The EU’s guidelines for Brexit negotiations state that “Nothing is agreed until everything is agreed.” Until a trade deal is finalised, British businesses need to prepare for several scenarios. As the UK and EU continue to navigate Brexit, discover how importing goods from the EU could change after the transition period.
When is the Brexit transition period?
The Brexit transition period started on February 1st 2020. The transition period is designed to give the UK and EU time to negotiate a new cross-border relationship, including a new trade deal. The transition period will end on December 31st 2020 when new rules on importing goods from the EU will come into effect.
But the arrival of a new trade deal could mean extra costs for your business.
That’s because any new deal could bring additional tariffs, i.e. taxes on imports, aimed at your EU suppliers. And in commerce, those extra costs are almost always passed on to the buyer.
While new trade rules could leave your business out of pocket, you can save up to 90% on international payments. Get five fee-free transfers, at market-beating rates, when you register with Azimo Business Visit the Azimo pricing page to see just how much you can save versus other providers.
What are the current rules on imports from the EU?
During the transition period, the UK still enjoys the benefits of being part of the EU, including the free movement of goods between EU member states.
Let’s say you’re a fashion designer that makes regular payments to suppliers in Poland for textiles. Until January 1st 2021, you can continue to purchase supplies without incurring any import duties, taxes or customs clearance. After that, a new trade deal will begin.
What could the new trade agreement on imports from the EU to the UK look like?
It is likely that any deal will be one of three options.
The first is a free-trade agreement (FTA), which would operate similarly to the EU’s ‘free movement of goods between members’ rule. The second is a UK Global Tariff (UKGT) which would replace the EU’s customs import tariff.
An FTA would mean the rules on EU imports stayed the same, i.e. no tariffs (border taxes on goods) or quotas (limits on the amount of goods). While a UKGT, and its associated costs, could have significant impacts on businesses.
The third option would be a ‘Canada-style’ deal which is the agreement the EU currently has with Canada. Its official name is the Comprehensive Economic and Trade Agreement (CETA).
A CETA would get rid of most, but not all, tariffs on goods traded between the EU and the UK. However, tariffs would remain on goods like poultry, meat and eggs. A CETA would also increase quotas, i.e. the amount of a product that can be imported without extra charges, but does not eliminate them altogether.
Importing goods from the EU after a no-deal Brexit
In the event there is no FTA or CETA, your business will likely need to fulfil new requirements when importing goods from the EU. That’s because the UK would have to trade with the EU under the basic rules set by the World Trade Organization (WTO).
Under WTO rules, tariffs will be applied to most goods which UK businesses receive from the EU. These tariffs would make EU imports post-Brexit more expensive and harder to sell in the UK and vice versa.
In light of this uncertainty, Azimo Business has put together this list of what these new steps could be, with a table below explaining what they mean:
- Getting a EORI number for your business.
- Checking any additional certification or licences for certain products.
- Understanding your company’s VAT requirements.
- Choosing whether or not to defer import declarations for standard goods.
- Deciding if you will make your own customs declarations or use an intermediary service such as a customs agent or freight forwarder
- Determining if any Customs Special Procedures can apply.
- Checking the UKGT to determine what duties apply against your product(s).
- Considering any duty deferment options where applicable.
- Ensuring your supplier has all the information needed such as your EORI number, additional licences and certification and export declarations.
- Submitting or ensuring your intermediary has made INTRASTAT declarations where applicable.
|EORI number||An Economic Operators Registration and Identification number is a code assigned by HMRC to track your imports across the EU.|
|Additional certification or licenses||These will cover controlled goods such as livestock, plants, chemicals and medicines. An inspection fee may also be applicable.|
|VAT requirements||VAT will be payable upfront by your business on “imported consignments of goods valued over £135”.|
|Defer import declarations||An option for standard goods such as clothes and electronics. It allows you to keep records of your imports but defer making full customs declarations and paying customs duties.|
|Customs declarations||When you bring goods into the UK, you or your intermediary will need to make a full declaration to customs officials.|
|Customs Special Procedure authorisation||Allows you to pay less or no duty on imported goods you store, process, repair or temporarily use. For example, if your business imports and fixes broken smartphones.|
|UKGT||The UKGT will apply to all imported goods unless an exception applies. How much you pay will depend on the type of goods you’re receiving from the EU.|
|Duty deferment||Lets businesses make one monthly Direct Debit instead of paying duty on individual deliveries. You can only apply for a duty deferment account if your company imports goods regularly.|
|INTRASTAT declarations||A monthly report submitted by companies who move over an agreed threshold of goods across the EU. Its purpose is for governments and the EU to track trade between countries for statistical uses.|
Will Brexit affect international money transfers?
Depending on who you ask, if the UK leaves the EU without an FTA or similar deal, Brexit could strengthen the euro.
If your company sends business payments to EU suppliers, you might consider a forward contract for any large transactions you plan to make after the transition period. This can help to protect your money against unpredictable currency movements.
For more information, we’ve written a guide on how to get the best exchange rates, including more on forward contracts and getting rate alerts.
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