or ROS. It is important to note that some traders may have already been automatically registered for an EORI number by Revenue and may not have to apply for one. Back in 2009 when EORI numbers were introduced, Revenue allocated EORI numbers for economic operators that held a customs and excise registration at the time. You can check if you were automatically registered for EORI by accessing the Economic Operator Identification and Registration system. You should insert your existing VAT number prefixed by “IE” under “Validate EORI numbers”. My Account If you access the EORI online registration service via My Account, you should make a request for an EORI registration through My Enquiries. ROS applications If you use ROS to access the EORI online registration service, you need to ensure that you have a valid ROS digital certificate and you need to be registered for customs and excise. If you are not registered for customs and excise, register using the following steps: Click on 'Manage Tax Registrations'. Under 'Registration Options' click on 'Register' beside Customs and Excise. Enter all the details on the eRegistration form. There will be a check box option to declare if you are 'importing/exporting goods to/from the EU'. If this option is not selected, click 'Add To Your Requests'. Under the 'Requests' section, click on 'Submit'. You will now be registered for customs and excise.  Once you have successfully completed this registration, you can then apply for an EORI number using ROS. An EORI number will issue in a few days.  An agent can make an application on your behalf. All details can be found on Revenue.ie and Revenue operates a helpline for EORI queries Applying for an EORI number in the UK Before you apply Check if you need to register for VAT before you apply To apply for an EORI number, you may need you: To apply you may need your: VAT number and effective date of registration - these are on your VAT registration certificate National Insurance number - if you’re an individual or a sole trader Unique Taxpayer Reference (UTR) business start date and Standard Industrial Classification (SIC) code - these are in the Companies House register Government Gateway user ID and password If you need a Government Gateway user ID, use either: the one for your business or organisation your own if you’re applying as an individual If you do not already have a user ID, you’ll be able to create one when you apply. Apply for an EORI number You can apply online to get an EORI number using this link HMRC advises that it takes between 5 and 10 minutes to apply for an EORI number.  Numbers can be issued immediately or could take up to 3 working days if the HMRC needs to carry out more checks. For help or any queries, you can contact the EORI team on 0300 322 7067 Monday to Friday, 8am to 6pm (closed bank holidays). Further details can be found on gov.uk.

Mar 07, 2019
Brexit

Last week, we looked at the changes that are proposed for claiming back EU VAT suffered by UK businesses in the event of a no-deal Brexit. This week we look at what’s contained in the Brexit Omnibus Bill published by the Irish Government. The Irish Government recently published its Brexit Omnibus Bill, a 15 part series of legislation designed to protect the Irish economy and its citizens in the event of a no-deal Brexit. The Bill prioritises issues that need to be addressed urgently and immediately through primary legislation at national level. Each Part will be commenced by the individual Minister at the appropriate time. Legislative provisions have been put in place to deal with the following areas: Health services:  to enable essential Common Travel Area healthcare arrangements, including reimbursement arrangements, to continue between Ireland and the UK. Industrial development: to help vulnerable enterprises deal with the effects of Brexit by giving Enterprise Ireland extra powers to offer enhanced businesses through investment, loans and Research Development and Innovation grants. Electricity: The Commission for the Regulation of Utilities will be allowed to amend the licences of electricity market participants for one year without recourse to the normal modification and appeal processes, to facilitate the continuing operation of the Single Electricity Market. Student education: Some Irish students studying in the UK and UK nationals studying in the Republic of Ireland currently qualify for SUSI grants. This legislative provision makes sure that, even after Brexit, these arrangements can continue to apply to eligible students. Tax: The provisions cover corporation tax, income tax, VAT (including the postponement of VAT on imports from the UK), capital gains tax, capital acquisitions tax and stamp duty. The provisions extend existing legislative definitions to include the UK, in the event that they are no longer a member of the EU/EEA, in order to allow the continuation of existing arrangements in the immediate future. Read more about these provisions in the Irish tax section. Financial services: legislative amendments to support the decision of the European Commission to grant temporary equivalency in European legislation to the Central Securities Depositories and Central Counterparties based in the UK. The provisions also extend the protections contained in the Settlement Finality Directive to Irish participants in relevant third country domiciled settlement systems. Financial services – Insurance and Reinsurance: to enable UK insurance undertakings and intermediaries to continue to fulfil their contractual obligations to Irish customers for 3 years from Brexit day. Social welfare: the continuation of current benefits allowed under the Common Travel Area arrangements Bus services: a regulatory regime in relation to bus and coach passenger services between Ireland and the UK. Protection of employees: in the event of an employer becoming insolvent under UK law, their employees who work and pay PRSI in Ireland, will continue to be covered by the protections set out in the  Protection of Employees (Employers’ Insolvency)  Act. Extradition: In the event of a no-deal Brexit the European Arrest Warrant system will cease to apply to the UK.  Immigration: Immigration officers, when considering removing or deporting a person from the State, have the power to undertake refoulement consideration (i.e forcible return to the person’s original country). Harbours Act: Seafarers who have a pilot exemption certificate can apply for new certificates in the period leading up to 29 March 2019 even if their existing certificate has not expired. Read the Bill and the explanatory memorandum. Timeline for the passing of the Bill: Week of 25 Feb – Brexit Bill in 2nd Stage in Dáil; Week of 4 March – Brexit Bill in Committee, Report and Final Stage in the Dail; and Week of 11 March – Brexit Bill in Seanad  

