Prepare Your Business for Customs
Are you planning to move goods to, from or through the UK after Brexit? These one-day interactive workshops, run regionally by Local Enterprise Offices will provide businesses with a better understanding of the potential impacts, formalities and procedures to be adopted when trading with a country which is outside the Single Market and Custom Unions (a Third Country).
Open to all businesses, see the full list of dates and locations here.
Brexit Advisory Clinics
The Brexit Advisory Clinics took place nationwide providing information and practical support through individual meetings across the following areas:
- Strategic Sourcing
- Financial & Currency Management
- Customs Transport & Logistics
The current series of Brexit Advisory Clinics is now complete with key takeouts from the events below:
FX Exposure Customs Challenges Movement of People Supply Chain Intellectual Property
Brexit: It’s a personnel issue
Brexit: It’s a personnel issue
European Union nationals have contributed a lot to the UK workforce. Popular culture celebrates the “Polish plumber” but EU citizens have also been important to sectors from high finance to healthcare and fruit-picking.
Statistics circulated by the City of London earlier this year showed that 12% of City workers in high-value jobs were from European Economic Area countries. Fruit and vegetable producers rely heavily on workers from EU countries such as Bulgaria and Romania.
With the demise of EU membership, and the free movement of workers, maintaining such staff can be achieved by an application under the mandatory EU Settlement Scheme. Otherwise, the worker will not have proof of their right to live and work in the UK. At an Enterprise Ireland’s Brexit clinic, Philip McNally of KPMG outlined the steps necessary to retain EU staff under the proposed scheme.
The UK government has published a video explainer on how the EU settlement scheme works which is available to view here
Free movement before and after Brexit
Under the current state of EU-UK negotiations, free movement of people continues until 31st December 2020. However, if there is no final agreement and Britain leaves without a deal, free movement could end on that date.
In preparing for Brexit, McNally stressed the need to have all paperwork completed and filed, and for workers to have all the documentation to prove their length of stay and employment in UK territory. “And if an application [under the EU Scheme] has not been made, a person will not have proof of their right to work and remain in the UK,” he warned the Brexit Clinic held in Dundalk.
The right to remain and work post Brexit
There are currently around 3.8 million EU nationals living in the UK. EU nationals will need to lodge their application to remain. This will allow EU nationals (who qualify) the right to remain and work in the UK after 31st December 2020. “The scheme has been trialled in a number of NHS trusts and universities,” McNally said. However, although the aim was for 4,000 responses, slightly over 1000 people actually lodged their applications, which he saw as a warning sign.
“If you look at a similar situation in the United States, there was the DACA legislation [which allowed undocumented child immigrants to remain], before it was cancelled. But only around two-thirds of those eligible made applications under the scheme,” he said, demonstrating that even when a measure is beneficial, individuals might not take advantage of it.
Employers must be proactive
So, employers are urged to be proactive in promoting the application process, as soon as possible. Any employer found to have EU staff without permission to remain is liable for a fine up to £20,000 per worker.
“You must make the assumption that workers themselves may not make the application,” McNally told the audience. Employers themselves need to be able to navigate the system, and encourage and assist their employers to complete the applications.
McNally explained that the freedom of movement also applies to citizens of the European Economic Area, which includes Norway, Switzerland, Iceland and Liechtenstein as well as the EU countries. The EU Settlement Scheme only applies to EU citizens, and the picture for the other countries is not clear yet, as their position is still under negotiation. However, any employees who have been in the UK for more than 5 years, and are either a citizen of Norway, Switzerland, Iceland and Liechtenstein may make an application for “Permanent Residence” instead.
The general rule is that a person who has lived and worked in the UK for five years will be granted “Settled Status” which is essentially a non-time limited right to remain in the UK. A person who has lived and worked in the UK for less than five years will be granted “Pre-Settled Status” which will allow them to remain in the UK until they have been in the UK for five years. Once they have been in the UK for five years, they may apply for “Settled Status”.
McNally warned employers about offering advice on immigration, as it is a criminal offence for anyone other than a solicitors, barristers or registered immigration advisers to provide such advice.
Another situation to consider is EU staff who must visit the UK regularly for work. Their situation, too, will have to be clarified by 1 January 2021.
Rules for Irish citizens
Irish citizens are an anomaly under the new application process: they are not required to seek the new status. McNally said, “they can apply if they wish”, but there is no onus on them to do so.
The British Cabinet supported a Migration Advisory Committee report which indicates the direction in which formal policy or law is developed.
