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SME rules for success (Webinar with Allica Bank)

Last month, Go Exporting teamed up with Allica Bank to host a webinar which discussed how small and medium-sized businesses can unlock new markets to future-proof their firms. 

On-top of specialist advice, the Q&A at the end also provided some great insights. 
The webinar is free to watch right here.

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Signed, sealed and delivered: UK signs first major independent trade deal in 47 years

The UK and Japan have put pen to paper on a trade deal that will allow tariff-free exports for 99% of British goods.

It’s the first major trade deal signed by the Government following the Brexit vote with international trade minister, Liz Truss said it’s a sign of future potential.

The main benefits for UK businesses include tariff-free exports, beneficial rules of origin interpretation for UK manufacturers, improved access for the UK’s financial services sector, and digital & data provisions which make it easier for UK firms to operate in Japan.

The main stumbling block had reportedly been stilton cheese which, upon signing the agreement, Truss presented to Japanese minister of foreign affairs Affairs Motegi Toshimitsu.

Truss said on the trade deal that: “It used to be said that an independent UK would not be able to strike major trade deals or they would take years to conclude. But today we prove the naysayers wrong with this ground-breaking, British-shaped deal that was agreed in record time.”

Read more: Canada or Australia – what are the benefits and shortfalls of each type of trade deal?

Whilst the new trade agreement is likely to contribute less than a 0.1% rise in GDP according to the government’s own analysis, the signing of the agreement is strategically important and could help lead the way in the UK’s bid to become a member of the Trans-Pacific Partnership – allowing easier trade and access to Australia, New Zealand, Canada, Malaysia, and other Pacific Rim nations.

Meanwhile, intensified talks with the EU over a free trade agreement continue and remains the priority for the majority of UK businesses, with EU chief negotiator Michel Barnier noting that ‘every day counts’ as the countdown to the end of the transition period ticks on.

How prepared for Brexit is your organisation? #BeBrexitReady with our free advice, resources, and webinars in our Brexit Knowledge Bank.

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Working with agents/distributors (Webinar with Business Wales)

Earlier this month we joined Business Wales for a webinar series supporting local companies to navigate Brexit and the road ahead. 

This episode looks at working with agents and distributors, looking at the difference between the two and which is best, how to find the right distributors or agents, managing your partner, whether to go exclusive or non-exclusive and how Brexit will affect partnerships and arrangements moving forward. 
Watch the webinar in full below and watch even more great business advice content over on Business Wales’ YouTube channel here.

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Canada or Australia – what are the benefits and shortfalls of each type of trade deal?

If the UK’s exit from the European Union had its’ own Doomsday Clock, then the time has been steadily ticking towards midnight for some months now.

The rhetoric from both sides of the negotiation table has been strong, with Boris Johnson saying himself only a few days ago that UK businesses should now prepare for a no deal exit from the single market.

There has been a slight ray of light in the last 48 hours though with Barnier and Boris agreeing on a new set of intensified talks, so an agreement could be reached.

But what would that agreement look like? The UK had previously set out to achieve a Canada-style deal but lately has been angling more for an Australian-style deal. There are semantics at play here, as business minister Alok Sharma said himself on LBC London, because Australia currently doesn’t have a deal with the EU.

But what are the pros and cons of both arrangements? Which would be best for UK businesses?

Australian-style Deal

Australia is currently negotiating a free trade agreement with the EU, but the version that the UK would get is what Australia currently has – which is not much.

On these terms, the UK would have no favourable access to the EU market, and businesses on UK and EU-sides would have to pay standard WTO tariffs when trading between markets.

This will increase costs on some goods such as milk and cheese, by 30%, whilst cars could see price hikes of 10% or more – and all these costs will likely be passed on to the consumer.

The UK’s large services sector would also lose any preferential access to the EU market as well under the current Australian-style model.

Canada-style Deal

Most businesses would tell you they’d prefer a Canada-style arrangement with the EU moving forward.

Canada has had a deal with the EU since 2017 called the Comprehensive Economic and Trade Agreement (CETA), which gives the country’s businesses almost tariff-free trade in goods.

One of the main restrictions of the CETA arrangement is the protection of EU goods which have geographical indicators. For example, Champagne and camembert imported into Canada must only be from France.

There are benefits when it comes to red tape as well. Products cleared under EU safety and security rules get an import pass when they arrive in Canada, saving time and money for the exporter and the buyer.

Read more: Trade deal back on?