Feb 28, 2019
Brexit

Last week, we looked at the simplified customs procedures the HMRC propose to introduce in the event of a no-deal Brexit.  This week we look at the changes that are proposed for claiming back EU VAT suffered by UK businesses in the event of a no-deal Brexit. If the UK leaves the EU without an agreement, then UK businesses will continue to be able to claim refunds of VAT from EU member states but in future they will need to use the existing processes for non-EU businesses.  This will mean a change in practice for businesses. As the UK will no longer be an EU Member State, UK business will no longer have access to the EU VAT refund system. According to recently released HMRC guidance, and in letters sent to impacted businesses, after 29 March 2019, UK businesses that suffer VAT in an EU country must claim VAT refunds from that EU member state by using the relevant member state’s existing process for businesses based outside the EU.  This includes outstanding claims that relate to 2018 expenses, and claims relating to 2019.  Read further guidance from HMRC. This process varies across the EU and UK businesses will need to make themselves aware of the processes in the individual countries where they incur costs and want to claim a refund. The general practice is that a claim is made directly to the EU country where the VAT arose.   VAT incurred in Ireland For example in Ireland, foreign traders established outside the EU (which will include UK businesses after Brexit) paying Irish VAT can claim back VAT from the Revenue Commissioners.  Revenue’s guidance on this process can be found here and there are strict conditions that need to be adhered to in order to reclaim VAT and not all VAT on expenditure can be reclaimed. The EU has also provided information on claiming back VAT incurred in Ireland and details can be found on the European Commission’s website. Readers can also find further general information about claiming VAT refunds from other EU member states on the EU Commission’s website. The above guidance is relevant in the event of a no-deal Brexit. We will keep members updated on developments in this area. Read all our Brexit updates on our Brexit web centre.  