McNally urged immediate action to preserve valuable EU staff.
“If you have only one employee who is affected, perhaps give them the correct information, as that is a low risk to you. If you have a number of employees affected, consider taking action and getting assistance in guiding your employees to make the appropriate applications as your risk is substantially higher.”
‘Think of it as one more administrative burden that you didn’t have to deal with before. Do what you can now,” he concluded.
Learn more on developing an action plan around your staff with the support of the Be Prepared Grant.
Don’t delay logistics plans to prepare for Brexit
Don’t delay logistics plans to prepare for Brexit
Irish exporters should, by now, have progressed past preparation, and have begun to act in response to the disruptions Brexit is expected to bring, even if it is unclear how severe those disruptions will be.
Once the UK leaves the customs union at the end of the transition period, it is possible that a wide range of goods exported to Britain will be subject to additional tariffs and duties. A Brexit readiness workshop hosted by Enterprise Ireland and the Irish Precast Concrete Association, heard that, Irish exporters can expect to face a substantial increase in bureaucracy and paperwork.
Impact of potential delays
An example of the delays that could accrue can be seen at the EU’s border with Turkey, a member of the European Customs Union, but not an EU member. HGV lorries entering the EU via the Turkish-Bulgarian border typically experience delays of 12 hours, while delays of 20 hours or more are not uncommon. Such delays are caused by the cumulative administration burden of all HGV drivers being required to declare what goods they are carrying and the origin of those goods.
If HGV drivers using the ferry at Dover, or the Eurotunnel at Folkestone, need to spend an additional two minutes each having paperwork checked, it would create thirty-mile tailbacks on roads leading to the ports, according to a survey by Imperial College London.
In Ireland, Dublin Port has already built additional customs facilities, including drive-by booths, covered vehicle inspection areas, and sheds where containerised goods can be unloaded, examined and reloaded.
For companies exporting to the European continent, there are alternatives to using the UK land bridge, that can help to avoid customs delays when entering and departing Britain. Cobelfret operate the world’s largest short-haul roll-on/roll-off ferry between Dublin and Antwerp.
Impacts for logistics
If you are exporting to the UK and not the continent, however, you must negotiate a way through Brexit delays, rather than trying to negotiate around them.
Just-in-time delivery is a common requirement in the construction industry, with penalties accruing if goods are not delivered on site within a pre-agreed timeframe, usually by a specified date. However, as no one knows exactly how long it will take a particular shipment to clear UK customs post-Brexit, exporters must build an additional margin for delays into estimated delivery times.
At the event, Ronan McDonnell of The Logistics Consultancy advised that those working under just-in -time constraints should consider investing in UK depots, where goods can be held temporarily before they are due for last mile delivery.
McDonnell noted that the effect of a delay entering a port can be amplified by restrictions on driver working hours. A haulier stuck in traffic for hours may be required to pull over and stop due to tachograph regulations. He suggested that Irish exporters could consider jointly investing in holding depots and sharing the additional cost burden.
The only way for Irish manufacturers to completely avoid export delays, said McDonnell, is to become UK manufacturers by building production facilities in Northern Ireland or Great Britain.
Customs Union dues
Outlining what could happen in a best-case scenario in which Britain stays in the European Customs Union, Donna Hemphill, a senior manager in Deloitte’s Global Trade Advisory division, said that Irish exporters will need to acquire an Economic Operators’ Registration and Identification (EORI) number before commencing exports with post-Brexit Britain.
Once exports commence, each shipment will need to be entered into the Irish Revenue Commissioner’s Automated Entry Processing (AEP) system, electronically filing single administrative documents (SADs) using the direct trader input (DTI) facility on the Revenue Online Service (ROS). More information can be found by downloading Revenue’s Guide to Customs Export Procedures [PDF].
Hemphill also recommended that exporters engage the services of a specialist freight forwarding and customs brokerage company to assist with sending goods to Britain as efficiently as possible. The paperwork involved can be substantial. An SAD alone contains 54 blank boxes that must be filled in.
In addition to the expense of hiring such a service, exporters should budget for the time required to provide necessary instructions to freight forwarders and customs brokers.
“Responsibility for making the correct customs declaration lies with the trader, not with the freight forwarder or customs broker,” added Hemphill. “And there are financial penalties for non-compliance.”
Becoming an Authorised Economic Operator
It is possible to speed up your passage through UK customs by becoming an Authorised Economic operator (AEO), but approved procedures and internal controls must be implemented to qualify for priority treatment.
