The best of both worlds

Any type of Brexit will reset the terms of trade between the UK and the European Union. It will cause some types of UK to EU trade and some types of EU to UK trade to cease to be viable.

Every business knows the value of goodwill and its client base. A UK business can make the most of Brexit by taking advantage of domestic UK opportunities while also establishing a base within Ireland to continue to serve its EU clients and markets, without customs and regulatory barriers.

An Irish subsidiary can facilitate importation into the EU of goods at a sufficiently large scale which is cost efficient from a customs and VAT perspective.  Otherwise, any EU importation would require the customer to undertake import declarations which may not be both practically or  economically viable. In this way, a business can truly have its cake and eat it.

The inevitable effect of any kind of Brexit is that some areas of UK to EU trade will cease to be viable while perhaps the same and more commonly other areas of EU to UK trade will cease to be viable for EU suppliers and be open to domestic suppliers. Even under a free-trade agreement without customs duties, significant new costs, barriers and procedures will apply. These costs barriers and obstacles are far from immediately apparent but are very significant.

Every movement of goods from the UK to the EU and vice versa will require an exit notice, export customs declaration and manifest to HMRC and an entry notice, import customs declaration and manifest to the EU revenue authority. Each requires a significant amount of very specific data much of it overlapping.

The declarations must be undertaken whether by the trader directly, by the freight forwarder or other customs agent and will be required for each consignment where there is a  movement of goods (whether by ship, ferry air or road transport) from a particular exporter to a particular importer.

Extra costs will arise in completing these requirements whether by way of the importer and exporter’s internal staff or by way of fees and extra costs incurred by their freight forwarders or customs agents, in both acting on their behalf and undertaking additional new processes.

Apart from these direct fees, these are very likely to be fees for the services of freight forwarders, customs agents, carriers and port authorities, where revenue interventions occur.The extent to which interventions may arise by the revenue authorities will be affected by the nature of the goods themselves and other goods with which they are bundled.

In the food and agriculture sectors, intervention with border checks and certificates are required in a very high percentage of movements and in some cases on all movements.

Even where goods are exported from the UK to EU they would require to be of UK origin in order to qualify for any favourable duty under an EU UK trade agreement. This will require a certificate of origin in each case. The requirements for the certificate of origin depend on the risk profile of the goods and may require a specific application to an independent body such as a trade chamber to certify underlying facts.

In addition, the default position is that VAT must be paid on goods when they arrive in the state of import. Many EU states allow for the deferral of VAT so that it is payable at the end of the VAT period and for business, importers may effectively be rolled over onto the eventual sale. However, even in these cases, a guarantee is commonly required.

Certain lines of UK to EU businesses will no longer be economic because the costs of complying with these processes make the  EU trade in the goods concerned no longer competitive.. (The same will apply to EU to UK trade trading opportunities within the UK for UK businesses)

In some cases, the baseline costs of making the declarations and giving the notices for each specific sale will make low-value consignments on economic. In other cases, the degree of revenue interventions licensing checking at the border with significantly increase costs incurred with freight forwarders customs agents and transport companies.

The extent of these additional costs which may be significantly more than basic declaration and notice compliance costs will not be apparent until the degree of revenue authority intervention and checking becomes apparent. Some extent this is a function of the effective trust that status of the trader and carrier with reference to the revenue authorities risk profile.

However, with Brexit all the parties will be starting with no history with an enormous increase in functions and processes inexperienced personnel will in revenue authorities and in providers a greater scope for error and a very steep learning curve for all involved.

Opportunities for substitution for domestic UK businesses will arise in sectors and segments of the market where importing from the EU is no longer competitive. Equally, opportunities will arise in the EU  in sectors and segments of the market were imports from the UK and no longer competitive

By having an Irish subsidiary or other establishments a UK company may either import from third countries or from the UK into Ireland in quantities sufficient to make the costs of the process viable. More importantly by completing the import processes, the goods will be in free circulation and the European Union so that the customer will not be required to act as the importer of record.

There may be simplified import procedures between the UK and Ireland in the context of steps to manage the Northern Ireland border. Even if they do not apply directly to Great Britain to Republic rather trade it may make logistical sense to Bruce movements of goods to Northern Ireland crossing the land border.

It is likely that the customs controls around transport movements will not be significant in the case of Ireland to Northern Ireland trade and vice versa and that the system will depend far more on checks and records the premises of the importer and exporter. This may make viable to undertake customs declarations in has given that the transportation elements of the movement which are usually central in any customs movement will be less critical given the avowed intention not to have border controls or checks in this case.