Feb 21, 2019
Brexit

After a short break, this series is back with a look in more detail at the simplified customs procedures the HMRC propose to introduce in the event of a no-deal Brexit. Transitional Simplified Procedures (TSP) HMRC will introduce simplified customs procedures for 145,000 UK importers who trade with the EU in the event of a no-deal Brexit to enable goods to move freely through the UK.  This will also give traders a chance to prepare to apply the same customs processes when trading with the EU that already apply when trading with the rest of the world.  These simplified procedures will be in place for at least a year from 29 March 2019. HMRC have written to affected traders telling them about the Transitional Simplified Procedures (TSP) for customs which will make importing easier for a year after Brexit in the event of a no-deal. The TSP will mean that traders can import goods into the UK and defer making a full customs declaration and paying customs duties.  Specific information must be included on the declaration including: The date and time the goods arrived in the UK A description of the goods and the commodity code The quantity imported Purchase and (if available) sales invoice numbers The customs value of the goods The serial numbers (if appropriate) Delivery details Supplier details After the goods have been imported: a supplementary declaration must be sent by the importer by the fourth working day of the month following the arrival of the goods into the UK HMRC will take a direct debit on the 15th day of the month after the goods arrive in the UK if there are duties or taxes to pay Businesses must register for TSP to be able to transport goods from the EU into the UK without having to make full customs declarations at the border. Traders are able to postpone paying import duties for a month after import.  Import VAT will be due on the next VAT return rather than when the goods arrive at the UK border. Businesses can register for TSP from 7 February 2019 if they are established in the UK, import goods from the EU and have an EORI number.  The policy will be reviewed three to six months after it is introduced on 29 March 2019 to see how it is working. Businesses will be given at least a 12 month notice period before withdrawing the TSP.  After that time period has elapsed businesses must apply the usual customs processes to imports from the EU.  It’s envisaged by the UK government that the 12 month notice period will give business a chance to prepare. More information on the TSP can be found on Gov.uk and you can also read a copy of the letter sent to traders. Read all our Brexit updates on our Brexit web centre.

Feb 14, 2019
Brexit

Last week, we looked at the history of the EU. This week we look a little closer about how Ireland and the UK came to join the EEC (now the EU) in 1973. Ireland joins the EEC We learned last week that the Irish people voted to join the European Economic Community (EEC) in 1973. It wasn’t all plain sailing for Ireland or the UK in their bids to become members. In the years before joining, many of Ireland’s political leaders such as Seán Lemass and Jack Lynch argued that to secure a future for Ireland, it needed to be part of the EEC. The founding six countries (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) of the EEC had doubts however. They weren’t confident that Ireland would be a suitable member due to its over dependence on the UK for agricultural exports, as well as the mass unemployment, poverty and emigration that was experienced at the time.  In fact, in 1963 French President Charles de Gaulle rejected the UK joining the community and this meant that all other applicant countries (including Ireland) had their negotiations abruptly ended.  A second attempt was made in 1967 but this was again blocked. Charles de Gaulle was then succeeded as French President by George Pompidou who in 1969 said that he would not block the possibility of UK and Ireland joining the community. Renewed negotiations began and in 1972 the Treaty of Accession was signed.  Ireland held a referendum in May 1972 under the leadership of Jack Lynch and 83 percent of voters supported membership.  Ireland formally became a member of the EEC on 1 January 1973. You can read more on the European Commission’s website. UK joins the EEC In 1961, the UK applied for membership of the EEC. The application was prevented by French President Charles de Gaulle, who was said to be concerned that UK membership would weaken the French voice in Europe. The French President was also reported to be afraid that the close relations between the UK and the United States would lead to the United States increasing its influence in Europe. A second application was again blocked by Charles de Gaulle in 1967. He formally stated that the UK economy would not be suited to membership of the EEC particularly given the UK’s practice of obtaining cheap foods from all parts of the world.   UK Prime Minister Edward Heath brought the UK into the EEC at the same time as Ireland in January 1973.  Along with Denmark and Ireland, this brought the membership of the EEC to nine countries. Under the Labour Prime Minister, Harold Wilson, there was a UK referendum on continued membership of the EEC in 1975. 67 percent of the electorate voted to remain. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.    