If you have AEO certification, customs can carry out checks on your premises, to ensure your procedures and internal security systems are up to standard. A customs audit will require you to make disclosures about your business activity.
AEO status also offers additional benefits. It helps confirm you as a trusted trader with business partners. UK AEO status is recognised in other countries.
Another option to consider is establishing a customs warehouse in the UK, in which your goods are physically present in Britain, but have not yet cleared customs, and duty has not yet been paid on them. The chief advantage in this scenario relates to cash flow – you won’t need to pay duty on exports until the goods leave your warehouse for delivery to customers. Customs warehouses are subject to periodic inspection by HMRC and operators must demonstrate good warehouse management capability.
Whatever the outcome of Brexit may yet be, such issues are worth considering. The UK remains Ireland’s closest trading partner, and Irish goods will continue to find a market there.
Customs: Trading with a Third Country
Customs: Trading with a Third Country
Irish goods exporters and importers are being advised to expect delays at ports once the transition period to establish a future trading agreement between the EU and UK concludes.
At a Brexit Advisory Clinic organised by Enterprise Ireland, Carol-Ann O’Keefe, Assistant Principal Officer at Revenue Commissioners, told business leaders that it is inevitable that Brexit will generate additional costs, administration, and delays at Irish ports but much is being done by Irish authorities to minimise these.
“Once Brexit occurs, and Britain leaves the EU, it will be classed as ‘a third country’, outside the single market,” said O’Keefe. “It doesn’t matter what kind of customs union is in place, or whether there is a free-trade agreement. After Brexit, full customs declarations will be required for all goods imports and exports shipped between Ireland and the UK.
“In theory, the UK has already become a third country during the transition period, however, the UK still operates as if it was an EU member and nothing will change until the start of 2021. If the UK and EU do not establish a free trade agreement the new UK Global Tariffs will automatically come into effect. “
Customs Declarations
As ‘a third country’, goods imported from the UK will require a customs declaration and be subject to controls. Checks by customs officers may be subject to licence requirements and will, generally, be subject to payment of duties and VAT when, and where, they are brought into Ireland.
Similarly, any goods exported from Ireland to the UK will require a customs declaration when leaving Ireland, may be subject to controls and requirements. Depending on the regime implemented by the UK Government, goods may require a customs declaration on entry into the UK and will, generally, be subject to payment of duties and VAT when, and where, they are brought into Britain.
Goods shipped from Ireland to the European continent, via the UK ‘land bridge’, will be classified as transit goods, and require a customs transit declaration. The shipment will require interaction with offices of departure and destination in the EU and with Office of Transit in the UK. Transit goods may be subject to control, leaving and re-entering the EU. Goods in transit are required to provide a financial guarantee to the authorities of the country through which they pass.
Once a business begins dealing with EU customs authorities, it is classified as an economic operator and will need an Economic Operator Registration and Identification (EORI) number. An EORI number, used on all customs declarations, can be obtained online through the www.revenue.ie site.
Potential Delays at Customs
Control inspections may also be required by other Irish agencies, and their UK equivalents (depending on the regime implemented by the UK Government). These include: the Department of Agriculture, Food and the Marine (who may inspect all food and agricultural supply imports); local authority environmental health offices (who will inspect shipments of waste), and the Department of Business, Enterprise and Innovation (who may inspect dual purpose goods to ensure that they are not being exported for nefarious purposes).
“In the post 9/11 era, customs services have taken on additional responsibilities for safety and security,” said O’Keefe. “Carriers need to provide a declaration about their cargoes, so traders have to provide additional information to their logistics partners in advance of shipment. A manifest that only says ‘full load’ is not acceptable. Exporters and importers will have to engage with their logistics companies and their customs clearance agents.”
To give a sense of the administrative burden involved in making customs declarations, O’Keefe pointed to the single administrative document (SAD), which covers trade with non-EU countries. “This customs clearance document has 54 boxes that need to be filled,” she said.
All the processing is done electronically, with SADs initially entered into the Revenue Commissioner’s automated entry processing (AEP) system.
Planning ahead for Irish exporters
Irish exporters should use a reputable third-party freight forwarder and customs clearance agency, said O’Keefe. “Generally, only large companies can afford (from a human resource perspective) to have in-house customs clearance expertise. We would advise that you start looking now.”
She also recommended that manufacturing companies examine their logistics flows and the potential impact of Brexit on both the cost of raw materials and the potential for delayed delivery.
