5 solutions to solve your BREXIT related customs issues

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You are concerned by Brexit if ...■ You sell goods or provide services in the United Kingdom or in the European Union.

■ You buy goods or use a service provider established in the United Kingdom or in the European Union.

■ You have a subsidiary in the United Kingdom or in the European Union.

■ You have European employees in the United Kingdom or British employees in the European Union.

■ You transport people or goods.

■ Your business is based on the protection of intellectual property rights active in the United Kingdom or in the European Union (patents, trademarks, geographical indications, plant variety certificates, etc.).

■ You are involved in a European or British project.

■ You perform missions in the United Kingdom or in the European Union.

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At midnight on 29th March 2019 (Brussels time), the United Kingdom will become what EU treaties define as a ‘third country’ towards the 27 EU members.

This major event will have a certain impact in terms of cost and customer experience.

Our teams are ready to provide you with optimised solutions and to limit the consequences of this significant disruption: engineering of physical and information flows, design and implementation of operational solutions.

In this communication, discover with us the solutions that will allow you to solve the major customs issues related to Brexit.

O. THOUARD, GEFCO’s Customs and Tax Director

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Brexit main milestones and the consequences to your supply chain

end of negotiations

BREXIT: 29th March 2019

24th November 2018:

DEALBut no ratification

by UK and EU Parliaments

SUPPLY CHAIN DISRUPTION

HARD BREXIT

DEALAnd ratification

by UK and EU Parliaments

SOFT BREXITTransition period up

to 31st December 2020

FINANCE AND CASH

SERVICE LEVEL

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Brexit: state of negotiations and options for the futureUnited Kingdom withdrawal agreement negotiated between Theresa May (British Prime Minister) and Michel Barnier (Chief Negotiator for the EU-27) has been validated by the governments of the EU countries on the occasion of an exceptional summit on the 25th November 2018.

The agreement will also have to be ratified by the two Parliaments, European and British.■ If the agreement is ratified, we will be in a position of a «Soft Brexit» which will open

a transition period until 31 December 2020 (unless further agreement of extension). During this period the current regulations apply.

■ If the agreement is not ratified, we will be in a «Hard Brexit» situation as of 29 March 2019 at midnight (Brussels time).

The agreement validated by negotiators of both parties (Theresa May and Michel Barnier) provides:■ The opening of a transitional period during which each party must strive to put in place

a viable agreement, in particular for the management of the Irish border.■ The possibility of requesting an extension of the transition period (maximum 2 years)

in the event of disagreement before 30 June 2020.■ At the end of this period, if no solution is found, the withdrawal agreement provides

for a «backstop» solution that would include the whole of the United Kingdom in the European Customs Union.

Whatever the outcome, “Hard Brexit” or “Soft Brexit”, the United Kingdom will be a third country on the 30 March 2019. Border controls will be restored on 30 March 2019 in case of a “Hard Brexit” or at the end of the transition period in case of a “Soft Brexit”.

Some solutions presented in this document will be valid in both cases, as stipulated in each of the pages:

Note that when the United Kingdom leaves the European Union, the country will also exit the common market, which will have implications that go well beyond the customs issues addressed in this document.

HARD BREXIT SOFT BREXIT

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GEFCO’S EXPERTISE IN CUSTOMS AND TAX REPRESENTATION: KEY FIGURES■ A central customs and tax

engineering department

■ AEO Certification (16 countries)

■ Customs broker status since 1971 (France)

■ 230 customs experts

■ 350,000 customs declarations per year

■ 25 years of experience in tax representation

■ Accompanying more than 150 customers

■ 1 central management for Brexit issues

Optimise and simplify your customs operations from and to the United KingdomTHE RESTORATION OF THE CUSTOMS BORDER BETWEEN THE UNITED KINGDOM AND THE EUROPEAN UNION IMPLIES FORMALITIES AND CUSTOMS AND NON-CUSTOMS CONTROLS (SANITARY AND PHYTOSANITARY CONTROLS). FAILURE TO COMPLETE THESE FORMALITIES CAN LEAD TO BLOCKAGES AND INTERRUPTION OF YOUR SUPPLY CHAIN.

GEFCO offers you solutions to manage the complexities of Brexit and to simplify and optimise your supply chain:■ Support for customs and tax (VAT) diagnosis of your company with regards to Brexit

and implementation of the best customs organisation possible.■ Choice of customs clearance locations: at customer’s site, in the warehouse, at the border

or at a logistics provider.■ Implementation of appropriate customs authorisations to carry out import-export

declarations, transits and customs zones.■ Implementation of EDI solutions to accelerate and optimise customs clearance.

