The National Audit Office has warned in a new report that it is ‘very unlikely’ that every company that deals in UK/EU trade will be fully prepared for the end of the transition period, saying that flaws in the Government’s Brexit planning will likely lead to significant disruption. 

The report says that a lot of attention has been paid to firms importing from the Single Market with the Government looking to ease administrative burdens on UK firms and that it won’t be applying full import controls from January first – even if a free trade agreement has been established before then. 

This will support businesses importing goods from Europe, but less attention has been given to UK companies who primarily deal in exports into the Single Market, with the National Audit Office warning that a ‘reasonable worst-case scenario’ could see anywhere from 40% – 70% of lorries not being ready to meet EU customs requirements. 

Read more: UK auto firms spend £735m on Brexit preparations, warn of no-deal damage

The National Audit Office said with its’ report that: “Despite the funding being committed by government, there remains significant uncertainty about whether preparations will be complete in time, and the impact if they are not.”

The British Exporters Association agrees with this assessment, noting that the Government has prioritised imports and that exporters have encountered poor communications with guidance lacking detail or definition – even misleading. 

Is your business fully prepared for Brexit? See how our Brexit Audit services can help you get Brexit-ready. For more news and insights, check out our Brexit Knowledge Bank.

Automotive firms in the UK have spent over £735 million preparing for Brexit, with over £235m already having been invested this year.

That’s according to research from the Society of Motor Manufacturers and Traders (SMMT), which published its figures alongside a last-minute plea fo the Government to agree a zero-tariff, zero-quota trade agreement with the EU.

It says a no-deal scenario could cost the UK auto industry almost £50bn over the next five years.

Mike Hawes, chief executive of SMMT, commented that: “As the UK-EU FTA (free trade agreement) negotiations enter the endgame, now is the time for both sides to deliver on promises to safeguard the automotive industry.

“Securing a deal is absolutely critical but it cannot be any deal.

“To work for UK automotive, it must deliver for UK products and that means securing the right terms and conditions that allow our exports – now and in the future – to be zero-tariff and zero-quota trade.”

Read more: Irish firms struggling to get to grips with Brexit customs requirements as Covid hampers preparation efforts

“A deal that failed to achieve this would be the equivalent to no deal at all, devastating jobs and slamming the brakes on the UK’s ambitions to be a world-leading manufacturer and market for electrified mobility and battery technologies.”

SMMT reports that 67% of companies across the auto sector are doing everything they can to prepare for new Brexit processes come January 1st next year, whilst seven in 10 have secured new identification numbers.

Is your business fully prepared for Brexit? See how our Brexit Audit services can help you get Brexit-ready. For more news and insights, check out our Brexit Knowledge Bank.

Over half of Irish businesses have admitted they’re struggling to understand new customs clearance procedures that are due to come into effect next year. 

That’s according to a survey by customs clearance service Declaron, which quizzed 300 Irish firms on their Brexit preparedness. 

The survey also found that nine in 10 medium to large companies had seen Brexit preparations hit by Covid management, with 37% overall saying they have yet to start planning for the UK’s departure from the single market at all. 

Declaron CEO, Michael Nolan, commented on the survey results that: “There are certain steps that every business must now take to be able to import and export with effect from January 1 and inaction now puts the efficiency of their trading with the UK at risk.”

Nolan urged firms to not stop their preparations given that Brexit with delivering ‘guaranteed tasks’ what Irish businesses will need to deal within just a few weeks time – predominantly in the form of creating and submitting customs declarations. 

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

Carol Lynch, Declaron director and partner in BDO warned that Irish firms are sleepwalking into a ‘trade agreement trap’. 

“Even when a Trade Agreement is concluded, there will still be a requirement for import and export declarations. The agreement only means that customs duties may not be payable. Compliance obligations actually increase rather than decrease. The delay in the service agreement being finalised cannot be seen as reason to delay preparations.”
Is your business fully prepared for Brexit? See how our Brexit Audit services can help you get Brexit-ready. For more news and insights, check out our Brexit Knowledge Bank.

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.

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.

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.

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.

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. 

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 31^st 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