Brexit Update: No-Deal Looming Near

The 11-month transition period, which started by the UK officially leaving the EU on 31 January 2020, is coming to an end, making Brexit the talk of the town once again. The ongoing negotiations about the future trade arrangements between the EU and the UK are not easy and strong political declarations are broadcasted by the media. Unless a deal is struck between the EU and the UK, mutual trade will be regulated only by WTO rules, which means, among other things, that import from the UK to the EU will be subject to “conventional rates of duty”, which are now being used by the EU in case of China, Russia or the USA.

According to the current arrangement, the participation of the UK in the EU single market will be terminated as of 1 January 2021, terminating the free movement of goods as well. That is why starting from the new year, goods imported from or exported to the UK will be subject to customs procedure.

What do companies have to prepare for?

From the EU’s side, all goods imported from the UK will be subject to standard import customs procedure. For the procedures to run smoothly, it is necessary to set the correct tariff classification, customs value and origin of the goods on time. Similarly, in the case of export to the UK, it will be necessary to deal with the export customs procedure. If your company has not yet traded with countries outside the EU, it is high time to apply for the necessary customs registration (the EORI number), select and appoint a customs representative, and alternatively also obtain the related export and import licences. It is also advisable to assess the VAT impacts on your transactions and review the INCOTERMS currently in use.

In an attempt to alleviate the initial strain at the borders caused by import customs procedure for goods entering the country, the UK issued a notification that in the first half of 2021, the submission of customs declarations for imported goods can be deferred until July 2021. The payment of customs duties for this period can also be deferred until 1 July 2021. However, a pre-issued permit will be required for this procedure.

Stricter rules will apply to certain types of sensitive goods for which the temporary simplified procedure will not be fully applicable. At the same time, importers in the UK will continue to have the obligation to report the movement of goods in the EU in the Intrastat declaration.

We can hope that at the beginning of 2021, the stated measures will ease the import of goods into the UK and prevent the expected delays. However, the EU is not planning any similar measures for imports from the UK, which is why only timely preparation can minimise the time and financial strain connected with importing goods from the UK into the EU. The question remains, however, what rates of duty will be applied for trade between the EU and the UK.

We will be happy to assist you with a more detailed analysis or the effective setting of processes in relation to customs procedure and VAT.

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