The European Commission has this week stepped up its “no-deal outreach” to EU businesses – specifically in the area of customs and indirect taxation – such as VAT – given the risk that the United Kingdom may leave the EU on 30 March this year without a deal.
The campaign is part of the Commission’s ongoing efforts to prepare for a no-deal Brexit at 00:00 CET on 30 March 2019. It stems from the meeting in December of the European Council – comprising the EU27 Heads of State. They called for “intensified preparedness work for all scenarios”. The campaign aims to reinforce the advice to businesses that will continue to trade with the UK after 30 March and builds on the Commissions Preparedness Notices and Guides – issued during 2018, but at a time that a 21-month transition period was anticipated. The documents set out that is needed to ensure as smooth a transition for businesses as possible.
Preparing for the UK becoming a non-EU ‘third’ country is of paramount importance if significant disruption for EU business is to be avoided – and the timescales for preparing have been reduced to a matter of days rather than months in the event of a cliff-edge no-deal Brexit.
European Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici, said: “With the risk of a no-deal Brexit increasing as we get closer to 29 March, the European Commission and national customs authorities are working hard to be ready to introduce checks and controls on goods flowing between the EU and the UK. This is key to protecting our consumers and our internal market. A lot depends on the ability of businesses trading with the UK to get up to speed with the customs rules that will apply on day one in case of no deal. There is no time to lose and we are here to help with the information campaign.”
Across the EU business community – and especially Small & Medium Enterprises – work is needed to prepare for a “no-deal” scenario and to continue trading with the UK. These businesses should:
Assess whether they have the necessary technical and human capacity to deal with customs procedures and rules, e.g. on ‘preferential rules of origin’.
Consider obtaining various customs authorisations and registrations in order to facilitate their trading activity if the UK is part of their supply chain.
Get in touch with their national customs authority to see what other steps can be taken to prepare.
Material available to businesses includes a ‘5-step checklist’ – providing an overview of the steps that need to be taken and available in all EU languages. The Commission’s campaign complements national efforts to inform EU businesses across the EU27 Member States.
Member States are, in parallel, undertaking preparatory work – supported by the Commission – to ensure that national customs infrastructure and logistics are ready to deal with a no-deal scenario.
Since the rejection of the UK-EU agreed Withdrawal Agreement by UK Parliament – and with “ratification remaining uncertain” – the risk of a ‘no-deal’ scenario has increased significantly. The Commission has been ramped up its preparedness work for a no-deal since December 2017.
The Commission’s first Brexit preparedness Communication in July 2018 emphasised that – irrespective of the Brexit scenario – the United Kingdom’s choice to leave the European Union will cause significant disruption. It has consistently called on European citizens, businesses and Member States to prepare for all possible scenarios, assess relevant risks and plan their response to mitigate them.
Stakeholders, as well as national and EU authorities need to prepare for two possible main scenarios:
If the Withdrawal Agreement is ratified before 30 March 2019: EU law will cease to apply to and in the UK on 1 January 2021 – that is, after a transition period of 21 months. The Withdrawal Agreement includes the possibility of a single extension of the transition period for up to one or two years.
If the Withdrawal Agreement is not ratified before 30 March 2019: there will be no transition period and EU law will cease to apply to and in the UK as of 30 March 2019. This “no-deal” scenario has been referred to as a “cliff-edge”.
With this in mind, the European Council in December 2018 called for preparedness work to intensify at all levels. The European Commission adopted a Contingency Action Plan on 19 December 2018 – and legislative measures – including in the area of customs – have now been enacted.
For instance, in such a ‘no-deal’ scenario, goods coming from or going to the UK will be treated as imports from and exports to a ‘third country’. This means that customs formalities and controls will apply at import and export. Customs duties, VAT and excise duties will be levied at importation, while exports to the UK will be exempt from VAT.
The Commission has published a series of notices – available in all EU languages – which aim to better inform stakeholders and travellers about the consequences that a ‘no-deal’ scenario could have for their business when it comes to customs procedures, indirect taxation – such as VAT and excise duties – preferential rules of origin, import licenses and export licenses.
Action by the EU27 Member States’ action is also essential. Each of their national authorities has a key role in monitoring and guiding industry preparations. On that basis, the Commission has held technical discussions with the EU27 Member States both on general issues of preparedness and on sectorial, legal and administrative preparedness steps.
A series of visits to the 27 EU Member States has also begun to make sure national contingency planning is on track and to provide any necessary clarifications on the preparedness process.
European Commission simplified 5 question assessment – issued on 18 February 2019:
“ASSESS WHETHER YOUR BUSINESS TRADES WITH THE UK OR MOVES GOODS THROUGH THE UK”
If it does:
1. REGISTER your business with the national customs authority to trade with non-EU countries, if you have not done so yet.
2. ASSESS whether your business has the necessary resources and capacity (staff, access to IT systems, storage…) and holds all necessary customs authorisations to import or export.
3. ASK your national customs authority which existing customs simplifications and facilitations are available for your business, such as guarantees and transit simplifications.
4. CONSIDER applying for Authorised Economic Operator (AEO) status from your national customs authority.
5. TALK to your business partners (suppliers, intermediaries, carriers…) as Brexit might also impact your supply chain.