Take time to understand the future of EU-UK trade

The timing of Brexit presents real challenges for Irish businesses, says Katherine Fitzpatrick, Director of International Relations, Cork Chamber
Take time to understand the future of EU-UK trade

The EU is an open single market with over 450 million consumers and Ireland’s position within this market as an English-speaking and open economy is strong. Picture: iStock

Change is never easy. When the UK became a ‘third country’ for the purposes of trade and customs on 1 January 2021, it understandably caused a lot of well-documented challenges for Irish businesses, and for their counterparts in the UK.

Katherine Fitzpatrick, director of international relations, Cork Chamber.
Katherine Fitzpatrick, director of international relations, Cork Chamber.

Although it was never going to be an easy transition, the timing of Brexit, in tandem with a global pandemic, has challenged business to find the time to prepare for an uncertain future, when there was very little clarity as to what exactly lay ahead.

While the conclusion of the EU-UK Trade and Cooperation Agreement (TCA) at the final hour was a positive outcome, as it eliminated the possibility of WTO tariffs, the announcement undoubtedly spread confusion. Many SMEs assumed that we had dodged a bullet and expected that there would therefore be no disruption, or no paperwork required, for trade between the UK and EU.

At Cork Chamber, we have been listening to and advising businesses on some of the issues they have experienced since 1st January and have put together a few tips for consideration:

Don’t assume that someone else will take care of it!

Many SMEs who never had a contract in place with their UK supplier or customer, are now facing a dispute as to who must complete the customs paperwork. Reluctance by a UK partner or distributor to complete import declarations has resulted in some companies being forced to decide whether to set up their own UK entity or to try and find another partner in the UK to complete the import declarations on their behalf. Companies who may need to draw up a contract for the first time can find a handbook on model contracts on the website of the International Chamber of Commerce (ICC), where they will also find information on Incoterms (standard terms of trade for contracts that establish exactly where the risk and responsibilities lie for both the buyer and seller during the delivery process).

Know your products inside out 

Confusion around ‘Rules of Origin’ and what constitutes ‘proof’ of origin still remains a key source of uncertainty for many SMEs. If you are manufacturing, importing or exporting a physical product, it is vital that you know exactly what raw materials or components are used to make your product and the origin of these parts. Establishing the exact origin of a product that has multiple component parts can be a complex process but is an essential task. Depending on the origin of your product, you may be eligible for preferential or zero-rate tariffs and duties. However, mis-representing the origin of a product – either wilfully or mistakenly – could result in the company having to retrospectively pay any back-taxes and duties if uncovered by a customs audit.

Preferential status for EU and UK products

 The EU has the world’s largest network of trade agreements comprising 46 agreements with 78 countries. You can check whether your products are eligible for ‘preferential status’ under any of these agreements by consulting the online Access2Markets database, recently upgraded by the European Commission, and containing product-by-product information for all EU countries and for more than 120 export markets around the world.

In the case of products for which you are declaring EU or UK origin in order to avail of tariff-free trade with the UK, you will need to be able to prove the origin of your goods with backup documentation such as a supplier or manufacturer declaration. 

In Ireland, Chambers of Commerce are the official bodies authorised by statute to issue and authorise documents called ‘Certificates of Origin’; however, these relate to non-preferential trade.

 It is important to note, therefore, that a formal ‘Certificate of Origin’ document is not required for EU – UK trade, except perhaps in certain cases, for example, if your UK partner is later going to be re-exporting the product to another third country. If you have further queries on this process you can contact the Exports team at Cork Chamber for advice.  

There and back again

 Many companies have been left wondering how to account for products that are being shipped abroad temporarily or for repair or processing, before being re-imported to Ireland. There are several scenarios that allow you to temporarily waive or delay the payment of customs duties, however, certain conditions apply and there is paperwork involved in each case.

An ATA Carnet is an international customs document (issued by Cork or Dublin Chamber) which waives the requirement to pay customs duties when goods are temporarily exported, once the terms of the Carnet are met (goods must be returned within the stipulated timeframe and must be in the same state in which they were originally exported).

The Carnet requires a financial guarantee, can only be used for specific categories of goods and is limited to exportation of professional equipment; goods for display or use at exhibitions, fairs or meetings; commercial samples. 

Companies can also use the Revenue’s ‘temporary admissions procedure’ for similar situations. However, if you are exporting goods for further processing or repair, you should explore the Revenue’s ‘outward processing procedure’, whereby you may be able to claim full or partial relief from import charges when these goods are re-imported. More information on these procedures is available from Revenue.

The future of EU trade 

Brexit has highlighted the vulnerability of Ireland as an island on the periphery of Europe, which is highly dependent on imports and exports to keep our economy moving. However, the EU is an open single market with over 450 million consumers and Ireland’s position within this market as an English-speaking and open economy is strong.

As an economic block, the EU is looking for new opportunities to remove trade barriers and tariffs between the EU and third countries (outside the EU Single Market) and to further support the movement of goods, services, capital and people. 

Trade barriers removed between 2014-2018 generated at least €8 billion of additional exports by EU companies in 2019, helping support hundreds of thousands of jobs. The recent launch of the European Commission’s future trade strategy, showed that the EC will continue to push for further reforms in global trade, ensuring it is rules-based, and strongly supports the sustainability and digitalisation agendas. Ireland will play its part in these efforts.

Conclusion 

Becoming compliant with the new rules in relation to EU-UK trade is not impossible, but it does require SMEs to develop an in-depth knowledge and understanding of all the relationships and rules affecting their supply chain. This takes time, which is undoubtedly something that is always in short supply for small companies. However, your local Chambers, trade associations and state agencies are all on hand to advise you and support you to understand the many regulations and navigate through the multiple resources that are available.

Visit corkchamber.ie/advancing_you for Cork Chamber's international services page, with extensive advice on Brexit. 

 

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