It looks increasingly like the European Union (EU) and the UK are heading towards a hard Brexit.
As time continues to run out, with no transition deal in sight, the deadline of 29th March 2019 looms ever more imposingly on the political horizon. If no deal is reached, the UK will leave the customs union without any transition measures in place.
Leaving the customs union was probably never a considera- tion for the British public when they voted for Brexit, but it has become the largest obstacle to trade between the UK and the EU, and means businesses on both sides of the English Channel should therefore prepare for the worst and take appropriate measures to adapt to this potential eventuality.
The customs union currently allows Dutch traders and their UK colleagues to trade in a ‘borderless’ fashion with each other. That means there are no customs formalities for ship- ping goods to and from the UK. From a customs perspective, the UK and the other EU member states are considered one country, with one border, one outside tariff and a common trade policy to deal with countries outside the Union – the so-called third countries.
This system allows for the goods destined for the UK to first be shipped to the large harbours of Rotterdam and Antwerp. They are imported into the customs union there, and are then shipped, using smaller vessels, to various ports in the UK. Likewise, UK companies can set up their continental distribu- tion in the Netherlands and benefit from the country’s storage and shipping facilities. A hard Brexit will end that flexibility and disrupt trade with the UK.
What disruptions are likely and how should businesses prepare for them?
The main disruption would be the re-introduction of customs formalities and delays, as trade with the UK becomes the same as with other third countries.
This would mean the introduction of import and export for- malities in both the UK and the Netherlands, including checks and verification, which all cause delays. Many traders will now face the responsibility for export or import declarations for
EU-UK trade. Although these, mainly electronically filed decla- rations, can be outsourced to custom agents; the importer or exporter always remains liable for all information that has to be provided to customs.
This includes information about the sales price and how that price is established, the classification of the goods with the correct tariff code, and the origin of the goods. All these elements will have to be correctly declared at both import or export even when the goods are duty free. The fees for filing declarations will add to the cost of the trade.
Traders in the UK and the Netherlands will also have to famil- iarise themselves with customs rules. Small and medium-sized businesses operating between the UK and the continent will have to face new, complex rules and regulations.
General advisors, like accountants, lawyers and tax advisors, do not usually have the expertise to deal with customs law. Advisors and lawyers, specialised in trade and customs law, can provide advice to traders on how to arrange their deal- ings between the UK and the continent.
This includes customs advice, assistance with adapting trading contracts, finding solutions for supply chain issues and training. UK traders will still be able to benefit from the extensive Dutch distributing facilities, despite the absence of a Free Trade Agreement with the EU. The use of bonded facilities will not only allow delayed import and duty payment when needed, but also provide for duty and VAT free transits to destinations outside the EU.
Imports into the Netherlands destined for the EU, will also benefit from the VAT at import system that allows for account- ing of the VAT at the VAT declaration, rather than having the importer finance the VAT at import.
McMan Ooijevaar can assist UK traders to make maximum use of the Dutch trade facilities, whatever the outcome of Brexit
This article is taken from the recent IR Digital doucment: IR GLOBAL – MEET THE MEMBERS: The Netherlands.
