It’s not too late for Brexit preparations but companies should ‘move quickly’

We may live in uncertain times but one thing is for sure – Brexit is happening on January 1st. The UK already departed the European Union on January 31st of this year but the interim Brexit-transition period is now drawing to a close. Are businesses north and south of the Border ready?

According to Giles O’Neill, manager of Enterprise Ireland’s Brexit unit, that’s the “$64,000 question”. For some businesses, he says, the realities of this new trading relationship with our neighbour are just dawning.

“The stark truth is that companies, whether importers or exporters, are exposed on a number of different fronts. And what some companies are missing is that whether there’s a deal or no deal, in relation to the requirement for customs declaration from January 1st, that’s not going to change,” says O’Neill.

Come the new year, any product travelling to, from or through the UK will need to have a customs declaration. This might sound straightforward but, as O’Neill warns, in practice it won’t be.

“As Great Britain becomes a third country and [with] all the goods we move backwards and forwards into GB on an annual basis, there will need to be something like 20 million customs declarations. And that’s coming from a current level of 1.7 million. That’s the scale of it.”

Enterprise Ireland has carried out regular research to assess business preparedness for the new realities of trading that Brexit will bring. When asked what their priority is as they prepare for Brexit, the number one answer from businesses has consistently been "customs and logistics". When asked if they are ready, just four in 10 companies reply that they are. O'Neill says this is "worrying".

“Companies have got to act and they have to decide who is doing their customs declarations. If they’re not used to dealing with third countries, it’s going to require quite a bit of training.”

Businesses may also mistakenly believe their logistics companies will take on this additional burden, he says. "We say, 'Are you sure? Have you asked them? Have you given your logistics company all the information they need? If not, then they won't be able to do what you expect them to do.'" For example, traders will need to register for an Economic Operators' Registration and Identification number in all jurisdictions as required, including Ireland, Northern Ireland and Britain, and this will need to be supplied to their logistics companies as soon as possible.

Distraction

Carol Lynch, partner at BDO Customs and International Trade Services, says the Covid-19 crisis has served to distract some businesses from their Brexit preparations. She says a significant proportion of companies, particularly SMEs, remain unprepared for Brexit because they were awaiting the outcome of trade talks or because they simply do not understand customs.

“I certainly see that a number of companies are still grappling with the Covid pandemic and have not focused on Brexit preparation but there is no time to waste,” she warns.

BDO is working with a number of companies to advise them on the last-minute steps they should be taking to ensure as smooth a transition as possible to this new way of trading.

“We are telling them to look at your supply chain to confirm what you are importing from the UK or exporting to the UK and also what is transiting through the UK, as they may need to look at alternative sources of supply where practical. Companies should also ensure they have a procedure for the new import and export rules and staff should be taking training courses to upskill.”

Like O’Neill, Lynch says companies must determine if they are going to self-file their customs declarations. Her advice? To engage an experienced customs clearance agent.

Building additional time into the supply chain is also critical as teething problems in the early days are inevitable, she says.

“The initial problems will be companies entering customs declarations with incorrect information and therefore not being able to get through customs or enter the ports or get on to the ferries. This will happen either through a lack of understanding of how to complete declarations or using inexperienced clearance agents. Customs declarations entail complex tax paperwork and require substantial experience to complete.

“My view is that over half of companies who are new to importing and exporting will be affected by this. Drivers could end up parked up for a considerable time waiting for clearance.”

This is echoed by Aebhric McGibney, director of public and international affairs with Dublin Chamber of Commerce, who can foresee significant logistical challenges at Dublin Port.

“Brexit is going to change considerably the way in which goods and people move through Dublin Port. It’s unfortunate that the changes required by Brexit, with large amounts of space going to be required for checks, is happening at the same time that Dublin Port is in the middle of very important expansion works.”

In the short term, McGibney says it’s likely additional checks will result in goods taking much longer to travel through Dublin Port. “That’s going to have obvious knock-on effects for businesses transporting goods or relying on goods coming through the port, both in terms of additional costs and time. It’s important that a system is identified that will minimise this impact going forward,” he says.

Adjusting

The immediate challenge for many firms will be adjusting to the new systems and processes that will apply to trading goods with the UK, says Glenn Reynolds, head of VAT and customs with KPMG Ireland. "This will include the haulage and transport and related supply chain challenges that may emerge at the ports or in using the UK as a land bridge to other EU countries. Understanding the implications and detail of any new rules will also be fundamental as will be understanding what opportunities may be created. Beyond that, it will be managing the impact of a new trading relationship and dealing with issues such as potentially more volatile exchange rates."

According to Aidan Gough, director of InterTrade Ireland, all firms will be forced to adjust to a new market environment. "They need to recognise the impact this will have on their day to day activity, adjustment to systems, supply chain, potentially changes to managing data protection and the movement of data, all of which will take time and effort on behalf of firms to settle into this new trading environment," he says.

Gough notes that while the Northern Ireland Protocol guarantees the free movement of goods there are many important cross-Border transfers and flows that are not covered by the protocol such as the transfer of data and trade in services. “There are also route-to-market issues associated with processing and supply chains that could negatively impact on competitiveness as NI goods are not considered as EU and therefore are outside EU trade agreements,” he says.

Understanding supply chains and risks within them, knowing how to import or export and assessing where vulnerabilities lie should be on the checklist for any business as the Brexit deadline approaches, Gough says.

For businesses feeling at sea as 2020 winds to a close, there is plenty of practical guidance as well as financial assistance available. In October, Enterprise Ireland launched an online Brexit Readiness Checker, which produces an individual report for companies within minutes. The report also provides resources and information from a range of State agencies with practical advice on what businesses need to do.

InterTrade Ireland offers a Brexit advisory service, as well as practical supports by way of voucher funding up to £2,000 or €2,250. "This includes support for example in the area of customs, supply chain, people, GDPR and general Brexit risk assessments," Gough says.

As the countdown continues, is it too late for those companies that remain unprepared? No, it isn’t, says Enterprise Ireland’s O’Neill, but he warns that they will have to “move quickly”. And while he cautions against panic, he says the full extent of the logistical challenges imposed by Brexit will only become clear in the new year.

"There's been a huge amount of work done all over Europe to ensure that systems, processes and procedures all work but testing that in real-time is going to be challenging."