In this white paper, which Customs Connect presented at the recent Construction Equipment Association (CEA) Conference, we provide a comprehensive overview of the impact of Britain leaving the European Union and the key risks for UK Industry. We provide some tips on how to mitigate these risks and to prepare for the impact of Brexit as much as possible.

1. Brexit and its Impact on You:
Risks, Practical Solutions & Opportunities
Customs Connect
PAUL VERRIPS
PAUL.VERRIPS@CUSTOMSCONNECT.EU

2. Agenda
• Introductions
• Brexit – where are we now?
• Future relations
• Key issues
• Current situation
• New situation
• Solutions for managing the transition
• VAT
• Summary

3. Customs Connect Introduction
• Fast expanding Pan – European Customs & Trade advisory firm of scale
• Locations: UK (Manchester, Birmingham, London), Netherlands, Belgium, Sweden
• Delivering successful projects on a largely contingent fee basis, we focus on;
• Tariff Classification
• Duty Suspensions
• Planning & Compliance
• VAT
• Recovery Audit
• Sector leading technical knowledge base
• Strategic and commercial Intelligence hub

4. Customs Connect
€141 million saved for our clients
• The wide range of services we offer are designed to maximise your profit
• We combine our expert knowledge with a dynamic approach to assisting our
clients

5. Customs Connect - Brexit
• Working with clients in UK and continent on Brexit preparations
• First hand intelligence on Brexit developments UK side as well as EU
side
• Brexit calculation model: Brexit scenarios
• Planning
Strategic advice
and practical
operational
implementation
capabilities

6. Industry Trade Situation
• EU is UK’s largest export market for equipment (41%)
• For parts EU is 2nd largest export market (29%)
• EU is UK’s largest import source for equipment (67%)
as well as parts (53%)
• UK has a trade surplus for equipment
• UK has a trade deficit for components and parts

7. Europe and UK Trade Related Challenges
(a.o.)
• Protectionism & trade war – US/China
• Global rule making: G20, G7, WTO
• Brexit and future of EU27
• Climate Change consensus
• AEO & increasing compliance and
regulation

8. Current Situation
UK-EU trade:
Customs Union hence no customs regulation, only Intrastat & VAT
UK-ROW trade:
Import/export: subject to Customs regulation Regulatory systems to be
established which may
cause blockage in the
cross boarder movement
of products

9. Transitional
• FTA / final agreement not likely to be concluded before UK exits the EU so
transitional agreement may be needed
Problem:
• Potentially difficult to agree on transitional when one does not know where to transit to….
• Options for transitional:
Tariff 0%
Temporary EFTA membership
Sector specific solutions

10. 15 Month Timeframe – Key Dates
• 29/03/2017: UK triggers art.50
• 29/03/2019: UK will leave EU
• 29/4/2019: EU Council meeting, agree mandate for negotiations
• 7/5/2017: French election 2nd round
• 8/6/2017: UK election
• 24/9/2017: German election
• Sept/Oct 2018: EU deadline deal
Onlya15monthtimeline

11. Future Issues
• FTA Issues: Origin, other FTAs/ limited ability own FTAs
• Customs Union. Issue: ECJ
• EU’s security area (EU 28 + Norway & Switzerland)
• EFTA Issues: Origin, free movement, ECJ/EFTA court
• WTO Issue: Schedules
These core areas present
numerous practical issues
whilst exposing a
competitive playing field

12. What does this all mean for
manufacturing on both sides?
• UK and EU’s aim is frictionless trade
• UK protecting UK’s interest
• EU protecting the interest of the 27 MS

13. Key Issues for Industry
• Tariffs
• Origin. Processing 3rd country parts/raw materials
• Classifications (HS code)
• Customs procedures
• UK Customs handling (CHIEF & resources)
• Logistics
• Non Tariff Barriers: Standards
All indications suggest daily
business activities will be
impacted by red tape
suggesting more efficient
compliance regimes (AEO)
may be required

14. New World Post-Brexit
UK will be outside Single Market and Customs Union
EU and UK 3rd countries for each other – divorcees even!
• New relation is unknown:
◦ Potential FTA UK/EU
◦ Potential transitional agreement UK /EU
◦ Potential tariff EU: UK origin imports subject to duties and declarations.
◦ Repeal bill: UK mirror EU customs tariffs and rates or WTO rates. EU imports
subject to duties and declarations

15. UK/EU FTA -1
• UK/EU origin goods may be duty free, still subject to customs control.
Origin of goods crucial (incl. evidence of origin)
• If no grandfather clause:
◦ ROW imports UK from preference countries: lose preference-duty
◦ UK export ROW preference countries: lose preference - duty
Regulatory clauses will
potentially impact Corporate
Earnings. Blockages in logistics
may also erode margins

16. UK/EU FTA -2
• ROW imports to UK send on to EU: double duty risk
• EU Customs rules unchanged
• UK adopting EU Customs rules day 1 exit
• Over time UK can adopt new rules.
Potential issues for FTA:
• ECJ or WTO dispute.
• Non Tariff Barriers: standards.

17. Example: Import of Finished Crane
Customs solutions minimizing duty impact and limit administrative burden:
• Customs warehousing
• Direct shipment
There are clear and deliverable
business model refinements that can
position corporations to adapt to the
most likely outcomes and become
more agile to handle unexpected
developments

18. Example: Parts Imported, Partly Processed,
Sent to EU for Assembly, Returned to UK
Customs solutions minimizing duty impact and limit administrative burden:
• Inward Processing
• Outward Processing
• Preference
There are clear and deliverable
business model refinements that can
position corporations to adapt to the
most likely outcomes and become
more agile to handle unexpected
developments

19. What can I do today?
Review Supply Chain:
• Duty costs:
◦ Classification
◦ Preferences.
• Planning:
◦ Origin
◦ Customs procedures
◦ AEO
◦ Relocation

20. Summary
• Brexit is a significant risk for companies
• Brexit process and outcome currently unclear
• Preparations to mitigate exposure can be helpful
• Origin and customs planning will be crucial
Brexit preparation should start now!

21. Value Added Tax
Legal landscape
VAT is an EU tax, ultimately governed by EU
Law
UK VAT law is currently defined by EU law,
including case law
UK VAT incorporates basic principles of EU
law – fiscal neutrality, abuse of rights
Potential flexibility on VAT liabilities and
rates?
General scope creep of the compliance
environment will demand more robust
internal business processes
Practical Considerations
Terminology – dispatch/acquisition –
export/import
Cash flow – import VAT – duty deferment
Change in reporting requirements – EC sales
lists/intrastats
Current supply chains – use of “triangulation”
& need for additional VAT registrations
VAT refund schemes – EU refund (old 8th
directive) – 13th Directive refund
System changes will be required with software
/ automation efficiency opportunities to
extract

22. Contact
Paul Verrips: Director Nordic Region & Head of EU Affairs
paul.verrips@customsconnect.eu
Mob: +32 478 460 381
Mob: +46 733 802 559
Rob Jenkins: Group Managing Director
rob.jenkins@customsconnect.co.uk
Mob:+44 (0)7970 464 325
Gavin Tucker: Director of VAT Services
gavin.tucker@customsconnect.co.uk
Mob: +44 (0)7966 250 866