But quotas on the quantity of individual products that can be exported without extra charges do still exist, although the ceiling whereby those charges would take effect is higher via this agreement. Import taxes remain on meat, eggs, and poultry, but 98% of products enjoy tariff-free status.

However, Canada does still have to deal with more regulatory barriers to trade with the EU than EU nations do and, of most concern to the UK economy, Canadian service providers have limited access to the EU market – although both EU and Canadian businesses can bid on governmental contracts where real and evident expertise exist.

For more information about the continuing Brexit negotiations, and for expert advice on how to prepare your business for the end of the Transition Period, visit our Brexit Knowledge Bank here.

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Trade deal back on?

A couple of days ago, Prime Minister Boris Johnson released a video message saying that trade talks with the EU would end up without agreement and that UK businesses should now prepare for a no deal, or Australian-style deal, exit from the European Union.

But there appears to have been a shift in rhetoric, and talks look to be back on.

Yesterday the Government released a statement on further UK-EU negotiations, with the Prime Minister’s office saying they watched in interest a statement from Michel Barnier to the European Parliament.

Key in the EU’s chief negotiator’s comments was that ‘any future agreement will be made in respect of the decision-making autonomy of the European Union and with respect for British sovereignty’.

Those last two words seem to have pushed the negotiating door slightly further ajar, with the PM’s office noting in their statement that: “The Prime Minister and Michael Gove have both made clear in recent days that a fundamental change in approach was needed from the EU from that shown in recent weeks.

“They made clear that the EU had to be serious about talking intensively, on all issues, and bringing the negotiation to a conclusion. They were also clear that the EU had to accept once again that it was dealing with an independent and sovereign country and that any agreement would need to be consistent with that status.

“We welcome the fact that Mr. Barnier acknowledged both points this morning, and additionally that movement would be needed from both sides in the talks if agreement was to be reached.”

Intensified negotiations will start this week, although clear red lines remain for both sides.

The statement continued that: “As to the substance, we note that Mr. Barnier set out the principles that the EU has brought to this negotiation, and that he also acknowledged the UK’s established red lines. It is clear that significant gaps remain between our positions in the most difficult areas, but we are ready, with the EU, to see if it is possible to bridge them in intensive talks. For our part, we remain clear that the best and most established means of regulating the relationship between two sovereign and autonomous parties is one based on a free trade agreement.”

Read more: Is a Free Trade Agreement with the EU make or break for the UK Economy Post-Brexit?

“As both sides have made clear, it takes two to reach an agreement. It is entirely possible that negotiations will not succeed. If so, the UK will end the transition period on Australia terms and will prosper in doing so.

“It is essential now that UK businesses, hauliers, and travellers prepare actively for the end of the transition period, since change is coming, whether an agreement is reached or not.”

For more information about Brexit, advice on how to prepare, and free webinars, visit our Brexit Knowledge Bank.

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Understanding Rules of Origin and their importance post-Brexit (Webinar with Business Wales)

Earlier this month we joined Business Wales for a webinar series supporting local companies to navigate Brexit and the road ahead. 

This episode looks at Rules of Origin, including a detailed look at what they are, the difference between non-preferential and preferential Rules of Origin, how they work in practice, how to determine and claim Origin and what effect Brexit will have operationally and legally for exporters.

Watch the webinar in full below and watch even more great business advice content over on Business Wales’ YouTube channel here

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Working with Agents & Distributors post Brexit

We are all hopefully aware that Brexit is going to mean changes to the way we export to the EU, in particular with customs declarations, added red tape, Vat changes and so on. But what effect will it have on our relationship with agents and distributors? The obligations, rules and regulations surrounding each will be changing and so you need to review if your current or proposed arrangements are still the best option for your business.

In this article, we will look in more detail at the changes and the implications so you can make an informed choice moving forward.

What is the difference between a distributor and agent?

Often the terms are used to mean the same thing, when in fact there are significant differences. A distributor buys and sells your product in the market, whereas an agent helps you to sell in return for a commission.

A distributor is a company situated in your target country and a specialist in your market sector. They should already have good contacts and existing customers for complementary products. Often, they will stock your product in the country and ship out to customers, making the transaction quick and simple for them. The distributor handles the sales paperwork and agrees the payment terms. The distributor is your customer, sometimes on an exclusive basis. 

