Brexit has created a number of challenges for importers and
exporters. In this QAD Precision Report, we look at five ways to
simplify trade between the UK and EU.
Reports in recent weeks suggest that post-Brexit trading
relationships between companies in the United Kingdom and the European
Union have not been frictionless.
In early March, a
report in The Guardian claimed that three-quarters of British
manufacturers are experiencing delays since the UK decided to leave
the EU. Added to this is the ongoing disruption due to the coronavirus
pandemic. In addition to delays, over half of the companies surveyed
had experienced increased costs despite the UK EU trade deal.
Furthermore, more than a third stated that they had lost sales.
Figures from Germany
show the stark impact of Brexit. Germany’s federal statistics
office, Destatis, found that German exports to the UK have fallen 29
percent since the start of the year. Additionally, imports from the UK
to Germany have plunged more than 56 percent.
The UK government relaxed certain import requirements for the first
six months of the year. From 1 January, UK companies had to comply
with basic import customs laws. Companies could, however, defer
customs declarations by up to six months.
From 1 July, full import requirements were due to kick in. The UK
government has now extended
this until next January. After this date, UK companies will need
to complete full customs declarations. Furthermore, from this point
on, companies will no longer be able to defer duties.
The extension came about in response to infrastructure challenges. A
number of UK
ports have stated that they are not ready to comply with new import
procedures. Ports asked the government to delay these requirements.
Furthermore, relations between the UK and EU member states are tense.
The European Commission is to take legal
action against the UK for alleged breaches of the Northern Ireland
Protocol. Unlike Great Britain, Northern Ireland remains in the EU
Despite this, there are a number of actions companies can take in
order to simplify post-Brexit trade and shipping operations. In this
QAD Precision Report we look at five areas where enterprises can make changes.
Whether you are importing or exporting, companies must classify all
goods with the correct commodity codes.
Commodity codes are used for:
Declarations and paperwork
To calculate duties or VAT
Duty relief under a free trade agreement (FTA)
While the UK was a member of the EU, they used the EU’s codes. Now
the British government has made UK codes available.
Let’s say that you are importing EU goods into the UK, these goods
must be classified with the correct HS
code. This is a universal six-digit classification subheading.
However, you must also include any additional digits required by the
UK — using HMRC’s commodity codes.
Get the classification wrong and you could be under- or overpaying
duties. You could also be missing out on preferential duties on goods
that qualify under a FTA; or worse, claiming preferential duties on
goods that do not qualify. An incorrect classification can have a
serious impact on your bottom line, and leave you vulnerable to fines
Technological solutions can really simplify
the classification process, firstly by giving you automated
access to commodity code data and allowing you to record and capture
These tools should integrate with your system of record to build a
comprehensive item master. This captures product attributes to flag
key data, documentation and screening requirements, including
It should also allow for multiple import and export commodity codes
to be assigned to items based on country. The proper codes are then
utilized for all documentation and customs reporting purposes.
You can engage a customs broker, trade consultant or other
knowledgeable professional to perform classification on your behalf.
However, you are still responsible for ensuring that all
classifications are correct. Customs authorities will hold you
responsible, not your broker or a third party, should goods be
A second area where companies can prepare is export compliance.
Anyone shipping goods from the UK will need, at a minimum:
A GB EORI number
The commodity codes of the goods
The value of the goods
management software, you can automate critical export
Restricted party screening
You’ll also have electronic access to the Customs Declaration Service.
Without automation, critical steps can be missed. If you don’t
include all the necessary paperwork, or the correct licenses and
permits, your goods will get stuck in customs.
If you are not performing the correct trading partner screening
checks before shipping your goods, you could end up shipping your
products to someone engaged in terrorism or organized crime. That
makes you liable for fines and penalties. And if your goods are
restricted, or dual-use, that’s even more serious. The reputational
damage to your business could be immense.
But perhaps most compelling of all, is this — if you don’t automate
export management, you’ll either:
Need a much higher headcount to manually process every order, or
You’ll need to hope that you have really, really patient customers
If not, you may find them looking for alternative trading partners
that don’t regularly miss promised delivery dates.
In recent years, carriers have been extending support for paperless shipping.
This is known by various names — Electronic Trade Documents or EDT at
FedEx, Paperless Clearance or Paperless Trade at DHL, and Paperless
Invoice at UPS.
When you leverage these services, information is electronically fed
to the carrier, including:
Shipper name and address
Ship to name and address
Delivery terms (Incoterms)
And invoice line information, such as the commodity code, ship
quantity, value, origin country and so forth.
On the carrier side, paperless shipping helps them to move goods
quicker through their networks. But it has even more benefits for
shippers. You reduce manual steps, and speed up processing times. It
can also help eliminate errors as there are a number of mandatory
fields you need to complete.
However, you are still obliged to ensure that all the information you
have provided is 100 percent accurate. Therefore, it is best to
paperless shipping along with an automated export management solution.
Consolidation, also known as direct injection, zone skipping or hub
induction, is simply bundling packages together that are bound for the
This can be achieved using the consolidation offerings available from
carriers, such as UPS World Ease, FedEx IPD, DHL Breakbulk or TNT IDE.
Alternatively, shippers can manage consolidations in-house by using
the zone-skip functionality available through some multi-carrier
Shippers can consolidate packages on-the-fly, that are going to the
same destination and using the same carrier service. This helps ensure
that the freight bill is for a single shipment rather than multiple shipments.
Consolidated shipments also reduce regulatory headaches. A
consolidated shipment only requires a single customs declaration for
the entire shipment rather than individual declarations for each package.
This is good practice for all global shippers. Furthermore, it will
reduce customs hold-ups for enterprises moving goods between the UK
One of the main drivers for Brexit is that it allows the UK to sign
free trade agreements (FTAs), such as the deal signed by the UK and Japan.
Leveraging FTAs can result in significant cost savings as the duties
are reduced or eliminated entirely. If you are a manufacturer
importing raw materials or goods from an FTA eligible country, this
gives you a distinct advantage as it is less expensive to make your
products. If you are exporting into an FTA eligible country, the same
This sounds great, however, there is just one tiny, little
problem associated with this — free trade agreement compliance is
complicated and time-consuming.
For manufacturers, this process begins by pulling product bills of
material and then calculating the content to see if goods qualify.
Then they need to create and distribute supporting documentation —
Certificates of Origin.
If you are an importer, you first need to source suppliers in
countries with a reciprocal Free Trade Agreement. Next, you’ll have to
validate whether their goods actually qualify.
However, if there are any changes to your bill of material, your
suppliers, or even a small change in price, you’ll need to requalify
your products again.
There is good news, it is possible to automate Free
Trade Agreement compliance. Using software, you can qualify your
goods under any trade deal in real-time. Some software solutions can
even automatically generate, and transmit the Certificates of Origin
to your trading partners.
Free Trade Agreement compliance software also automatically creates
audit trails and archives all supporting documentation in accordance
with the agreement’s record-retention rules.
It’s also possible to run “what if” scenarios for upcoming trade
deals. This will be incredibly useful once the UK starts announcing
potential trade deals around the world and would give you a head start.
To discuss how your company could leverage any of the above, or to
trade content data, please contact us here.
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IMPACTS OF A HARD BREXIT ON UK/EU TRADE