Aug 16, 2018
Brexit

Last week, we looked at how traders might go about applying for Authorised Economic Operator (AEO) status.  This week we look at the history of the EU and where it all began.  A chronological history of the EU  We are all familiar with the EU, even more so since the UK voted to leave the union. This week we delve into the history books to examine how the EU came about and how it has changed and grown through the decades.  Beginnings…. The makings of the EU began in 1950 when the European Coal and Steel Community began to unite countries in Europe economically and politically seeking lasting peace. The founding countries were Belgium, France, Germany, Italy, Luxembourg and the Netherlands.   In 1957, the Treaty of Rome creates the European Economic Community (EEC) otherwise known as the Common Market.   During the 1960’s, these countries stopped charging each other custom duties when they traded with each other.  In 1973, the union grows to nine members when Denmark, Ireland and the UK join.  The EU regional policy started to transfer money to support job creation and infrastructure in poorer areas and the European Parliament began to increase its influence over European affairs.  In 1986, the Single European Act is signed. This treaty launched a six-year programme aimed at encouraging the free flow of trade across EU borders which resulted in the creation of the ‘Single Market’.  During the 1980’s Greece, Portugal and Spain join. Communism collapses in eastern and central Europe and results in European countries moving closer together.  In 1993, the EEC becomes the European Union. The Single Market is also completed and the 'four freedoms' emerge: movement of goods, services, people and money.  In 1995, Austria, Finland and Sweden join. People are allowed to travel without having their passports checked at the borders of member countries and this movement is called Schengen.  It gets its name from a small village in Luxembourg.  In 2002, the Euro becomes the currency of many European countries (currently 19 Member States).  In 2004, ten new countries join the EU with Bulgaria and Romania joining in 2007.  In 2009, the Treaty of Lisbon is passed by all EU countries and enters into force. It provides the EU with modern institutions and more efficient working methods.  In 2012, the EU is awarded the Nobel Peace Prize for its commitment to the development of peace, equality, reconciliation and human rights in Europe.  In 2013, Croatia becomes the 28th member of the EU in 2013.  In 2016, the UK votes to leave the EU.  Presently, there are 28 Member States (27 when the UK leaves) and 24 official languages used in the EU.  The most common are English, German and French. Other languages are Bulgarian, Croatian, Czech, Danish, Dutch, Estonian, Finnish, Greek, Hungarian, Irish, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slovak, Slovene, Spanish and Swedish. Many EU documents, such as debates in the EU Parliament are translated into all these languages.    You can find more historic website information on the European Union website. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.  Guide on customs and supply chain issues after Brexit Chartered Accountants Ireland and The Institute of Chartered Accountants of England and Wales have released a joint publication entitled Taking the Lead: Chartered Accountants & Brexit which gives practical details of customs and supply chain issues after Brexit.  Download your free copy.  

