Export advice for SMEs on Brexit – how do I prepare?
First of all, can you prepare? If you are running a UK business and would like to sell outside of the UK after exiting the EU the simple answer is ‘yes’. What appears as a bold statement explains itself when we look at the facts; let’s ignore all conjectures regarding possible trade deals – i.e. the things we do not know – and turn our attention to the things we do know:
Incoterms & contracts
The general Incoterms and all contracts you have with trading partners will have to be checked and updated where necessary
VAT payments after Brexit
These will have to be invoiced by VAT registered companies when exporting into the EU. However, they can be claimed back.
Tariffs – Export to Europe
These are taxes imposed on imports of goods and services. Trade within the EU is tariff free, one of the main benefits of the customs union. This is why this issue is so important in the current Brexit negotiations; the outcome will determine if importers need to pay them and also define for which goods/services and how much.
Here are the three Brexit options that are most likely to happen:
The Canadian-style model (Free Trade Agreement) would include little or no tariffs.
The Norway model (EEA type membership) would include heavy tariffs.
A ‘no-deal’ hard Brexit would mean the heaviest tariffs set by WTO rules.
Brexit consequences for my business
Firstly and obviously, increased cost. The extend of these depend on the outcome of the negotiations and could range from no (highly unlikely) or little tariffs on only a few products/services to heavy tariffs on everything.
The payment of tariffs, however, proves an insignificance compared to the additional effort and cost for customs clearances. Even the softest version of a soft Brexit would require you to spend considerably more time and money for getting goods out to the 27 EU member states or its 80 trading partner nations. Detailed forms will have to be filled in, comprehensive documentation needs to be provided (e.g. certificates of the origin of your goods and their component parts/ingredients) and there will be possible language barriers. Since trade deals work both ways senders would have to fulfill the same or similar requirements to get goods into the UK, what this means for you as the receiving party is yet to be seen.
Another aspect to consider is the increased shipping time due to customs clearances and possible backlogs. This could cause problems for freight traffic that depends on fast deliveries, e.g. for fresh produce or just-in-time goods.
How can I prepare for Brexit?
The effects portrayed above merely resemble the core of changes. Further implications – compliance, legal issues, quality standards, etc. – will vary on the final trade deal and the nature of your business.
However, you now have a fact-based idea what is least to be expected and can take it from here. Talk to people with know-how – the more, the better. Important: Verify all information you obtain. Create a picture and a raw solution for yourself. Start doing it now, even if you think it is not urgent. Keep honing this solution until you are entirely happy with it, but still be prepared to dump it if something better comes along – regardless of how much time and effort you have invested. There is no reason to be petrified of anything, once you start you will make progress.
Marcus Broix, Trade with Europe Ltd