Suppliers Hub Warehouse Plant Distribution centre

Points of sales

SALES

SALES

SALES

HARD BREXIT

SOFT BREXIT

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After Brexit, crossing the border will affect the fluidity of your business if all obligations and regulations are not met.

Penalties, blocked goods, customs and fiscal controls, can disrupt your physical flows and impact your cash flow.

GEFCO Group AEO certified customs expertise enables you to benefit from a solid customs culture with robust processes in order to move towards zero risk: support and advice for the identification of the appropriate INCOTERM®, support and assistance with the implementation for customs compliance are all areas in which GEFCO can help to smooth the border crossing in full compliance.

O. THOUARD, GEFCO’s Customs and Tax Director

Ensure fully compliant border crossing■ Support and advice to identify the good INCOTERM®

- With the EXW, the export declaration is the responsibility of the buyer. In the event of a tax audit, you will not be able to justify your export duty-free sale.

- With the DDP, the import declaration is the responsibility of the seller. You therefore do not control the risks related to document flow and will be responsible for non-compliance.

In both cases, the seller and the buyer do not control their customs operations in a country where their companies are making sales. It is therefore strongly recommended not to use these INCOTERMS® in future relations between the United Kingdom and the European Union (except in case of VAT registration of the country of import or export).

Experts in customs since 1971, our GEFCO Customs & Tax teams advise you on the most appropriate INCOTERMS® according to your flows in order to optimise and secure your operations from / to the United Kingdom.

■ Support and help with document compliance Today, you issue tax-free intra-community sales between the United Kingdom and the various countries of the European Union. After Brexit, you will issue export tax free invoices for each shipment. In the absence of correctly worded commercial documents, these invoices can be the object of a recovery of VAT during a fiscal control.

In the context of this complex regulatory evolution, our dedicated teams are at your side to guarantee the appropriate support and compliance of your operations with international regulations.

EXW DDP

HARD BREXIT

SOFT BREXIT

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BUSINESS CASES■ GEFCO exports for an

automotive equipment supplier located in Germany under the Outward Process Relief (OPR) regime automotive parts to Macedonia. The processed parts are re-exported from Macedonia to Germany.

Payment in Germany of customs duties on the value of the finished product after deduction of the value of the parts exported to Macedonia.

■ GEFCO has set up an Inward Process Relief (IPR) regime for the pharmaceutical industry in Serbia for the manufacture of medicines in the Czech Republic before re-export to Serbia.

Exemption from duties and taxes on raw materials imported into the Czech Republic.

Optimise the payment of your customs dutiesIN CASE OF THE ABSENCE OF A TRADE AGREEMENT BETWEEN THE UNITED KINGDOM AND THE EUROPEAN UNION, YOU WILL HAVE TO PAY THE CUSTOMS DUTIES AT THE FULL RATE ACCORDING TO THE BASIC TARIFF RULES OF THE WTO. SIGNIFICANT FINANCIAL IMPACTS ON YOUR BUSINESS ARE EXPECTED.

GEFCO offers customs engineering services and the implementation of Inward or Outward processing solutions in the event of a return flow of goods between two separate customs zones. These solutions allow you to eliminate or reduce significantly the customs duties to be paid at the border crossing.To illustrate this problem, here is an example of Inward or Outward Process Relief solutions that we can implement between the United Kingdom and the European Union.

HARD BREXIT

Import on return under OUTWARD PROCESS RELIEFPayment of duties and taxes on value added alone resulting from the transformation in the United Kingdom and not on the total value of the finished product

Export under OUTWARD PROCESS RELIEF

EUROPEAN UNION UNITED KINGDOMTransformation/Processing

Import under INWARD PROCESS RELIEF Exemption from duties and taxes on goods imported and intended for processing / machining

Export under OUTWARD PROCESS RELIEF

1 2

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BUSINESS CASEBackground: an Indian company wants to import, store and sell goods in 3 European Union countries using INCOTERM® DDP.

GEFCO solution:■ Flows engineering ■ Design and implementation

of a complete solution ■ Registration of the Indian

company for VAT in Germany, France and the Czech Republic

■ Optimisation of sea and road transport

■ Customs clearance exempted from VAT on import

■ Storage in each of the 3 countries

■ Sales to the end customer

Customer benefits: ■ Securing logistics with

a door-to-door solution■ Financial gain with the

optimisation of transport costs and the exemption of VAT on import

■ Acceleration of commercial activity in Europe

Have an expert handle your VATBREXIT WILL GENERATE CHANGES TO THE VAT RULES THAT WILL NOTABLY IMPLY THE OBLIGATION TO ENTRUST THE ADMINISTRATIVE FORMALITIES OF FISCAL REPRESENTATION TO AN ESTABLISHED COMPANY (EXTERNAL SERVICE PROVIDER, SUBSIDIARY ...) AND CAUSE A FINANCIAL AND CASH IMPACT.