Aug 09, 2018
Brexit

Last week, we looked at what a “no deal” Brexit could mean. This week we examine how traders might go about applying for Authorised Economic Operator (AEO) status. We looked at AEO status back in Series 5 of Back to Brexit Basics and this week we look more closely at how you might apply for AEO status.  Before we delve in, to briefly recap, AEO status is a certified authorisation issued by customs authorities in the EU for traders involved in customs declarations.  The status means that a trader can be recognised worldwide as a safe, secure and compliant trader in international trade.  While AEO is not mandatory, because it indicates that a trader’s customs controls and procedures are efficient and compliant, it does give faster access to certain simplified customs procedures and in some cases, shipments can be fast-tracked through customs procedures.  Who can apply? Any trader established in the EU who is part of an international supply chain (that is trading with countries outside the EU) can apply to their country’s customs authority for AEO status (so the Revenue Commissioners for traders established in Ireland and the HMRC for traders in the UK).  For example, manufacturers, exporters, warehouse operators, clearance agents, importers or freight forwarders can all apply for AEO status. They just need an Economic Operators’ Registration and Identification (EORI) number to do so.  This should be obtained before applying for AEO status.    It’s important to note that you need an EORI number anyway to trade goods with countries outside the EU.  How to apply for AEO status in Ireland Apply to Revenue for an EORI number (this can be done online) The first step before applying for AEO status is to complete a  self-assessment questionnaire. This will help you to evaluate your procedures and ensure they meet the criteria for AEO Revenue has prepared explanatory notes that will help you to complete this questionnaire. If the AEO criteria are met, you should complete the application for AEO certificate  The completed application and self-assessment questionnaire should then be sent to the Simplifications and Compliance Unit. Phone numbers, postal and email addresses are provided Revenue staff will then carry out an evaluation which will always involve a visit to the premises detailed in the application How to apply for AEO status in the UK Apply to HMRC for an EORI number Complete the form C117 application form which requires basic information about the business Complete the form C118 which is a detailed questionnaire about your business activities Send both forms together to HMRC at AEOapplications@hmrc.gsi.gov.uk so the application can be accepted and processed Traders need to have evidence of processes and procedures to support your application and meet the AEO criteria. These should be retained and produced at the audit stage of the process or at the request of the auditor If you’re a group of companies, you have to submit separate applications for each legal entity. If you have common standards and customs procedures, only one questionnaire C118 is needed along with an application form for each legal entity. However, if you submit a separate C118 for each legal entity, you can speed up the application process More information Chartered Accountants Ireland and The Institute of Chartered Accountants of England and Wales have released a joint publication entitled Taking the Lead: Chartered Accountants & Brexit which gives practical details of AEO status and its benefits.  Download your free copy. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.

Aug 02, 2018
Brexit

Last week, we looked at the trade deal that was recently agreed between the EU and Japan.  This week we refresh ourselves on what a “no deal” Brexit could mean. No deal Brexit? The UK and the EU have been negotiating for the past number of months in advance of the UK leaving the EU next March in the hope of reaching an exit deal that is satisfactory to both sides. Various proposals have been put on the table and certain elements have been agreed. But there are still some unsolved issues, not least the issue of avoiding a hard border on the island of Ireland.  The EU has repeatedly said that nothing is agreed until everything is agreed and the UK has said that “no deal for Britain is better than a bad deal for Britain”. So what happens if agreement is not reached on the Irish border and the UK crash out of the EU without a deal? If no deal is reached between the UK and the EU, essentially all of the current rules and regulations could in theory fall into the abyss.  Free trade between the EU and the UK would no longer be possible and trade would operate under World Trade Organisation (WTO) rules where tariffs and border checks would become a reality.  Remember these? We covered them back in Series 3 of Back to Brexit Basics.   Delays from border checks will inevitably mean long queues at ports which may not have the capacity to hold trucks and other vehicles.  These bottlenecks could result in shortages in certain foods or other components which will disrupt the supply chains of many manufacturers.  Currently all foodstuffs, medicines, safety of mechanical parts among a host of other things are regulated by very strict EU standards.  If no deal is reached, the UK would need to implement their own standards. How long could this take and would these standards be acceptable to the EU?  In addition, EU citizens living in the UK and UK citizens living in the EU could have their permission to live and work removed. A transition period A transition period, which would mean that all current rules stay the same until December 2020, has been discussed.  This period would allow more time for the UK and EU to agree the finer details of the future trade relationship between them.  However this grace period can only be introduced if a deal is reached between the UK and EU.  So a no deal Brexit means no transition period and the UK will leave the EU in March 2019.  What would work? The border on the island of Ireland is the major sticking point in the negotiations.  Neither side want a hard border but both have rejected each other’s proposals.  The EU wants, at the very least, for Northern Ireland to remain within a customs union with the EU but this proposal has been rejected by the UK.  The UK wants a type of facilitated customs arrangement which would see the UK operate customs on behalf of the EU in certain circumstances.  The EU is not happy with this proposal. The easiest solution would be for the UK to remain within the Single Market where rules would essentially stay the same.  But they have been very clear that they want to leave the Single Market. More information Chartered Accountants Ireland and The Institute of Chartered Accountants of England and Wales have released a joint publication entitled Taking the Lead: Chartered Accountants & Brexit which gives practical details of how traders could cope with the new trading landscape that will come with a no deal scenario.  Download your free copy. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.