“We’ve spoken to companies who didn’t realise that the raw materials they were getting from the UK originated elsewhere in the EU. If you can avoid buying EU goods in free circulation in the UK, you can avoid paying duties on the double.”
There is a possibility of goods being fast-tracked through ports for operators who become an Authorised Economic Operator (AEO). AEO or ‘trusted trader status’ means that shipments aren’t subject to control checks as frequently, and goods in transit do not require financial guarantees. Obtaining AEO status involves developing and maintaining quality-assured procedures that demonstrate a secure international supply chain. “There are currently 144 AEOs in Ireland,” said O’Keefe. “Acquiring AEO status can be costly and it’s not for everyone. If you are a food exporter, your exports may still be stopped for control at UK ports depending on the regime implemented by the UK Government, so AEO is not for you.”
Exporters and importers should understand what their customs obligations will be, said O’Keefe. “There is a lot of information on www.revenue.ie and you could try opening up communications with HMRC. At the very least, you should obtain your EORI number now and ascertain what tariffs you will pay. InterTradeIreland will help with tariff information and Revenue has a tariff classification unit. Usually tariffs are straightforward, but one economic operator spent years in the Court of Justice arguing over whether Kinder Eggs were toys or confectionary!”
Make sure your business is ready for Jan 1st 2021 and learn the key customs concepts, documentation and processes with Enterprise Ireland’s Customs Insights course.
How Brexit will impact intellectual property
Joe Doyle, Intellectual Property Manager, Enterprise Ireland outlines the impact Brexit will have on Intellectual Property
There are many seismic shifts predicted in the UK’s future relationship with the EU. Some are quite apparent, but others are below the surface and don’t receive the same level of public attention. Intellectual Property (IP), for example, may appear to be a side issue to more pressing political and economic concerns but IP is, in fact, fundamental to trade and innovation within and across borders.
A study by the European Union Intellectual Property Office (EUIPO) attributed 28% of jobs (60 million) in the EU to IP intensive industries. That accounts for 42% (€5.7 trillion) of total EU economic activity and 90% of EU trade with the rest of the world. The study showed that, in Ireland, IP intensive industries accounted for 24% of employment and contributed to 53.8% of GDP.
How Brexit impacts intellectual property
So how does Brexit affect IP? Fundamentally, IP is territorial i.e. IP rights (IPR) only apply in the territories where the IP is registered or legally recognised. If the territory changes, then so too does the IPR. In recent years, attempts have been made to harmonise IP frameworks across the EU to give companies predictable and efficient protection for their innovation throughout the economic area. For example, the EU Trade Mark (EU TM) and the Registered Community Design (RCD) are IP protections that apply across the whole EU territory via a single application, thereby reducing cost and administration. The implication of Brexit, for companies trading in the UK and relying on EU-wide IP, is what happens when the UK falls outside the EU territory? To put it another way, in IP terms, Brexit means the earth (or part of it) will effectively move.
Thankfully, the UK and EU negotiation teams are Pre-empting ahead of this and aim to ensure that companies will retain equivalent protection in the UK post-Brexit. According to the draft Withdrawal Agreement, the negotiating parties have agreed that owners of EU TMs and RCDs, granted before the end of the transition period in 2020, will automatically get an equivalent right in the UK. However, it’s not so straightforward. For example, issues such as how the UK re-registration procedure will work in practice, and who will pay UK fees, are not yet agreed.
Furthermore, there are several unregistered forms of IP where things are potentially even less predictable. Unregistered rights refer to things like copyright, trade secrets, and unregistered designs, the protection of which depends very much on certain legal frameworks and institutions in each member state. The intention, post Brexit, is that the UK will replicate EU directives, but due to legal and institutional complexity, it may not be possible to achieve harmony in the presence of a border.
What will Brexit mean for patents?
Of course, there is also the issues of patents. The withdrawal agreement is silent on this one, largely because the European Patent Office is not an EU institution. However, the EU Unitary Patent and Unified Patent Court, which have been the subject of a 40-year EU negotiation (take note Brexit negotiators), are due to come into force later this year. As Brexit has significant implications for these, their future is uncertain.
What can I do to prepare?
No one can predict how the post Brexit IP world will look but attempts are being made to patch over the fault lines. Early tremors have passed largely unnoticed but the ‘IP earth’ beneath exports to the UK will move. Maybe the main event will even pass unnoticed, but the aftershocks may be severe and long lasting, and by then it might be too late do something about it.
