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Preparing the chemical supply chain for Brexit

Preparing the chemical supply chain for Brexit

In her presentation to the Chemical Business Association’s recent Brexit Conference, Sandra Strong,  of the international trade consultants, Strong & Herd LLP, gave delegates an action checklist to help them prepare for Brexit.  This is a summary of her presentation.

It is vitally important for businesses to understand their supply chain today because, whatever the outcome of Brexit negotiations, there will be changes – and some opportunities for optimising the ways you manage your supply chains.

The Chequer’s Agreement (on 6 July 2018) suggesting a ‘third way’ represented a shift in the UK Government’s position.  At the core of this proposal, is the establishment by the UK and the EU of a free trade area for goods – but this is still only a proposal.

For some businesses, the UK being an independent country will bring about very few issues and result in further supply chain opportunities.   For others, it will require some reshaping and reassessment of current procedures to mitigate any impact on existing supply chains.

If Brexit slows the movement of goods through the supply chain – through customs, ports, logistics – it could change how stock is distributed, the network design needed to cope, and the facilities needed to hold stock.

To prepare for Brexit and assess its likely impact, companies should consider the following questions:

  1. What do you ship into the EU27, including goods moving temporarily, goods returned, shipments for and after repair, samples, exhibitions?
  2. How much do you bring in from EU27 countries (again including goods moving temporarily, goods returned, shipments for and after repair, samples, exhibitions)?
  3. What delivery terms (Incoterms Rules) do you use on EU movements to and from the UK?  Do we buy or sell at the two extremes EXW or DDP – how will the costs change if we have a customs border?
  4. Distribution set up – do you move goods out of a warehouse based in one of the EU27 countries?  Do you import from outside the EU and supply under free circulation rules into the EU27.  Do any of our UK based suppliers bring goods in from the EU27?
  5. Movement of goods – do you currently export or import by road to/from non-EU countries?  Will these movements need customs entries and transit guarantees to move about the EU27 post-Brexit?
  6. What is the commodity code number for the goods brought into the UK from the EU?  Using the existing trade tariff what import duty rate and special customs measures or licensing/ registrations apply to these commodity codes?  Do we currently pay a low or zero rate of customs duty because of an EU preferential trade agreement, for example EUR1, ATR, GSP?
  7. What is the commodity code number for the goods you send into the EU27 from the UK?  Using the existing trade tariff what import duty rate and special customs measures or licensing/ registrations apply to commodity codes?
  8. Do you export to non-EU countries that have a preferential free trade agreement with the EU and issue a preference document/ statement, for example Canada, South Korea, Mexico, Turkey, Switzerland?  What would the duty impact be on your overseas customs if they had to pay duty because UK was no longer a party to the free trade agreement?
  9. Do you issue or receive Long Term Supplier Declarations (LTSD) so that either you can issue preference documents on export outside the EU or your EU customer can use your goods to evidence their exports qualify when sold to non-EU countries?
  10. Import regulations – supplies to and from EU27/UK will be subject to customs entries and therefore will come the international rules relating to valuation rules (especially how you value free of charge shipments and intercompany supplies), rules of origin and potential impact of additional origin based duties and tariff measures such as import licenses

Each business will have its own answers to these questions, but only when you have answered each of the points will you be able to map the supply chain and understand the potential impact – not just on the flow of goods but also on additional areas such as the cost of customs tariffs.

We recommend that you begin discussions with suppliers and customers so that you can begin to explore the division of any additional costs a post-Brexit trading scenario may bring.

It is also a good time to explore other options such as buying direct from an overseas supplier rather than through an EU based distributor, establishing a closer relationship with a EU27 partner or selling direct to non-EU countries to provide additional support to the overall income of the business.

Strong & Herd LLP

Strong & Herd LLP is a widely respected consultant in all areas of International trade. S&H LLP are a ‘one-stop-shop’ for any international trade question or export training, export support, import training and customs compliance requirement.  Staffed by highly skilled associates working in specialist areas such as Excise, Customs computer systems, DEFRA requirements, UK/EU VAT, finance and payment methods, dangerous goods, USA ITAR rules, managing agents and distributors.  S&H LLP supports small, medium and large companies helping to manage exports and international trade. Strong & Herd LLP also provides an outsourced shipping office customs compliance function.