Eszter Kantor's Brexit Update

Eszter Kantor's Brexit Update

The latest news from Westminster suggests that Theresa May is taking over the Brexit negotiations while Dominic Raab, the new head of the Department for Exiting the European Union (DEXEU) will be focusing mainly on preparing the UK for a no-deal scenario.

Similar preparations on the EU side have been on-going for a while. Driven by the uncertainty surrounding the negotiations, the European Commission has been publishing Brexit preparedness notes since October 2017. These guidance notes are meant to inform businesses on the most important changes that will take place if the UK exits the EU without any withdrawal agreement in place. The notes identify the necessary actions stakeholders must take in order to maintain a disruption-free operation. 

The EU`s preparedness notes contain important information for all UK operators who have an EU presence.  For those UK businesses that (will) operate without EU-based representation DEXEU will compile an information kit.

At a January 2018 Fashion Roundtable meeting we have given a brief update to UK stakeholders regarding some of the key issues that will arise in case of a hard Brexit. These were:

  • UK businesses must familiarise themselves with the EU`s combined nomenclature. This annually updated document includes product classifications and accompanying tariff rates which will need to be declared when goods are sold to EU member states. As UK companies will become exporters/importers the price of imported goods will increase with the tariff rate and the additional VAT, which is calculated on the duty-inclusive value of the imports. Given that fashion is comprised of many supply chains for any single garment, this is something which we need to be aware of when it comes to pricing our products. 
  • Fashion Roundtable also recommends that, if possible, businesses attain an Authorised Economic Operator (AEO) status (both UK companies exporting to the EU as well their EU counterparts wishing to export to the UK). This provides access to custom simplification procedures and ensures faster transit procedures.
  •  Additionally the EU operates a couple of very useful online tools, which would hopefully adopted and copied by the UK authorities: the first one is Binding Tariff Information (BTI). This tool allows exporters to ask customs agents to determine the right product category and customs code for their products. Alternatively exporters can search the BTI database for previous decision on goods similar to theirs. A BTI decision is, as its name suggests, binding for both the exporter and the authorities for a period of three years. That means that once customs authorities grant a product classification number, exporters must use that.
  • TARIC, the integrated Tariff of the European Union, is a multilingual database containing all measures relating to EU customs tariff, commercial and agricultural legislation. It includes the codes of the products, their tariffs, any other levy attached, restrictions etc. It gives economic operators a clear view of all measures to be undertaken when importing into the EU or exporting goods from the EU. 
  • It is essential that companies know their own supply chain so that they can see what percentage of their raw materials or product parts come from or sold to the EU. This will help identify the foreseeable amount of cost increase (tariff and VAT) and give stakeholders time to adapt their pricing or formulate a new business strategy.
  • When customs services are under pressure the problem of counterfeit goods is almost always highlighted. With the sudden increase of importers a higher number of counterfeit goods may slip through custom control. The industry needs to work together with authorities in the UK, in Ireland as well as in the EU making sure these criminal networks cannot infiltrate the market. With an open border in NI and an overwhelmed UK customs, the transportation of illicit items can become easier. Creative industries need to work together to spot and report counterfeit goods on the market. 
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