We export exemplary coffee to England to explain customs procedures before and after the brexite
Impact of Brexit from 1 January 2021 – will it all be different?
A free trade agreement has to be negotiated between the EU and the UK by January 2021 in order for trade to continue smoothly. If no agreement can be reached, there will be a hard Brexit. The United Kingdom will then be treated by the EU as a third country and this will change the way in which goods pass through customs.
Using our example of a consignment of Bremen coffee and one of British yeast spread, we will now show what this would mean in practical terms. Our example assumes that there is no agreement at all on customs tariffs. See how customs rules change in a scenario where the United Kingdom becomes a third country:
’UK as third country’ export scenario
This would mean that the coffee from Bremen destined for London would be despatched to a ‘third country’.
1. The coffee company would have to submit an electronic declaration to customs in Bremen via the internet, stating that the consignment of goods was being exported to the UK, and then await an electronic approval from the customs authorities. To this end, the company concerned would have to apply to the customs authorities for an EORI number (economic operator registration and identification number). The export notice (Ausgangsvermerk), which is issued electronically, would serve as proof that the consignment had been exported.
2. The coffee company in Bremen would issue a commercial invoice stating that the goods were exported from the EU and therefore exempt from VAT. The commercial invoice would have to include the following details: brand, identification numbers, quantity and type of packages, exact description of goods, weight and content of each package, and the country of origin. The information would also have to include the FOB costs (to port of shipment) and, if used, the CIF costs (cost, insurance and freight to port of destination).
3. Documentary proof of the origin of the goods, i.e. a certificate of origin issued by a chamber of industry and commerce, could also be required.
4. The goods, together with all accompanying documentation, would be transported by a freight forwarder using the TIR carnet system. This system facilitates customs declarations by the contracting parties and allows the goods to be transported through transit countries without these countries levying import taxes or duties. However, a security needs to be lodged with an association that provides the necessary guarantee.
5. In the UK, the coffee would be declared to customs for import purposes and checked at the border. When the goods cross the border, the relevant import VAT in the UK would be become due for payment. The goods would then be subject to customs duty at the third-country rate – expected to be 5 to 6 per cent (the average EU rate of duty for goods is 4 per cent). However, within the World Trade Organization (WTO), rates of duty can be up to 40 per cent.
6. At the border, the labelling of the goods would be checked to ensure compliance with UK law – when imported for the first time, the goods would be inspected by the British authorities to make sure they complied with all requirements, such as hygiene and consumer protection regulations.
7. The goods would be paid for by international transfer, for which charges would apply.
This would all amount to additional time and organisational effort for our coffee roaster in Bremen.
As the exchange rate would no longer be fixed within the European Monetary Union, this could give rise to uncertainty in relation to the price of the goods. If the pound sterling were to fall in value, goods from Germany would become more expensive for British customers, as a consequence of which German products could lose some of their appeal. The new customs duties payable on the goods would also make the coffee more expensive in the UK.