An agent is similar in that they will be based in your target country and a specialist in your market sector. They should already have good contacts and may represent complementary products. That’s where the similarity ends however. They will open doors to introduce your company and products but the actual sale will be down to you. You handle the marketing, the customer orders from you directly, you agree the payment terms, arrange delivery and support the customer. The agent receives their commission. 

We talk in more detail about choosing distributors and agents in our 7-Steps to Export Success e-Book and there is a specific article in our Expert Exporter Resource Hub 

What are the implications of Brexit?

In general terms, the UK will no longer be part of the EU Customs Union or Single Market, it become just like any other country trading with the bloc. Customs Declarations will therefore be required, irrespective of whether a Free Trade Agreement (FTA) is agreed or not. The UK also loses access to the EUs FTAs with other countries such as Canada, Japan and more. This all has implications for Rules of Origin and Duties/VAT for starters. 

You can find a more detailed discussion of Rules of Origin in our special article below:

Rules of Origin – the greatest Brexit challenge you’ve never heard about

For more details on the impact of Free Trade Agreements click below:

Is an FTA with the EU make or break for the UK economy? 

A Distributor will become the Importer

With the changes in legal standing of the UK vs the EU, so changes the legal position of a distributor post-Brexit. The EU will class them as the importer of record and the legal entity presenting the product onto the Single Market. As such this brings additional responsibilities on the distributor. They automatically become what is known as the ‘Responsible Person’ for your product.

The Distributor now becomes responsible for the legal compliance of your product to EU laws and regulations. For example, they must ensure you have done everything correctly in terms of CE marking. This will mean you having to hand-over your products technical file to every distributor. If you have one in every country, that will be 27 to start with! Think of the headaches, not to mention the potential confidentiality and intellectual property issues. 

In addition, as the responsible entity in the eyes of EU law, the contact details of the distributor will need to appear on the labelling/packaging of your product. Again, this could mean 27 different labels!

One way around this complexity is to appoint your own Responsible Person or Authorised Representative in the EU to handle your compliance matters. They need to be a legal entity or resident of the EU. Your distributor(s) will also have to legally mandate them to act on their behalf. 

Another alternative is to appoint an Initial Importer, who takes on this responsibility and also effectively supplies your distributors, though this can be just a paperwork transaction. If you supply medical devices, under the new MDR regulations the Initial Importer also has additional responsibilities such as recording product complaints.

There are specialist companies offering these services which Go Exporting for example can help you find and appoint. For further details Contact Us here.

An Agent is not the importer

In contrast, an agent does not become the Importer as they are not handling the sales transaction, you are. In effect therefore each customer becomes the importer and takes on the responsibility for ensuring product compliance for example. Will they accept the task? Again, you may decide it is better to appoint your own Responsible Person/Authorised Representative and consider an Initial Importer. 

Other challenges

It is important to review your distribution agreement and the terms you have in place. Do they still apply? It may be necessary to amend them based on new Incoterms to make it clear who is responsible for duty and customs arrangements for example. 

Ex works terms puts most responsibility on your distributor, but will they want the added complications? Will it spoil the relationship and make them look to EU suppliers instead? You may decide to deliver DDP (Delivered Duty Paid) to take this burden from them but make sure you know the implications and costs, for example can you reclaim the Vat? In many EU countries you will need a Fiscal Representative to have a local Vat number post-Brexit.

Consider delivery times, pricing and stock levels too. Border delays may have an effect, so take this into account to ensure your relationship remains smooth.

Review your Agents contract also. Current EU regulation gives them enhanced rights such as minimum notice periods and the right to compensation or indemnity on increased goodwill. If you end the arrangement this could become very costly. Agents agreements need careful drafting by a suitably qualified legal expert for this very reason. The EU Withdrawal Act commits the UK to retain these agent’s rights, although this may change in the final Brexit deal. 

Changes in Practice

Keep your distributor/agent close. Be aware they may look for EU alternatives. It is estimated that 60% have already looked! Did you receive that expected order?

We have seen a hesitance towards entering or renewing agreements with UK suppliers. The key reasons cited are fear of red tape such as customs arrangements, increased currency volatility, uncertainty over the future landscape for standards and approvals, potential delays at port and possible cashflow implications. 

A great product or service and perfect execution of orders throughout will help overcome this, however. But don’t be complacent. Discuss with your partners, understand their fears and plan how to overcome them. Make it a priority.

What steps should you take? 

The clock is ticking. Everything changes at 11pm on 31st December 2020. Do not delay therefore. 

