Brexit: the impact on trade between the UK and the EU for franchise businesses

By Shelley Nadler

10-2020

If your franchise relies on products being imported into the UK or involves the supply of products to franchisees in the EU then, if at the end of the transition period no free trade agreement is negotiated, you could face the possibility of tariffs being introduced and increased regulatory and administrative burdens imposed related to the import and export of products.

The UK government published detailed guidance in July 2020 for traders on the trade and customs requirements to be fulfilled for trade between the UK and the EU following the end of the Brexit transition period on 31 December 2020. At that point, the UK will cease to be a member of the EU Single Market and of the EU Customs Union, and trade between the UK and the EU will generally be subject to the same requirements as those for trade between the UK and the rest of the world.

The requirements that traders must follow are set out in a detailed government “Border Operating Model”, The Border with the European Union – Importing and Exporting Goods.

As from 1 January 2021, customs declarations will be required in respect of both imports from the EU and exports to the EU, and customs duties will be payable on imports from the EU under the new UK Global Tariff. For this purpose, importers will need to determine and state the origin, classification and customs value of the goods. However, as regards imports from the EU, it will be possible to defer customs declarations on standard goods by up to six months and also to defer the payment of customs duties on such imports until the declarations are made. Importers will also need to account for and pay VAT on goods imported from the EU.

Safety and security declarations will be needed on exports and imports of goods between the UK and the EU. These will be needed for exports from the UK to the EU as from 1 January 2021. However, safety and security declarations on imports from the EU to the UK will only be required as from 1 July 2021.
Customs declarations will in any event be required for controlled goods and excise goods (including alcohol and tobacco products). There will be additional checks on all high risk live animals and plants (with a requirement to pre-notify for certain movements). Products of animal origin, including meat, milk and egg products and all regulated plants and plant products will require pre-notification and health documentation as from April 2021. However any physical checks will be conducted at the point of destination (rather than a border control post) until July 2021.

Some of the requirements foreseen in the government's Border Operating Model could be removed or reduced in scope if a free trade agreement were concluded between the UK and the EU with effect from the end of the transition period, depending on its contents. For example customs duties might be eliminated by such a free trade agreement, though insofar as they are merely reduced, the relevant arrangements on the Model will still apply.

There are a number of steps that traders can take to prepare for compliance with these trade and customs requirements. These are specified in the Border Operating Model and include the following:

  • Apply for an EORI (Economic Operator Registration and Identification) number;

  • Appoint a customs intermediary (such as a customs agent, a fast parcel operator, a freight forwarder or a broker) to carry out customs declarations and other formalities; and

  • Apply for a duty deferment account, to enable payment of customs duty, excess duty and import VAT by monthly direct debit instead of on individual consignments.