So, while there is still some time, Irish companies trading with the UK, and with IP protection in the UK, need to engage with their legal and IP advisors to ensure their IP Strategies are Brexit-proof. Companies should start by conducting an IP audit to identify what IP is protected and what is not, review IP terms in agreements and contracts, identify risks and threats etc. Then, they should work closely with their IP advisors to develop sound IP Strategy that takes account of the immediate and long-term risks posed by Brexit. This may include filing IP protection in the UK in case the EU and UK do not reach full agreement.
Learn more about Enterprise Ireland’s Brexit supports here.
Brexit and managing currency risk
Although the final outcome of Brexit is uncertain, the sterling and euro volatility remains a key concern and challenge for Irish businesses
Enterprise Ireland’s Brexit Unit is supporting companies to better understand the financial implications of currency fluctuations on their business and take the necessary actions to mitigate against this risk. The following questions cover the key issues related to the management of currency risk and are addressed by John Finn of Treasury Solutions.
I’m an Irish company exporting to the UK. How can I analyse the impact of movements in sterling/euro on my business?
For Irish companies exporting to the UK, the Enterprise Ireland Currency Impact Calculator can help you understand the effect of movements in the sterling/euro exchange rate on your business. This online tool is freely available and demonstrates what an adverse change in exchange rates would have on your business profitability.
Will my bank permit me to hedge my foreign currency exposures?
For an exporter to hedge its currency risk, in the first instance, it must first have a foreign exchange line of credit from the bank. This must be formally sought in advance prior to its use and, from the bank’s perspective, it is the equivalent of making a loan application i.e. it requires credit approval.
What instruments will the bank permit me to use to manage foreign currency risk?
For the most part, this is restricted to either spot or forward transactions. The former implies selling sterling at the current market rate.
As a general rule, spot deals settle in two days’ time ie agree a rate on Monday with funds transferring on Wednesday. In the case of forward foreign exchange contracts, a rate can be agreed today to apply to receipts on a future date.
The advantage of this instrument is that an exporter can bring certainty to the amount of euro that it will receive in return for a specified amount of sterling at this stated future date.
The primary disadvantage is that there is no opportunity to share in any upside in any currency movement.
In order to achieve that objective, it is possible to purchase an instrument known as a foreign exchange option. However caution is urged; it is an extremely useful instrument to utilise in managing foreign exchange risk, but it needs to be constructed appropriately. In essence, it is an insurance product for which the purchaser pays a premium and which protects it against a worst possible (defined) outcome whilst permitting full participation in the upside should it arise.
Some banks sell a combination of an option and forward contract called a participating forward. This allows participation in a fixed percentage of the upside. However it does have a cost. Again, these should not be purchased without full knowledge and understanding of what is involved.
How far forward can I hedge?
Most banks will have a maximum time period for which they will sell forward contracts to their customers. This needs to be ascertained now. In general, most banks will not provide forward contracts for periods beyond 12 months.
What terms and conditions apply?
In some cases, the banks may require security to be provided in the form of charges over assets or guarantees. If the exporter is already a borrower, it is probable that the bank would simply extend any security that it already had over the foreign exchange line. It may also monitor the extent to which the currency contracts are showing a “profit” or “loss” at a point in time and either limit this or seek some collateral, which may include cash, if the loss – although only theoretical – extends beyond the defined amount.
Finally, some banks may require the completion of what is known as an ISDA agreement. This is quite a complex document to complete for the first time, and proper advice should be taken in its construction and prior to signing it.
One final point to note in hedging foreign currency risk is that there are non-bank providers of such services who tend to be less prescriptive in their dealings. However, many borrowing agreements now specify that the borrower may only conduct foreign currency transactions with the lender.
What are the wider financial implications associated with currency risk?
The obvious effect of weakening sterling is adverse consequences for both profitability and cash flow. Immediate actions that could be taken include:
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Calculation of the exchange rate at which UK sales are no longer profitable
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Rerunning financial forecasts at current exchange rates and assessing the projected outcomes
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Where financial covenants are part of your borrowing agreement, ensure that adverse foreign exchange moves do not materially and negatively impact on compliance with them
Please note that where companies with material amounts of UK exports intend to refinance their banking facilities in the coming months, a significant amount of sensitivity analysis will be required in any financial projections provided to banks.
I would strongly urge paying close attention to the terms and conditions attaching to any new borrowing agreements, as I would expect banks to tighten up significantly in this area as a consequence of the UK vote to exit the European Union.
Email BrexitUnit@enterprise-ireland.com with your queries on currency fluctuations.
