Develop a Brexit strategy for your supply chain
Before you start you will need to understand what the risk points and potential liabilities are in your supply chains, based on your contractual agreements with suppliers and customers. Once you have identified these, your strategies should address:
- In-country registration and reporting requirements for both customs duty and VAT
- Payment of customs duty and VAT, including minimising these through the use of potential duty reliefs such as customs warehousing and processing
- Payment of increased freight forwarder costs
- Introduction of commercially beneficial Incoterms in contracts with suppliers and customers
- Obtaining trader assurance schemes such as AEO to gain fast track port clearance benefits and to support the use of duty reliefs.
When reviewing your supply chains, you may identify that you will need to carry out new reporting or compliance activities, for example, submitting customs declarations. If so, you should consider if you have the necessary data, resource and systems in place to manage this process compliantly.
Customs authorities require detailed information and there are penalties for submitting wrong or inaccurate information. You may, therefore, need to develop expertise to understand customs information such as classification and its application to your products or materials.
You may also need to update new systems to record and maintain this data and introduce new procedures and controls to manage your obligations.
Analyse the economic origin of goods
The key to developing a robust preparation plan in the event of a hard Brexit will be for you to fully understand your supply chains, both purchases from suppliers and sales to customers. You will need to look at these in a level of detail perhaps not previously done. You need to determine what you are buying and from who.
One aspect of the supply chain which will be important is economic origin. Where have your goods been manufactured?
Economic origin of goods
If the UK and EU enter into a Free Trade Agreement, understanding the economic origin of your goods will be key to determining if your business could benefit from zero tariffs - ie no duty at import, which is a typical benefit of these Agreements.
This benefit is however, only available where, rules relating to the economic origin of the goods can be met.
Understanding economic origin can be a complex exercise, so you should start to do this now, to prepare for both a potential UK-EU free trade agreement, and any UK third-country free trade agreements which may be introduced in the future.
And when reviewing your supply chains, you should identify when and where the goods cross borders. Post Brexit, the movement of goods across the border between the UK and the EU will trigger compliance, registration and administrative requirements from a customs duty and VAT perspective as well as financial costs linked to duty and increased freight forwarder costs.