Cross border trade
Conducting a review/assessment of the following:
- Location of business and customers (including target markets) – Whether the business should relocate any part of its operations to minimise the disruption caused by Brexit.
- Trade with non-EU countries – To what extent does the business rely upon existing trade agreements that are in place between the EU and those countries.
- Trade tariffs – What tariffs would be charged on imports and exports bearing in mind that WTO rules would apply in relation to goods (as discussed above). The UK has indicated that it will set temporary tariff rates to apply for a year from 31st October 2019 (“Exit Day“) while it decides upon a permanent tariff regime.
- Other trade barriers – Consider the impact of new regulations that may apply on goods being imported/exported, goods having to adhere to certain standards as well as customs declarations and possible border delays.
- Supply chain – Restructuring the business’s supply chain may be advisable to reduce the impact of Brexit. Checking what new VAT rates may be charged on goods / services purchased will be important. Consider using different suppliers.
- Register to make customs declarations (obtain EORI number):
- Businesses trading only with the EU will be responsible for making customs declarations for cross border trade. They will need to obtain an Economic Operator Registration and Identification (EORI) number. HM Revenue and Customs uses this to identify the business and to collect duty on the goods. The EORI number may be obtained online via the HM Revenue and Customs website and, without it, the goods may not be cleared at customs. Businesses should also consider appointing a customs agent who can make customs declarations on their behalf; the alternative is to buy software that interacts with HMRC’s systems so that the business may make its own declarations.
- Businesses already trading with non-EU countries will need a UK EORI number (being a number with the prefix “GB” at the start of the number) if they do not have one already but will be able to use their EU EORI number initially. A UK EORI number will eventually be needed.
A review of any existing material contracts that are expected to run beyond Exit Day as well as new contracts and any which are up for renewal. Check the following:
- Their impact on the business’s post-Brexit strategy – Where a business is relocating its business or restructuring so that, for example, a part of the business is physically based in the EU, do existing contracts contain:
- Early termination clauses enabling the business to terminate without penalty?
- Change of control provisions, giving the other party (customer/supplier/lender) the right to terminate in the event of a change of control of the company? If so, what are the consequences?
- Break clauses in a lease, where a business is being relocated?
- Amendments required to existing contracts – For example:
- Applicable law (businesses from England will, for example, generally wish to specify that English law applies) and applicable jurisdiction (eg they may want English courts to have exclusive jurisdiction ideally). There will be uncertainty over the effectiveness of a jurisdiction clause as certain countries in the EU may not recognise a judgment from a UK court.
- Currency fluctuation – A no-deal scenario is likely to make currency exchange rates more volatile. Consider the cost implications of buying goods in a different currency from other countries where the value of sterling drops. While this may be mitigated by hedging the business’s currency exposure (through the bank), an alternative may be for the parties to agree to share the increased cost where the exchange rate varies by more than a specified percentage.
- Provisions giving the right to terminate the contract, to renegotiate or to adjust the price in certain Brexit related scenarios, for example where trade tariffs are imposed on goods, where there are delays at the border on account of changes to export/import controls or restrictions are imposed on the right to provide services.
- Data protection – Including provisions to allow personal data to continue to be transferred from the EEA to the UK (where the European Commission does not give an adequacy decision).
Assess the following with a view to devising a strategy to retain staff (by providing support) to reallocate staff to different areas and to recruit new staff to minimise disruption:
- Loss of EU rights – How the loss of the business’s right to be established in the EU, recognition of qualifications obtained by its workforce as well as the loss of freedom of movement both to and within EU countries will impact on its ability to trade with EU countries.
- Overseas personnel – The extent to which the business relies on personnel from EEA countries and Switzerland as well as UK nationals working in those countries.
- Immigration status – for existing workforce, in particular key staff.
- New UK immigration rules – The implications of the new skills based immigration system especially in relation to any lower-skilled workers employed by the business.
Consider the following:
- Data mapping – Check the flow of data from EEA countries to the UK and vice versa. This may, for example, include data on consumers or staff payroll details.
- Reviewing existing data policies
- Implementing safeguards – Establish safeguards compliant with GDPR to enable personal data to be transferred from EEA countries to the EU where there is no European Commission adequacy decision, for example, by applying the business’s own policies or having appropriate data protection clauses in its contracts.
- Supervisory authority – the Information Commissioner’s Office is the lead supervisory authority (ie regulatory body that oversees GDPR compliance) for businesses in the UK for so long as the UK is in the EU. However, from Exit Day, UK businesses processing personal data received from EEA countries will need to consider which supervisory authority they should deal with in the EEA and whether they may be able to deal with just one lead supervisory body in the EEA (as a “One Stop Shop”) where they process personal data received from more than one EEA country.
UK businesses holding and/or reliant upon EU based intellectual property rights (for example EU trade marks, registered community design rights or unitary patent rights), should check on their status following a no-deal Brexit. For example:
- EU recognition of existing EU trade marks and registered community design rights – Those held by a UK business will continue to be recognised by other countries in the EU.
- Protection of EU trade marks and registered community design rights in UK – The UK government has indicated that it will ensure that those intellectual property rights will continue to be protected and be enforceable in the UK as businesses holding those rights will be provided with a new equivalent UK right with minimal administrative burden.
UK businesses that have in place licences involving EU based intellectual property rights, should consider having them amended so that they will apply to any new UK intellectual equivalent property rights that are granted.
A review of the following should be undertaken:
- General economic impact to business – For example, exchange rates may be volatile until the relationship between the UK and EU is resolved, the UK may also experience a period of higher inflation. Consumer confidence may be a factor.
- Cash flow – The Institute of Chartered Accountants in England and Wales has suggested that more complex port procedures and border delays may result in additional working capital being tied up. Consider the following to mitigate the impact:
- Shorten payment terms in contracts with customers.
- Reduce credit given and/or increase credit received.
- Identify where costs may be reduced.
Government information tools
The UK government has provided on-line guidance on how to prepare for Brexit in the event of a no-deal which may be accessed via this link. Guidance relevant to the business is supplied by using a short series of search filters.
Where you are interested in a review of your existing contracts or wish to discuss how you may prepare for Brexit, please feel free to contact Frank Scott-Ashe in our Company Commercial Department on 01225 462871 or at frank.scott-ashe@blbsolicitors .co.uk.