Jul 26, 2018
Brexit

Last week, we looked at the trade war involving the US and other countries and what it is all about.  This week we delve into the trade deal that was recently agreed between the EU and Japan. A deal is signed After 18 negotiating rounds and several other meetings since talks were launched in 2013, the EU and Japan have agreed a trade deal, or an Economic Partnership Agreement as it is referred to.  Agreement was broadly reached in July 2017 but the past 12 months have been spent finalising the legal text of the agreement.  The agreement will cover over 600 million people and relates to trade in goods worth over €120 billion as well as services. Both sides hope that this pact will open up large market opportunities for Japan and the EU as well as strengthening cooperation between the two jurisdictions in a range of areas including climate change and sustainable development, particularly in the area of labour standards. President of the European Council, Donald Tusk said that the agreement was the “largest bilateral trade deal ever” and that “relations between the European Union and Japan have never been stronger”.  The deal will mean the removal of the vast majority of the €1 billion of duties paid on EU exports to Japan and will help many SMEs across the EU and Japan. The European Commission have released a useful tool which allows you to check what your country and region export to Japan and have also provided an infographic for each EU country showing the kind of products that are exported. For example, in the case of Ireland, 503 companies export horse feed, dental products, scaffolding, pharmaceuticals, dairy products and chemicals worth €2.5 billion to Japan and this supports over 7,600 jobs in Ireland.  The EU-Japan trade agreement will make it cheaper for these companies to trade with Japan.  The UK exports whiskey, tyres, paint, chemicals and aluminium among other products valued at €6.5 billion. Other features of the deal include: Over time 85 percent of EU agri-food products will be allowed to enter Japan free from customs duties Tariffs on EU beef exports to Japan will be cut from 38.5 percent to 9 percent over 15 years Tariffs on EU wine exports to Japan will be reduced from 15 percent to nil Tariffs on EU cheese exports which were 29.8 percent will be reduced to nil EU tariffs of 10 percent on Japanese cars and 3 percent tariffs on most car parts will also be removed Import quotas will no longer apply to fish and tariffs will be abolished on both sides In terms of services, the agreement says that it will be easier for EU firms to provide services (currently worth €28 billion) on the Japanese market In summary, the big winners are Japanese car and auto-part makers and the EU’s food sector particularly in high end goods such as wine and cheese.  Japanese dairy companies may lose market share with the removal of significant tariffs on cheese on imports from the EU.  Watch this short video released by the European Commission which explains how free trade agreements can help companies and communities. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.

