© Crown copyright 2018
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: email@example.com.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/partnership-pack-preparing-for-a-no-deal-eu-exit/traders-exporting-to-the-eu-only-what-to-expect-on-day-one-of-a-no-deal-scenario
The trade that you carry out with the EU will broadly follow the customs controls that apply for the rest of the world – you will need to adapt your business to comply with these new systems, processes and controls.
How the export process will change
If the UK leaves the EU without a deal, you will need to follow customs procedures in the same way that businesses currently do when exporting goods to a non-EU country.
HMRC wants to ensure that traders have access to the right authorisations ahead of 29 March to ensure trade can keep flowing. We will be publishing further information in January 2019 specifically for importers, exporters, carriers, and port operators who trade with the EU through roll-on roll-off locations. This will include new and temporary easements to support continued trade fluidity at these locations.
What to do before you export goods to the EU
You will need to:
- have a UK Economic Operator Registration and Identification (EORI) number (see ‘Actions you need to take now’ to find out how to register for this). You’ll need an EORI number to continue to export goods after 29 March and before you can apply for authorisations that will make customs processes easier for you – see our guide for the information you’ll need to register [web link needed when published]
- ensure your contracts and International Terms and Conditions of Service (INCOTERMS) reflect that you are now an exporter
- consider how you will submit export declarations. It’s up to you whether you choose to submit the export declaration yourself or do it through a third party such as a customs broker, freight forwarder or logistics provider (see more information about third parties below). If you choose to do it yourself, you’ll need the right software and the necessary authorisations from HMRC, both of which will take time to set up
- find out the commodity code of your goods. Commodity codes classify your goods so you that can fill in export declarations accurately
- research the destinations you want to export to. This background information, along with the commodity code of the goods will help you work out if the goods will incur import duty in the destination country
- check if you need a licence to export your goods. You may also need to apply for an export licence or provide supporting documentation to export specific types of goods from the UK, or to meet the conditions of the relevant customs export procedure
- check if they’re restricted goods. You will always need a licence to export:
- military and paramilitary goods
- dual-use and technology
- certain artworks
- plants and animals
- medicines and chemicals
- choose the right customs procedure code for your goods. Customs procedure codes identify the customs or excise procedures that you may want to use depending on what your business does
- pay customs duty on goods. Some goods benefit from a duty suspension regime. Your goods might also be liable to additional duties, such as anti-dumping duties
What to do when you export goods to the EU
You will need to:
- have a valid EORI number
- submit an export declaration using HMRC’s National Export System. It operates within the Customs Handling of Import and Export Freight (CHIEF) system, which controls the movement of international cargo. Your export declaration may need to be lodged in advance so that you get permission to export before the goods leave the UK (the export declaration also counts as a safety and security declaration (Exit Summary Declaration)
- complete a commercial invoice, if you’re using an agent, courier or freight forwarder to submit your export declaration. The commercial invoice must show the price you’re selling your goods for. You must list, separately, the price of any freight costs or export insurance (which you may have included in the selling price)
Read the government’s existing guidance for exporting outside of the EU to familiarise yourself with the key processes. On GOV.UK, search for ‘Export goods’ and then select ‘Exporting goods outside the EU’.
Getting help from third parties
There are third parties that can help with the customs process and movement of your goods, these are:
- freight forwarders
- customs agents or brokers
- express courier industry (fast parcel operators)
Freight forwarding is a service that involves moving goods around the world for importers and exporters. A freight forwarder will arrange customs clearance of goods crossing the frontier and they’ll have the right software to communicate with HMRC’s systems. There’s more about this on the British International Freight Association and Institute of Export websites.
Customs agents or brokers
Customs agents and brokers make sure that your goods clear through customs on their way to the final place of delivery in the UK. A customs agent or broker will act as either a direct representative or indirect representative.
Express courier industry
The express courier industry involves operators who specialise in time critical transportation services for documents, parcels and freight. These fast parcel operators offer worldwide, integrated, door-to-door movement of shipments. They track and control shipments throughout their journey.
