The only certainty we have in the whole Brexit soap is that there is no certainty. The two sides are still facing each other and there is no deal, let alone a rapprochement. How should you, as a company, prepare for this now?
Leon Kanters, Brexit Specialist at KPMG, finds the impasse a 'frightening' situation. There seems to be progress in the area of fisheries, but differences of opinion on the level playing field for the internal market are unbridgeable. The European Union does not want British companies to receive unfair state aid and compete with European companies. The UK still finds it ridiculous that the EU has anything to say about how British business might be supported.
Prime Minister Boris Johnson is already warning his countrymen that a no-deal Brexit should be assumed. In the meantime, the European Commission is working on a contingency plan if there is no agreement by 31 December. There are rumors about a "review clause" in a new Free Trade Agreement. This could be a solution for a unbridgeable topics, but would create – if we understand it correctly - a kind of temporary trade agreement, resulting really in a never ending story.
Doubtful period of time
In the UK, after Brexit fatigue, there is now Brexit panic, says Rebecca Okuda, Director Head of Trade & Customs at KPMG UK. How on earth are companies supposed to prepare for this? There are so many questions, for example about what paperwork is needed. There are big concerns about that.
Because of this questionable period, from a supply chain perspective too, everyone is waiting for the final verdict. Johan Smits, Partner at KPMG Strategy & Operations Supply Chain Lead: 'We can see that the predicted hustle and bustle of goods has come about sooner than expected. There are now more than 2,000 extra truckloads a day being shipped from Calais to the UK. Shippers are screaming for wheels. Alternative routes via Rotterdam have also become busier. It results in higher turnover for European companies, but that probably means that there will be a decrease in the first quarter of next year'.
Double import duties
In a number of cases part of a production process takes place is either place in the EU or in the UK. Nowadays this can be covered as intra community supply delivery. As of 1 January the UK will no longer be part of the EU and this transactions transfers from in intracommunity supply into an export. This may cause strange situations especially when this is an ongoing process on an almost daily basis. The exporters need to apply for an outward processing relief allowing them to export raw materials and re-import a finished or semi-finished product with partial exemption of customs duties. But in some cases that is just a part of the solution. In many cases the exporter or any other in the EU established company need to apply "for "prior importation" too. With prior importation the authorization holder can import the finished or semi-finished product before the actual export of the raw material has occurred from the EU. Many companies did not apply for this. Why this is crucial clarifies
Kanters: 'The reason why you have to apply for this is simply the fact that when you export your material on New Year's Eve at 21:00, it is still an EU good. And when your finished product comes back from the UK on 1 January, it turns into a UK product. A straightforward Outward Processing Relief would not help you. Only an outward processing relief including prior importation would help you to claim partial exemption of customs duties'.
This was KPMG's sixth Brexit Update Call, which normally takes place every fortnight and lasts half an hour. However, the next one will take place on 23 December. Call topics include Sap, import, labour, supply chain and financial services. Please register in Brexit: Same book – Final chapter!