Season 1, Episode 48
Host: Deepesh Patel (DP), Editor, Trade Finance Global
Featuring: Kevin Shakespeare (KS), Institute of Export & International Trade
The Coronavirus Pandemic has quite rightly been the key focus for governments around the world in recent months, but that doesn’t mean the UK’s exit from the European Union has taken a backseat.
Seems like quite a while ago now, but as of February 1st this year, the UK Brexited the EU, and we are in the transition phase until the end of 2020. But when clocks chime midnight at the New Year, the way exporters and importers trade with the EU will change significantly. There are implications for customs and declarations, changes at the ports, documentation, and various checks.
The information provided is often quite overwhelming, so in this podcast, we are catching up with an expert in these areas – Institute of Export & International Trade’s Kevin Shakespeare.
Deepesh Patel (DP): I’m Deepesh Patel, Editor at Trade Finance Global.
So let’s start with a 30-second elevator pitch from you, who are you, where are you from, and what do you do?
Kevin Shakespeare (KS): Thank you Deepesh, and good day, everybody. So my name is Kevin Shakespeare – I’m the Director of Stakeholder Engagement at the Institute of Export & International Trade (IOE&IT).
So certainly with regard to planning around the post-transition period, this has become a key area of focus for us and increasingly for businesses as well. So it’s something we’re very heavily involved in. I’ve worked in international trade for a good number of years with businesses, agriculture, textiles, manufacturing, e-commerce… lots of different types of businesses.
It is fair to say that right now, the level of change, issues, opportunities, or challenges we’re seeing in the market right now are unprecedented. Now is a really fascinating time for businesses, but certainly the most important priority for businesses right now is to cope with the ‘here and now’ and to plan as much as possible.
Again, a pleasure to be able to speak today. Thank you.
DP: As of the 1st February, following the Withdrawal Agreement, the UK is now no longer a member of the EU. We are in a transitionary period. Broadly speaking, what does this mean for the UK between now, and the 31st December 2020?
KS: Yes, well, it is, to some extent ‘business as usual’ in terms of trade with the European Union, which currently remains the same as it has done.
1st January 2021 – The end of the transition period
That said however, now is the time for businesses to prepare to look at some of the issues which are going to arise from the 1st January 2021, and really prepare for some of those issues. So really, it’s about planning and preparing as much as you can. There are still many uncertainties, but there are some things that are definitely going to change that businesses can prepare for.
DP: What exactly do these changes mean for UK importers and exporters and what can they do right now to start preparing?
KS: So the definite change is that the UK is leaving the Customs Union of the European Union.
Customs declarations will be required for goods moving out of the UK and for outbound declaration. When it comes to importing into the UK, there will also need to be a customs declaration.
On the customs element, there are changes in product conformity as well, and compliance to the UK will need to be met in the same way as Canada or the United Arab Emirates, for example. So, there will be a need to meet product conformity regulatory standards, as well as the customs element as well.
Now, clearly, if there is no trade deal and no zero-tariff trade deal between the UK and the EU, then that could have a significant impact on businesses. That is perhaps the main area of uncertainty at the moment – as to whether there will be a change deal, but the other elements around regulatory product differences and the need to meet EU conformity standards will certainly change because the UK will no longer be part of the single market and the Customs Union.
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Scenario: Zero-tariff no trade deal between the UK and EU
DP: So if we don’t have an agreement with the EU, what will be the situation on the 1st January 2021?
In the case of a zero tariff position, there will be tariffs applied to goods. So whether that’s goods entering the European Union or goods entering the UK, there is something around the Border Operating Model (BOM) that will allow for the ability to defer payments of tariffs.
Products with the highest tariffs tend to be of animal origin; the agricultural products and finished products as well. So businesses really do need to consider the level of tariffs, whether you’re importing into the United Kingdom or if you’re exporting.
It’s not just about the customs declaration, per se, yes, that’s needed, but it’s everything that goes in with the declaration. You’ve got to make sure you have the correct classification code and commodity code, the value of the goods for customs purposes, the correct origin of the goods. Even if a freight forwarder is operating on your behalf, it’s still your responsibility as a trader or an importer to ensure these declarations are filled out correctly.
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Customs Procedures, Declarations and Documentation
DP: Let’s talk about Customs Procedures and Documentation – completing customs declarations is going to be changing. What’s changing, and how does this impact filling out the SAD C88 form?
KS: Yes, it’s a really valid point. So, the SAD C88 form, which is accessed online now, is a key form, and businesses need to understand the different elements of the form.
There are more fields on the importing form. On the import declaration, it’s important to get all of the fields correct, both the evaluation and commodity codes, the consignee, the consignor, and one of the ways of looking at it is that a lot of the documentation should be on your commercial invoice or possibly on the packing list.
DP: Where can you get help from, when it comes to compiling import and export entries?