Software providers offer software that enables you to make customs declarations electronically to HMRC’s systems.
How the excise process will change
If your business exports excise goods from the UK, you must follow the correct procedure, depending on whether the goods are in an excise duty suspension arrangement or excise duty paid. You can reclaim excise duty paid on goods you’re exporting out of the UK.
If you’re exporting duty-suspended excise goods to the EU, you will need to continue using the Excise Movement and Control System (EMCS) to record your movement from a UK warehouse or premises to the place of export in the UK.
Find out more about how to move, store and trade duty-suspended and duty-paid excise goods.
Dealing with export VAT
If you’re a VAT registered business, you will continue to be able to zero-rate sales of goods to EU businesses but you won’t be required to complete EC sales lists. This means there will be changes to how these sales are recorded.
You will need to keep evidence to prove that the goods have left the UK, to support the zero-rating of the supply. Most businesses already keep this evidence as part of their current processes. The evidence you’ll need will be similar to what’s currently required for exports to non-EU countries, but any differences will be advised in due course.
If you are selling goods to EU consumers, distance selling arrangements will no longer apply to your business and you will be able to zero-rate the sales.
Current EU rules would mean that EU countries will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries, with associated import VAT and customs duties due, when the goods arrive into the EU.
Individual EU countries may have different import VAT rules for non-EU countries and import VAT payments may be due at the border when you are importing goods. You should check the relevant import VAT rules in the EU country concerned.
UK businesses selling their own goods stored in an EU country to customers in that country
If the UK leaves the EU without a deal, you will be able to continue to sell goods you have stored in an EU country to customers in the EU, in line with current Rest of the World rules.
Current EU rules would mean that you will still be required to register for VAT in the EU countries where sales are made, in order to account for the VAT due in those countries.
Go to the EU Commission’s website for more information on:
- EU rules for storing non-union goods in an EU country before selling or exporting
- registering for VAT in EU countries
Changes to VAT IT systems
If the UK leaves the EU without a deal, the UK will stop being part of EU-wide VAT IT systems. However, you can still use these systems to handle transactions you made before EU exit.
UK VAT Mini One Stop Shop
UK VAT Mini One Stop Shop (MOSS) is an online service that allows EU businesses selling digital services to consumers in other EU countries to report and pay VAT via a single return and payment in their home country. Non-EU businesses can also use the system by registering in an EU country.
In a ‘no deal’ scenario, you will no longer be able to use the UK’s MOSS portal to report and pay VAT on sales of digital services to consumers in the EU.
If you want to continue to use the MOSS system, you will need to register for the VAT MOSS non-union scheme in an EU country. You can only do this after the date the UK leaves the EU.
The non-union MOSS scheme requires you to register by the 10th of the month following a sale, so you will need to register by 10 April 2019 if you make a sale from the 29 to 31 March 2019, and by 10 May 2019 if you make a sale in April 2019. Alternatively, you can register in each EU country where sales are made.
Go to the EU Commission’s website for more information.
EU VAT refund system
You will no longer have access to the EU VAT refund system but you can still claim VAT refunds from EU countries by using the existing processes for non-EU businesses. This process varies across the EU and you will need to make yourself aware of the processes in the individual countries where you incur costs and want to claim a refund.
You’ll find more information about claiming VAT refunds from EU countries on the EU Commission’s website.
EU VAT registration number validation
This service allows businesses to check whether a customer or supplier’s VAT number is valid. You will still be able to use this service to check the validity of EU businesses’ VAT registration numbers. UK VAT registration numbers will no longer be part of this service.
If there’s ‘no deal’, HMRC is developing a system that can continue to validate UK VAT numbers. We know this is important for certain businesses, to carry out due diligence.
Northern Irish businesses exporting to Ireland
The UK government is clear that in a ‘no deal’ scenario we must respect our unique relationship with Ireland, with whom we share a land border and are co-signatories of the Belfast Agreement.