Create a Brexit Planning Checklist – you can download a template here

Discuss and plan your Importer/Responsible Person arrangements

Assess Vat requirements and changes

Review contracts and agreements

Assess market competitiveness

Factor in potential delays at port

Prepare for red tape e.g. customs declarations

Consider Rules of Origin and how they will affect your product/supply chain

KEEP YOUR DISTRIBUTOR/AGENT CLOSE

About Go Exporting:

Go Exporting is a specialist export consultancy that launches businesses just like yours into new international markets. As such we have made it our mission to keep exporters informed about the challenges Brexit will bring and provide support services to help them along the journey. 

Whether you have a single question or are looking for a full Brexit audit, we offer cost-effective, flexible support.

For further details call +44 (0)800 689 1423; email info@goexporting.com

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Is a Free Trade Agreement with the EU make or break for the UK Economy Post-Brexit?

With the end of the transition period fast approaching on 31st December this year, we still do not have a Free Trade Agreement (FTA) in place with the EU. Some commentators are hopeful one can be reached but difficult obstacles remain surrounding fishing rights and Government subsidies. It is still possible the UK could tumble out of the EU without an agreement. 

What would that mean for business and the economy? How important is a Free Trade Agreement with the EU? In this article we will explore this subject in more detail.

A Brief History of Free Trade Agreements

Trade Agreements date back to Egyptian times and were widely used, or rather imposed, by the Roman, Ottoman and British Empires. Bilateral agreements on trade interests really started in the 18th Century with Britain at the forefront in promoting the benefits of open trade. The Great Depression revived protectionism, however, and then came the two World Wars. It was only post WW11 that the General Agreement on Tariffs and Trade (GATT) was signed, initially by 23 countries, with the aim of minimising barriers to international trade by eliminating or reducing quotas, tariffs and subsidies. 

This led to the creation of the World Trade Organisation (WTO) in 1995, absorbing GATT. The treaty was signed by 125 countries covering 90% of world trade. Today the WTO has 164 members and reaches 98% of world trade. Its role is to regulate and monitor trade in goods, services and intellectual property between members. It sets agreed maximum tariffs for what is known as Most Favoured Nation (MFN) status. Members agree that they will not discriminate in terms of trade between other MFNs. So, the tariffs they charge are the same for all countries. That is unless there is an FTA in place between two or more countries. Such agreements are allowed by the WTO providing they do not worsen the pre-agreement situation for non-FTA countries.

This has led to the growth of Bilateral FTAs and most recently Plurilateral or Regional FTAs, of which the EU is a complex example.  

The Anatomy of a Modern FTA

An FTA can be defined as a reciprocal agreement between two or more countries according to international law. It aims to liberalise trade between signatories across substantially all goods and service sectors by easing barriers, reducing or eliminating tariffs and quotas. 

The latest FTAs go beyond this however and are often known as Deep Integration FTAs. Good examples are the EU-Japan Economic Partnership Agreement (EPA) and the Comprehensive Economic & Trade Agreement (CETA) between the EU and Canada. Such agreements cover a wide range of topics such as Investment, Intellectual Property, Government Procurement, Technical Standards, Sanitary and phytosanitary standards. The diagram below shows more detail on typical areas covered by such agreements.

anatomy of a FTA

As we can see these are detailed and complicated agreements which consequently can take years to negotiate. CETA took 9 years, EU-Japan EPA 6 years, EU-South Korea 9 years, the USA takes on average 5.5 years to conclude an FTA.

What the UK and EU are currently negotiating is this kind of a Deep Integration FTA. Both sides have indicated it needs to be agreed by end of October/early November in order to be ratified in time for the end of the transition period. 

On top of that, the UK will not be able to continue to trade with other countries under current EU agreed FTAs. As a non-EU member, the UK is not a signatory. Therefore, it must negotiate its own FTAs with any other country it wishes to trade with on preferential terms.

So, No Pressure!

What is the Importance of FTAs?

Without an FTA with the EU and other major trading partners, the UK will fall back onto WTO rules and tariffs as from 1st January 2021. Compared to the current zero tariffs with the EU, which accounts for around 46% of all UK exports, this could come as quite a shock to many industries. There are over 5200 tariff rates agreed by WTO members, below are a selection of average rates for different sectors. 