KS: There are a couple of ways you can get help – there are forwarders, customs agents and brokers who can make the declaration on your behalf – obviously there will be a charge for doing that. You can also try and do it yourself. But either way, you need to understand what these fields are. There is also a grant scheme as well – the HMRC grant scheme of £50 million pounds – where further details were announced late last week, which covers grant funded training, grants for software and also recruitment to make these customs declarations.
The Border Operating Model (BOM) and the Post-transition border plan
DS: Let’s talk about borders. The Post-transition border plan was published recently. Now, to spare our readers the 206 page document, what are the key takehomes, and what is the BOM (Border Operating Model)
KS: Good question. So some of the key takeaways from the post-transition border plan is around the fact that the UK has control over its borders. The UK has introduced a three-stage plan around what businesses should do when they’re importing. So the importers of standard goods can defer payments for up to six months for an import declaration, which also differs payment of the import tariffs, if there are tariffs. Controlled goods on the other hand, such as excise goods, alcohol, military goods, will not be subject to these procedures, nor will the likes of live animals, where declarations have to be made from 1st January 2021.
The key determinant there will be that if you can defer the payment of the import tariff for six months to help a business’s cash flow, that would probably be one of the main reasons you would do it. That’s the main take home – there are specific requirements for certain sectors; products of animal origin, live animals, excise goods, which are detailed, and clearly if your product falls within those categories, we’re happy at the Institute to provide further information. The EU has indicated that it will not reciprocate with this. So all of these controls happen from the 1st January, whereas the UK has opted in for full controls to apply from the 1st July 2021.
Roll on Roll off (Ro-Ro) and the Smart Freight Service (SFS)
DP: Let’s talk about Roll on Roll off. In Gove’s words, he wants to ‘lay the foundations for the world’s most effective border by 2025’. So efficiency is key, and the govt’s new ‘Smart Freight Service’ will help Ro Ro – can you explain what Ro Ro is and why the SFS will be important for ports in the UK?
KS: So the concept of Ro-Ro is around driving efficiency in the border crossings and in entering vessels. The concept of roll-on roll-off is the idea that a lorry could just go onto the vessel. One of the prime examples here is going from Dover to Calais, where you don’t really want anything that could slow up the process. Currently, we’re part of a single market customs union, so, there is no requirement for border controls. However, from 1st January, there will be a requirement for border controls, so the concept of a Smart Freight Service (SFS), is to avoid a situation where lorries have to turn up at Dover and other ports and be held, whilst a safety and security check has to be made. To avoid these delays, smart freight aims to automating processes so that information could perhaps be checked in land rather than at the border, or using technology, automation, recognition, and references so that the Ro-Ro process can continue with minimal delays from having to provide documentation or searches, etc.
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Sanitary and Phytosanitary checks (SPS)
DP: Will there be changes to sanitary and phytosanitary checks and rules?
KS: So there will be sanitary and phytosanitary checks because the UK is the third country outside the European Union. To use an example, for products of animal origin, there need to be checks at the border control posts. So, what will happen there, is that the goods will need to be checked. Under the Border Operating Model, for the first six months, for live animals and high risk plants, for example, checks will be made at the point of destination. And for products of animal origin, the Sanitary and Phytosanitary checks will commence from the 1st April at the point of destination, on 1st July 2021, these checks will take place through border control posts – that could be at the border itself or at an inland facility nearby.
The UK Global Tariff
DP: And finally, tariffs – what’s the new UK Global Tariff?
KS: So what the UK has done is that currently it has to follow the tariffs set by the European Union (the EU common external tariff). Outside of the European Union, the UK, as a member of the WTO, can set its own tariffs – and it has done that for the UK Global Tariff. These tariffs apply for all 164 members of the WTO, not just the European Union. These are the tariffs that will apply from the 1st January 2021. If there is a trade deal with any country, whether it’s a European Union, or the United States for example, progress, then there will be zero terrorists within the terms of the trade deal. But if there’s no trade deal, tariffs apply if the goods come in from the European Union. What the UK is trying to do in its global tariff is to simplify the tariff. So where do you have tariffs of say 16.8%, it is simplified to a more round figure like 15%, for example. It has also liberalised or reduced tariffs in some cases to zero.
DP: So if I’m an exporter or importer can you give 3 or so pieces of advice for me, in terms of preparing for GB EU trading in Jan 2021?
KS: Communicate. Speak to your customers, speak to your suppliers and engage, because they may also be feeling uncertain as well. Secondly, understand the end to end trade journey. So, by communication and understanding of the trade journey, you can start to look at potential solutions. You can potentially use the customs grant scheme as part of your planning process with certain organisations. Further to this, look at what trading terms you’re trading under at the moment. So, for example, what Incoterms (international commercial term) are you using, what commodity classification codes are you using, who is responsible for the customs declaration to transport and these are all things that need to be considered?
DP: Kevin, thank you very much.