The UK government has consistently placed upholding the Agreement and its successors at the heart of our approach. We recognise the basis it has provided for the deep economic and social cooperation on the island of Ireland.
It is the responsibility of the UK government to continue preparations for the full range of potential outcomes, including ‘no deal’. In such a scenario, the UK would stand ready to engage constructively to meet our commitments and act in the best interests of the people of Northern Ireland, recognising the very significant challenges that the lack of a UK-EU legal agreement would pose in this unique and highly sensitive context.
This would include engagement on arrangements for land border trade. We will provide more information in due course.
The Irish Government has indicated it would need to discuss arrangements in the event of ‘no deal’ with the European Commission and EU countries. We would recommend that, if you trade across the land border, you should consider whether you will need advice from the Irish Government about preparations you need to make.
Exhaustion of intellectual property rights
Intellectual property rights give the business, organisation or individual that holds the rights (the right holder) certain exclusive entitlements, which include the right to control distribution of a protected product. The exhaustion of intellectual property (IP) rights refers to the loss of the right to control distribution and resale of that product after it has been placed on the market within a specified territory by, or with the permission of, the right holder.
The UK is currently part of a regional European Economic Area (EEA) exhaustion scheme, meaning that IP rights are considered exhausted once they have been put on the market anywhere in the EEA with the right holder’s permission.
In a ‘no deal’ scenario, the UK will continue to recognise the EEA regional exhaustion regime from exit day to provide continuity in the immediate term for businesses and consumers. This approach means there will be no change to the rules affecting imports of goods into the UK, and businesses that undertake this activity may continue unaffected.
There may however be restrictions on the parallel import of goods from the UK to the EEA. The implication for UK businesses is that goods placed on the UK market by or with the consent of the right holder after the UK has exited the EU will not however be considered exhausted in the EEA. This means that businesses exporting these goods from the UK to the EEA might need the right holder’s consent.
The government is currently considering all options for how the exhaustion regime should operate after this temporary period, and is undertaking a research programme to support this decision. The government will be working closely with business representatives, trade associations and other stakeholders on the implications of our plans.
The Intellectual Property Office has also published a factsheet on intellectual property rights and EU exit.
Trading under the mutual recognition principle
Some manufactured goods, such as furniture, textiles, bicycles, and cooking utensils are subject to national regulations rather than EU-wide rules.
These non-harmonised goods can circulate on the EU market under the mutual recognition principle, which prevents EU countries from prohibiting the sale of goods that have already been legally sold in another EU country. This applies even where countries have different national requirements covering the same good.
As an example, a bicycle made to comply with French national requirements and sold in France can then lawfully be marketed in other EU countries – even though those countries may have different national requirements for bicycles.
The only exceptions to the mutual recognition principle are restrictions which EU countries can introduce on grounds such as public safety, public policy and public morality.
EU countries’ right to restrict the circulation of these goods, for the above reasons, is regulated by the EU Mutual Recognition Regulation (764/2008). As well as setting out rules and procedures, it establishes product contact points in each EU country which respond to requests for information about national regulations.
How processes will change
In the event of a ‘no deal’ scenario, the UK would no longer fall within the scope of the mutual recognition principle. This means that if you export non-harmonised goods to the EU market you will need to consider the national requirements of the first EU country you export to. You won’t need to consider the national requirements of any EU countries goods travel through before reaching the EU country in which they are intended to be placed on the market.
If you have already exported a non-harmonised good to an EU country by meeting the relevant national requirements, you will still be able to make use of the mutual recognition principle and market your product in other EU countries.
Trading goods regulated under the ‘New Approach’
EU legislation sets out the rules, or ‘essential safety requirements’, that certain products must meet before they are placed on the EU market.
If you trade in goods covered by these specific EU directives and regulations, you can read more guidance in the section Customs, excise, VAT and regulatory changes you need to know about if there is no deal in this pack and read the technical notice on Trading goods regulated under the ‘New Approach’ if there’s no Brexit deal.