Jul 19, 2018
Brexit

Last time, in Series 14 of Back to Brexit Basics, we looked at the free trade agreement that was recently agreed between the EU and Canada to get an understanding of what is included in a free trade agreement.  This week we look at the trade war involving the US and other countries and what it is all about. The makings of a trade war US President Donald Trump has long campaigned that he wants to make trade fairer.  He wants customers in the US to buy US made goods.  In an effort to encourage this, the US has imposed tariffs (or taxes) on imports from China, Mexico, Canada and the EU.  China has retaliated by putting tariffs on imports from the US and Mexico, Canada and the EU have said that they will do the same; thus escalating a trade war. What is a trade war? A trade war occurs when countries try to attack each other's trade with tariffs and quotas. One country will generally increase its tariffs on imports from the other country and the other country will respond with similar efforts.  The theory behind the trade war is that putting additional taxes and restrictions on imports, means consumers are less likely to buy the imported goods because they have become more expensive.  Instead, they will buy local products as they are cheaper and this in turn boosts the home economy. China v US trade war The US President has campaigned heavily about cutting US trade deficits, which is the difference between how much the US buys from another country compared with how much the US sells to another country.  The US has a huge trade deficit (reported to be $375 billion last year) with China. The US President has said for a long time that trade deficits hurt US manufacturing and to fix this he wants to increase tariffs on goods imported into the US.  The US has already imposed tariffs on steel (25 percent) and aluminium (10 percent) on imports from the EU, Canada and Mexico. Last Friday, a 25 percent tariff was imposed on $34 billion of imports from China, which were largely manufacturing components.  China retaliated with tariffs of its own on US agricultural products and medical products.   And this week, the US President released a new list of $200 billion worth of goods from China that could attract a 10 percent tariff.  Most of these goods are categorised as auto parts, construction materials and processed food.  However these tariffs are subject to a consultation period that will complete at the end of August. What is the effect of this trade war? Some observers have said that the immediate effects of a trade war would be lower economic growth and increased inflation in both countries.  It could also affect global supply chains. For example, many technological exports from China contain parts made by US companies. And US goods manufacturers rely on parts from China to sell their goods worldwide so consumers outside of the US and China could be affected.   Companies may also have to relocate factories or distribution centres if imports become too expensive and this could affect employment and associated taxes. If US imports become more expensive in China, traders in countries like Ireland and the UK could benefit from opportunities to expand into the Chinese markets and vice versa.  The US buys nearly four times as much goods from China as it sells to them so therefore China may be limited in how far it can ‘war’ using tariffs and quotas.   Time will tell how this trade war will develop. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.

Jul 12, 2018
Brexit

Last time, in Series 13 of Back to Brexit Basics, we looked at the experience at customs borders between the EU and non-EU countries and what can be learned in terms of Brexit. In this series we look at the free trade agreement that was recently agreed between the EU and Canada to get an understanding of what is included in a free trade agreement.  The free trade agreement between EU and Canada We touched on free trade agreements in Series 2 of Back to Brexit Basics, and learned that the objective of these agreements is to increase trade of goods and services.  Free trade agreements can mean that customs duties on imports between the parties to the agreement are either zero or minimal.   However free-trade areas always and necessarily involve border checks. Countries under a free trade agreement do need to operate a degree of customs controls at internal borders in order to ensure that goods do originate from the free trade agreement member and are therefore entitled to customs free trade. Parties to a free trade agreement are also free to make their own trade deals with other countries.  In this series we look at some of the features and benefits of the free trade agreement that was recently reached between the EU and Canada. After some years of negotiation, the EU and Canada reached provisional agreement on free trade under an agreement called Comprehensive Economic and Trade Agreement (CETA) in September 2017.   It’s estimated that in time this agreement will save EU businesses €590 million a year which is the amount they pay in tariffs on goods exported to Canada.  From an EU perspective, CETA will also: remove customs duties on most products traded between the EU and Canada open up markets for European food and drink exports open up the Canadian services market to EU companies make it easier for EU firms to bid for Canadian public contracts, therefore helping make European firms more competitive in Canada cut EU exporters' costs while upholding standards benefit small and medium-sized EU firms and EU consumers allow for the mutual recognition of some qualifications, making it easier for European professionals to work in Canada create predictable conditions for both EU and Canadian investors, making it easier for European firms to invest in Canada Removing customs duties By removing customs duties, European exports will be cheaper to buy in Canada and will therefore become more competitive on the Canadian market. In turn, Canadian imports into the EU will be cheaper and therefore more competitive.  European firms could therefore benefit from being able to purchase cheaper components from Canada which they may use to make their products. For the agri-food sector, it’s estimated that European traders will be able to export almost 92 percent of their agri-food products to Canada duty-free.  This will create export opportunities for EU farmers and producers, particularly in fruit and vegetables, cheese and some processed foods. What about services? In terms of services, in its guidance, the European Commission has said that European firms will have “more opportunities to provide services, such as specialised maritime services like dredging, moving empty containers, or shipping certain cargo within Canada. In sectors such as environmental services, telecoms and finance, European firms will be able to access Canada's market at both federal and – for the first time – provincial levels”. Recognition of standards In terms of standards, the EU and Canada have agreed to accept each other’s “conformity assessment certificates” in areas such as machinery, toys, measuring equipment, electrical goods, and electronic and radio equipment.  This means that a standards body in the EU can test EU products that will be exported to Canada in accordance with Canadian rules and vice versa. Therefore products that are being exported from the EU to Canada will only need to be tested once in the EU and the standard certificate will be valid in Canada.  This could significantly cut costs for exporters. In terms of next steps, CETA entered into force provisionally on 21 September 2017. Before it takes full effect it needs to be ratified by all of the Member States.  You can read the legal text of CETA as well as some explanatory notes on the European Commission’s website. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.  

