No-deal Brexit and its impact on EU-only traders

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In September 2018, HMRC published a letter of advice and guidance to thousands of British companies who currently only trade goods with other EU member states.

In the letter, HMRC alerts these companies  about customs, excise, and VAT procedures that they will need to apply in case of a no-deal Brexit. Starting on 29th March 2019, these companies would have to start completing customs declarations, and customs checks would apply for the very first time since the UK joined the EU.

As one of the first steps, the companies would have to register with the UK’s customs authority, HM Revenue and Customs (HMRC) in order to work with its IT system(s) for processing customs declarations. That’s because all import and export declarations to HMRC have to be submitted electronically, which is why companies would have to apply for access to the government’s customs systems to officially engage in import and export procedures.

Which IT system and customs procedure companies require to apply for depends on the type of goods they move and the timing of planned exports and imports from and to the UK. In addition to standard import and/or export declarations, controlled goods are also subject to licence requirements, and for excise goods, processing via the Excise Movement and Control System (EMCS) also applies.

To complicate things even further, HMRC operates two central customs systems at the moment – an old one called CHIEF (Customs Handling of Import and Export Freight) and a new one called CDS (Customs Declaration Service). CDS is going to replace CHIEF, and the phased system rollout has already begun, with a scheduled completion date in March 2019. Depending on when companies want to start importing and/or exporting, access to either one or both systems will be required in line with HMRC’s IT implementation timeline.

As the next steps in the no-deal Brexit preparation process, companies would have to set themselves up as economic operators and examine their product master data to understand the customs requirements and commodity code classifications for the goods they move. When it comes to the actual process of filing import or export customs declarations, companies need to pay attention to various aspects, including an analysis of their ERP system and global trade data capabilities, the options for integrating specialist solutions, existing in-house knowledge on customs processes, collaboration options with service providers, and how to ensure customs compliance and the revision-safe storing of relevant records.

The recent HMRC notices and guidance letters make it clear that companies trading exclusively with the EU would need to understand what additional red tape and costs would await them in case of a no-deal Brexit. Businesses that are either unfamiliar with or unprepared for managing new customs processes will need to understand the requirements of this scenario.

Global trade has always been a dynamic environment but Brexit certainly adds significant new challenges for both experienced global trading companies and first-time exporting or importing businesses. With less than six months to go, they had better start preparing themselves now.

Iqubal Singh Pannu

Iqubal Singh Pannu is Senior Solutions Consultant at AEB in the UK and has been with the company since 2006. With considerable consultancy and project management experience, spanning several areas of the supply chain, Iqubal is advising companies on solutions for optimising supply chain performance and generating value through automated global trade and logistics processes.

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