  • Dairy – 37.5 per cent
  • Confectionery – 21.2 per cent
  • Animal products – 16.3 per cent
  • Fish – 11.6 per cent
  • Cars and Car Parts – 7%
  • Chemicals – 4.6 per cent
  • Petrol – 2.5 per cent
  • Electrical machinery – 2.3 per cent
  • Non-electrical machinery – 1.8 per cent
  • Pharmaceuticals – generally 0%

It is clear therefore that outside of an FTA, many UK businesses will become less competitive in international markets due to duties. Agriculture will be particularly hit as can be seen by the tariffs above. FTAs usually lead to significant benefits over WTO rules for this sector. The lack of an FTA will affect both exports and imports, so supply chains will also be a concern. 

As we have already seen, deep integration FTAs cover much more than just tariffs, they are designed to reduce barriers to trade too. Without FTAs UK businesses will encounter more red tape for example. Most FTAs agree on simplified procedures for customs, Vat etc. It is already predicted there will be a 6-fold increase in the number of customs declarations required by UK companies. Additional licences and certificates may also be required. This all comes at a cost.

Compliance and product certification will also be an area of concern. The UK has announced it will adopt a new UK Conformity Assessed (UKCA) as from 2021 which will cover most of the same products as the current European CE marking. There will be a CE transition period until the end of the year but after that CE may not be recognised in the UK in the same way. Equally UKCA will not be recognised by the EU. To sell in both areas therefore will require both certifications. Taking this a stage further, CE conformity assessments carried out by UK notified bodies may not be recognised by the EU. It is important to check this point with your assessment organisation.

As we have seen, FTAs always include an agreement on Rules of Origin. UK companies will now have to prove UK origin rather than EU origin for their products. With today’s complex supply chains, this could be more difficult than it sounds. In fact, it is reckoned Rules of Origin is the biggest Brexit challenge for many businesses. See our in-depth article on this subject here

Is it Make or Break for the UK?

As with all questions of this kind, there is no black and white answer. Many countries do trade quite happily on WTO terms, although the growth of regional trade agreements such as the Transatlantic Trade & Investment Partnership (TTIP), Trans-Pacific Partnership (TPP) and Regional Cooperation in Asia & Pacific (RCEP) makes the number smaller almost by the day.

What is for sure, is that UK businesses will be exposed to higher duties and increased costs in order to comply with new trading terms and conditions. The new normal will be a hard learning curve and some will suffer. UK companies have proven themselves to be resilient, however. Many will find a way. 

Brexit will also bring exciting opportunities as well as the challenges. See our special article ‘Brexit: the greatest business opportunity for a generation?’ for more details.

That said, let’s all hope the UK and EU reach a consensus and there is a smooth transition into 2021 and the post-EU reality.

About Go Exporting:

Go Exporting is a specialist export consultancy that launches businesses just like yours into new international markets. As such we have made it our mission to keep exporters informed about the challenges Brexit will bring and provide support services to help them along the journey. 

Whether you have a single question or are looking for a full Brexit audit, we offer cost-effective flexible support.

For further details call +44 (0)800 689 1423; email info@goexporting.com

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Free trade agreements – what’s next post Brexit? (Webinar with Business Wales)

Earlier this month we joined Business Wales for a webinar series supporting local companies to navigate Brexit and the road ahead. 

This episode looks at free trade agreements, including what they are, which post-Brexit FTA’s are in place already and where agreements may be reached soon, what trade agreements mean for your export strategy and how to assess market potential after the end of the transition period. 

Watch the webinar in full below and watch even more great business advice content over on Business Wales’ YouTube channel here

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A third of Irish exporters have experienced a COVID sales drop

New research from Enterprise Ireland has found that a third of exporting firms in Ireland have seen sales fall so far this year. To compound worries, a further 85% of the 728 firms surveyed said they also expect Brexit to add up to 10% to their operational costs.

However, although the overall picture looks bleak, certain sectors including digital and life sciences have seen sales growth of 30%.

And almost six in 10 of the companies questioned said they still expect their exports to grow and over 80% are planning to hire more staff next year.

CEO of Enterprise Ireland, Julie Sinnamon commented on the survey results that: “Irish exporters came into 2019 from a position of strength recording exports of more than €25bn in 2019.”

Read more: Businesses still have many unanswered questions over Brexit with less than 13 weeks to go

“However, 2020 has proven to be very challenging so far. While our clients have largely succeeded in retaining customers across the world, we know that customer contracts have declined by 10%, compared to last year.”

Last month, Go Exporting presented a free webinar alongside Enterprise Ireland discussing the opportunities within UK local authorities for Irish exporters. You can watch that in full below:

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