Brexit Opportunities of a Different Kind

The ongoing debate about Brexit continues to fill newspaper columns TV and radio time and to occupy the minds of people involved in international trade. While the controversy remains, there are at least some positives that can be anticipated.

Bill Williamson, Director UK Customs, has told us that the Union Customs Code (UCC) gives a solid foundation for post Brexit UK Customs law.  The draft is a virtual cut and paste of the UCC with references to the EU arbiters of Customs law changed to the UK. We know that Authorised Economic Operator (AEO) provision will remain and we can bet that mandatory guarantees for potential Customs debts will remain since Duty and Taxes collected on import will be UK Government money. The Treasury will need confidence that UK money will not be put at risk.

What opportunities?

AEO Mutual Recognition Agreements (MRA)

The World Customs Organisation (WCO) Authorised Economic Operator (AEO) programme under the WCO Safe Framework is internationally seen as a central element for Customs-Business Partnerships. Under the WCO’s SAFE Framework, customs administrations are called upon to seek partnerships with business and between each other to secure and facilitate trade.

Mutual recognition of AEO programmes (MRA) will lead to the globalisation of supply chain security and compliance standards and is valuable for those companies seeking true global supply chain security and compliance benefits.

On exit from the EU the UK not only loses access to over 50 Free Trade Agreements it additionally loses three MRAs on AEO formed with the USA, China and Japan (and MRAs of a lesser form with Norway and Switzerland).

MRAs save time in freight movement  because your goods will be less likely to be delayed by customs at import and export. You will have more certainty of speedy movement and more time spent in movement is money lost to business.

A major thrust in WCO Safe Framework is the prospect of forming MRAs with other countries who have implemented the WCO Safe Framework.

The WCO Compendium for 2018 tells us that:           

  •  77 Operational AEO (or equivalent) Programmes are in place across the world.

  • 17 AEO programmes are under development.

  • 57 MRAs are concluded and 35 MRAs are being negotiated in addition to four plurilateral MRAs being negotiated.

Given that the UK currently only has access to three AEO MRAs (and MRAs of a lesser form with Norway and Switzerland) via EU membership we can see that on exit from the EU there is massive potential to form MRAs with other countries. The countries range from the developing markets of Africa and South America to the markets of India, the UAE, Saudi Arabia and East Asia plus our friends in Canada, Australia and New Zealand.

The UK will have AEO in place, based on WCO Safe Framework and the EU model. This puts us in the right situation for reformation of the MRAs we currently have via the EU with Japan, China and the USA and formation of more rapid MRAs whilst we are also hoping to enter new markets on export of our goods and negotiate Free Trade agreements which will take longer.

MRAs save time in movement of freight, add certainty of speedy delivery and therefore save money for exporters.

WCO Customs Compliance Programmes:

The WCO also looks for creation of customs compliance programmes by customs administrations. Such programmes will be based around the compliance parts of the WCO Safe Framework. The development of a compliance programme, whilst not giving the opportunity to create an MRA with another Customs administration, starts the process toward MRA availability.

The UK already has a Compliance arena based on the UCC to be subsumed into UK Customs law post Brexit. The UK covers the vista of customs scenery from electronic submission of declarations, risk-based border examination selection, risk based post-import audit to provision of Customs facilitations granted according to compliance history and the capacity of the business to deliver the conditions agreed under the granting of the facilitation.

This gives the UK an even greater base from which to negotiate MRAs at pace whilst lengthy free trade negotiations take place over a longer period. UK exporters will at least benefit from the savings created by an MRA.

World Trade Organisation Trade Facilitation Agreement (TFA):

The TFA came into being in February 2017. It is of international impact.

In many ways it ties together the above and reinforces AEO schemes and enhanced customs compliance. It also looks toward developing countries and economies from which the UK may benefit in free trade agreements. Countries are encouraged to use common standards in customs control ensure that their authorities and agencies responsible for border controls and procedures dealing with the importation, exportation, and transit of goods cooperate with one another.(the Irish Brexit problem may have a solution in this or at least some way forward).

The WCO have fully noted the TFA and now reflect it in name and style as evident in the WCO Compendium for 2018.

At least in this field the UK is in a very strong position to move positively post Brexit since the components are in place to benefit.

Where a business should go now

The influence of Brexit will have many variations on UK manufacturing, importers, exporters and logistics providers.

A clear path toward protection of such businesses is gaining AEO accreditation, particularly with Security and Safety provision (currently AEO S); but given the further emphasis on Compliance in Customs matters AEO Customs Simplification (AEO C) is a good addition.

With those accreditations behind your business you will benefit in due course from less customs interference, faster movement of your goods, easier access to other facilitations, reductions of guarantee costs and an enhanced corporate image.

Article written by Tim Cornell - Associate of Strong & Herd LLP

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