Jul 05, 2018
Brexit

Last week, in Series 12 of Back to Brexit Basics, we examined supply chain management and what businesses could be doing now to prepare for Brexit.  This week, we look at the experience at customs borders between the EU and non-EU countries and what can be learned in terms of Brexit.  Border considerations  How to keep the border on the island of Ireland open has proven to be a difficult one to solve in the Brexit talks so far.  Both the UK and the EU want to avoid a return of a hard border posts but so far there has been little put forward in the way of a workable solution to avoiding physical infrastructure or checks.  This week we look at how border operate between Turkey and Bulgaria, Norway and Sweden and France and Switzerland to get a sense of what the reality might look like for Northern Ireland and Ireland after Brexit. Norway/Sweden border Sweden is in the EU, Norway is not.  But Norway is a member of the European Economic Area (EEA) which means that is part of the EU’s Single Market.  This means that Norway enjoys free movement of goods (i.e. no tariffs), capital, people and services but there are still customs checks at the border. The border between Norway and Sweden is over 1,600 kilometres long and there are 10 official border crossing points for customs purposes.  Lorries go through customs once generally.  At the main border in Svinesund, on average, 1,300 heavy goods vehicles pass through the border every day.  Technology is used at the border which means that lorries only generally stop once and customs officials in both countries work together. According to a report by the BBC, the average wait time from when a lorry arrives at the border to when it clears customs is 20 minutes. Switzerland/France border France is in the EU, Switzerland is not.  But Switzerland is part of the Single Market but is not in a customs union with the EU.   This means that Switzerland’s regulations in terms of product quality and standards are fully aligned with EU rules; thereby reducing quality control checks at the border. The border between Switzerland and France is over 500 kilometres long and there are customs controls in the form of physical infrastructure at several points along the border.  Some are only open at certain times (i.e. Monday to Friday) to receive declarations and others are no longer manned. The average wait time for a lorry carrying goods is reported to range from 20 minutes to 2 hours. Turkey/Bulgaria border Bulgaria is in the EU, Turkey is not.  Turkey is in a customs union with the EU which means that certain goods can cross from Turkey to the EU and vice versa without customs duties arising. Turkey is not in the Single Market so there is no free movement of services, people or capital.  There are also restrictions on several types of goods including agricultural products. Because Turkey is not in the Single Market, several regulations and EU standards need to be adhered to and checked before goods are allowed into the EU.  Therefore there is a need for traders to have certain documentation ready at the border including export licences, invoices and transport permits.  The border is around 270 kilometres long and there are three designated crossing points for customs purposes.  Coupling this with the fact that additional documentation is required, this means that long delays at the border between Turkey and Bulgaria is normal.  There are reports of waits ranging from 3 hours to in excess of 24 hours in order to clear customs. Is technology the answer? If the UK leaves the Single Market and Customs Union, it is difficult to envisage how a hard border can be avoided on the island of Ireland.  Regardless of whether tariffs apply, customs checks are still going to need to happen in most scenarios.  Technology can improve wait times at the border but it is important to note that it cannot get rid of borders altogether.  Trusted trader schemes where fast track customs clearance options are available to certain traders can also help but again cannot get rid of borders. Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.  

Jul 03, 2018