Businesses have been told for some time by HMRC that the trading relationship between the EU and the UK will change in a post-Brexit, post-transition environment. In certain circumstances, these changes are likely to be profound.
In previous articles we have covered the fact that no matter what trade deal is struck in the future, both importers and exporters will face new documentary requirements and the potential for physical customs checks as customs easements are abandoned.
In the first instance, businesses in the UK and the EU may find themselves having to obtain Economic Operators Registration and Identification (EORI) numbers in the relevant jurisdictions to which they export and import. For example, this may mean appointing a VAT agent in the UK for EU firms exporting to the UK and similarly UK firms obtaining an EORI registration number in the EU for UK goods moving to the EU.
However, complications arise when we consider the legal requirements placed on businesses in the EU jurisdictions to be allowed to obtain EORI numbers in those countries. Having a local VAT number maybe insufficient to obtain an EORI. The parameters for obtaining an EORI in most EU jurisdictions appear more complex and involved than in the UK. This could prove exceptionally problematic for UK companies seeking to act as both the exporter and importer of record.
Many EU fiscal authorities insist on some form of business activity or entity in the relevant jurisdiction to be allowed an EORI registration. While this problem may, in some circumstances, be circumnavigated in the EU by appointing a locally-engaged Fiscal Representative, this can be just as costly as forming a viable EU entity.
Additionally, using a local Fiscal Representative means that the level of representation for customs purposes will change from ‘direct’ to ‘indirect’. This brings higher costs to the importer, just in the same way as it does when using different domestic and international trade terms (INCOTERMS) and certain Customs Special Procedures.
Companies are advised to look closely at their current intra-EU supplies and methodology and consider what measures to take to obtain the necessary authorisations and registrations to ensure business continuity.
If you would like to discuss any of the elements explored within this article, or have wider questions about how Brexit will affect you or your business, please contact Simon Sutcliffe or one of the wider Brexit team.