There is a real risk for companies established in the United Kingdom or in the European Union not recovering VAT.

For more than 25 years, GEFCO has supported its customers in the management of their VAT obligations in the European Union and outside the European Union*: regulatory watch, engineering and design of optimised logistics schemes, registration with local tax authorities, support during tax audit, coordination of operations by a single contact, reporting declarations, payment and recovery of VAT, recovery of VAT on your travel expenses.

This scheme is also valid for companies established in the 27 countries of the European Union and having or needing a VAT number in the United Kingdom.

* Valid in some countries only, according to local VAT legislation.

UNITED KINGDOM EUROPEAN UNION (27) OPERATIONS THAT MAY REQUIRE A REGISTRATION FOR VAT PURPOSES

Import (Tax free according to conditions)

Storage

Local purchase

Local sales

Intra-Community purchases excluding tax

Intra-community sales excluding tax

Export

VAT NUMBER MANAGED BY THE COMPANY ESTABLISHED IN THE UNITED KINGDOM

VAT NUMBER MANAGED BY A TAX REPRESENTATIVE ESTABLISHED IN THE EUROPEAN UNION (27)

BEFORE

AFTER

HARD BREXIT

SOFT BREXIT

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25 YEARS OF EXPERIENCE IN MANAGING REUSABLE PACKAGING■ At the central level: design,

optimisation, planning & monitoring of international packaging flow solutions

■ At the regional level: collection and maintenance

■ At the local level: on site auditing, training & support, local monitoring

23 DEDICATED REUSABLE PACKAGING

CENTRES

1,700 CUSTOMERS

6.5 MILLION OWN PACKAGING

UNITS

Benefit from smart solutions for your reusable packagingBREXIT WILL GENERATE COMPLEXITIES IN THE MANAGEMENT OF REUSABLE PACKAGING WITH CUSTOMS OBLIGATIONS AS WELL AS A POTENTIAL FINANCIAL IMPACT ON YOUR ACTIVITY.

GEFCO Customs & Tax teams will support you in designing and monitoring optimised solutions for post-Brexit management of your reusable packaging: implementation of temporary import-export solutions exempting you from customs duties, establishment of material accounting, implementation of web tracking solutions for our packaging.

Conditions for implementing the optimised scheme: ■ Capacity of all actors to follow the packaging and to issue, for each empty and full packaging

flow, invoices including the number of packaging■ Be responsible for import and export material accounting

SITUATION WITHOUT OPTIMISATION

OUR TEMPORARY IMPORT / EXPORT SOLUTIONS

Export

Export

Import

Temporary import

Material and packaging

Material and packaging

Empty packaging

Empty packaging

Import to the EU Export from the UK

Re-export aftertemporary import

Reimport after a temporary export

Customs duties No VAT

(VAT Guidance 23/08/2018)

No Customs duties No VAT

(VAT Guidance 23/08/2018)

Customs duties- Import VAT (if applicable)

No Customs duties- No import VAT

HARD BREXIT

BREXIT: significant risks for your supply chain> GEFCO solutions tailored to your challenges

Contact our experts: brexit@gefco.net

5 MAIN RISKS 5 SOLUTIONS BENEFITS

Delayed loading in case of non-compliance of customs paperwork and procedures

Optimise and simplify your customs operations from and to the United Kingdom ■ Support for customs and tax (VAT) diagnosis of your company ■ Choice of customs clearance locations■ Implementation of appropriate customs authorisations ■ Implementation of EDI solutions

TRANSIT TIME

CUSTOMS DUTIES

CASH FLOW

FLUIDITY OF YOUR SUPPLY CHAIN

Non compliance: Export regulationsINCOTERMS®

Ensure fully compliant border crossing■ Support and advice to identify the appropriate INCOTERMS®

■ Support and help with document compliance

Customs duties payment betweeen the United Kingdom and European Union

Optimise the payment of your customs duties■ Customs engineering ■ Implementation of Inward / Outward process relief solutions

Change of VAT rules Have an expert handle your VAT■ Support in the management of European or British VAT numbers

Payment of duties and taxes on reusable packaging

Benefit from smart solutions for your reusable packaging■ Implementation of temporary import-export solutions exempt

from customs duties■ Establishing material accounting■ Implementation of web tracking solutions for our packaging