£8 million funding scheme for customs intermediaries and traders
The government fully acknowledges the potential capacity challenges facing the customs intermediaries sector in supporting existing and new clients when the UK leaves the EU. In September HM Treasury and HMRC announced a one-off investment of £8 million to support broker training and increased automation.
As part of this investment, funding is now available to help customs intermediaries and traders based in the UK, meet the upfront costs of employee training and IT improvements.
Employee training grant
There’s £2 million available to fund training for intermediaries and traders that complete customs declarations, or intend to complete customs declarations in the future. The grant will provide funding for up to 50% of the cost of training staff.
How to qualify
Your business must:
- either complete customs declarations for themselves or someone else (or intend to in the future)
- or import from, or export to the EU and complete customs declarations (or intend to complete customs declarations in the future)
What you can use the grant for
The grant will provide funding for up to 50% of the cost of training your employees to:
- complete customs declarations
- facilitate other businesses to use import and export procedures
- carry out the technical processes of customs procedures
The training does not have to lead to a formal qualification.
What you cannot use the grant for
You cannot use the grant:
- towards the existing costs of current training
- for other unrelated training
IT improvements grant
There is £3 million available for funding IT improvements. This is available to small and medium-sized enterprises in the customs intermediaries sector who are currently completing customs declarations on behalf of importers and exporters. The grant will fund investment in packaged software that increases the automation and productivity of completing customs declarations.
How to qualify
Your business must:
- currently complete customs declarations on behalf of importers and exporters
- have 250 employees or less
- have an annual turnover of £50 million or less
What you can use the grant for
You must use the funding to buy software that’s:
- a packaged solution
- used to increase the automation or productivity of your business in completing customs declarations
The funding can also be used:
- to buy hardware that’s needed for the software to run
- to install and configure the software and hardware
- for the first year licence
- for training employees to use the software
What you cannot use the grant for
You cannot use the funding:
- to commission bespoke software
- for unrelated networking costs
How to apply
Applications will close on 5 April 2019, or earlier once all the funding is allocated. If you think your business qualifies for either grant, please apply at the earliest opportunity. More information, and a link to the online application page, are on GOV.UK.
Actions you can take now
- Register for a UK Economic Operator Registration and Identification (EORI) number. Read more information about how to do this.
- Decide if you want to hire an agent to make export declarations for you or if you want to make them yourself (by buying software that interacts with HMRC’s systems). If you want to declare through an agent, contact one to find out what information they’ll need from you. If you want to use software to make declarations yourself, talk to a software provider to make sure that their product meets your needs, depending on whether you import, export or both.
- Find out the commodity code of your goods. Commodity codes classify your goods so you that can fill in export declarations accurately. Research the destinations you want to export to. This background information, along with the commodity code of the goods will help you work out if the goods will incur import duty in the destination country.
- Choose the right customs procedure codes for your goods. Customs procedure codes identify the customs or excise procedures that you may want to use depending on what your business does. For example, you may wish to import goods into a customs-approved warehouse, so that you can suspend payment of duty and VAT until they’re sent to a UK customer from the warehouse.
- Contact the organisation that moves your goods (for example, a haulage firm) to find out if you will need to supply additional information to them so that they can make the safety and security declarations for your goods, or whether you will need to submit these declarations yourself.
- 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.
- If you deal with intellectual property-protected goods, you may wish to seek legal advice on how a ‘no deal’ scenario could affect your business model or intellectual property rights.
- If you trade under the mutual recognition principle, check that the goods you import to the UK meet relevant UK national regulations. This list is not exhaustive.
- The passport rules for travel to most countries in Europe will change if the UK leaves the EU on 29 March 2019 (may also apply to new exit date on 31 December 2020) without a deal. Read the government’s guidance on Travelling to the EU with a UK passport if there’s no Brexit deal and, if relevant, ensure your employees and customers are aware of the potential changes.
- Stay up-to-date with these changes by registering for email alerts. Follow the link, add your email address, select ‘submit’, select ‘Add subscription’ and choose ‘EU Exit’ then select ‘Submit’.