The United Kingdom is due to leave
There are currently three possible scenarios for a Brexit.
The UK agrees to a withdrawal agreement and a "soft" Brexit. In this case, the UK would remain for a transitional period in the customs union and Northern Ireland would also remain in the EU single market.
Current assessment: Unlikely
Unless the exit agreement is revised significantly (and even then), UK approval is almost excluded.
If the EU and the UK are unable to reach an agreement by 31 October 2019 (previously 29/03/2019), the United Kingdom would leave the EU unregulated. This would make the UK a "third country" and the rules of the WTO apply to goods from the United Kingdom and to goods from the EU, the rules of the United Kingdom apply to the EU. This would, inter alia, directly lead to the imposition of duties and customs controls on both sides. However, the United Kingdom has expressly opposed an unregulated exit.
Current assessment: Low probability.
But the risk of a “hard” Brexit persists.
There will be an unregulated Brexit. However, this "hard" Brexit is being softened by individual agreements and transitional arrangements between the EU and the United Kingdom. For example, the imposition of customs duties and customs and personal controls may initially be restricted, air transport between the EU and the UK regulated, and a transitional phase for EU citizens in the UK and Britain in the EU pending the final determination of their status be created. The UK Government has already announced that it will apply simplified customs procedures in the event of a No-Deal-Brexit. It is unlikely that Britain will agree to the withdrawal agreement in this form. Instead, there will probably be several individual agreements governing different areas.
Current assessment: Most likely.
The Brexit will affect most of your business areas and a variety of different aspects need to be considered. The most important points are described below. The following statements apply to a "hard" Brexit or after expiry of a withdrawal Agreement.
For exports to the United Kingdom, the UK government has announced that initially the same standards apply as in the EU. This also applies to the CE marking. This should gradually be converted into British standards. In the long run, British standards will have to be considered.Imports are subject to EU standards. In the case of a "hard" Brexit, British conformity assessments lose their validity.All CE markings issued by UK institutions lose their validity in the event of an unregulated exit and require re-certification. Otherwise these goods may no longer be placed on the market in the EU.
By leaving the Customs Union, both the EU and the UK will impose tariffs on imports.Depending on the industry and the goods, additional accompanying documents will be required and higher requirements must be observed. This applies, inter alia, to the agri-food industry. The customs tariffs for EU imports have already been published by the British Government on the following Website:
The EU specifications for import and export can be retrieved via the TARIC-database, for example.
Those who have not yet had the pleasure of dealing with the codes for the classification of goods should do so now.Much more important than the actual tariffs and underestimated is the additional work and time. This is especially true for small and medium-sized companies.
Leaving the jurisdiction of the European Court of Justice will have a serious impact on EU-UK business relations. This point is definitely underrepresented in the current debate. Various laws and ordinances will no longer apply and replacement regulations do not yet exist for the most part. Thus, EU law, which is binding for all member states, will no longer apply in the United Kingdom. The Brexit will significantly increase legal risk, legal enforcement difficulties and related enforcement costs. Within the member states of the EU, the judgments of the individual countries are mutually recognized. This will no longer be the case after leaving the EU in this form. The recognition and enforcement of judgments will take much longer and become significantly more difficult.
With a withdrawal from the EU, Great Britain is no longer part of the intra-community VAT system. Imports from the United Kingdom are subject to import sales tax on the border crossing of the goods. The United Kingdom will also impose import sales tax.
After Brexit, British goods are no longer considered EU goods. In order for an EU product to be classified as an EU good, no more than 40% of the components of the final product should originate from non-EU countries. This origin characteristic must be proven by means of a preference calculation.
It is important for EU companies to verify that they are affected. If so, supply chains need to be adapted and new suppliers found in the EU. Stocks of British precursors must have been processed until Brexit.
Many companies in the UK could be affected by the prefenratial origin regulatories, especially those who export high quality intermediates to the EU, such as the supplier industry. It is urgently advisable to look for new export markets outside the EU.
EU trademarks and EU designs lose their protection in the United Kingdom after leaving the EU. In this case, a national registration may have to be made in Great Britain. This can already be done now.
All insurance policies and contracts that are directly or indirectly affected by the changed relationship between the EU and the UK should be reviewed and revised. This also applies to the registered office of the insurance company. Due to the unclear situation, it is advisable to prepare several variants for selection and to decide at short notice for a suitable contract.
In addition, especially in the case of a Brexit without exit agreement, it should be taken into account that a devaluation of the British pound against the Euro is to be expected. This means that EU goods are becoming more expensive in the UK and British goods are becoming cheaper in the EU.
Trade risks and trade costs between the United Kingdom and Germany increased significantly by more than 6%-points in the third quarter of 2018 for the manufacturing industry. This increase has been exceptionally strong for a third quarter. The fourth quarter remained stable. The reason for this development is the uncertainty regarding to future trading modalities. Previously, optimism had prevailed that an exit agreement would be a reliable and sustainable BREXIT agreement. The drop in trading costs in Q1 and Q2 2018 also suggests that many companies have moved up their trading activities. It remains to be seen how trade costs and risks will continue to evolve. A serious prognosis is currently not possible given the unclear circumstances. An increase is definitely to be expected. (The calculation was based on data from Destatis, ONS and Eurostat / ECB.)
In view of the current situation, Elcando GmbH would like to support all companies affected by the Brexit in their planning and in
adjusting their strategy. Elcando GmbH will tell you within a very short time which countries are
for your foreign trade or relocation.
Do not hesitate to ask for advice.
Phone (+49) 40 - 4920 7474
Fax (+49) 40 - 4920 7475