The UK ceased to be a member of the EU on 31 January 2020 and entered a transition period with the European Union which will last until 31 December 2020. During this time, current rules on trade, travel and business for the UK and EU still apply, so little has changed in respect of day-to-day operations. However, Incora needs to prepare for any changes implemented from 31 December 2020 once the transition period ends. The biggest areas of impact are in relation to our workforce, cross-border transactions and taxation.
’No deal Brexit’ referred (until January 2020) to an EU Exit without a Withdrawal Agreement and thus without transition period. A ’no deal Brexit’ in this sense did not happen as the UK left the EU with an agreed Withdrawal Agreement and entered into a transition period which will last until 31 December 2020. During this time negotiations with the EU around trade and other issues will be ongoing. ’No deal’ now refers to the potential for the UK to reach the end of the transition period with no trade deal with the EU in place.
Negotiations on the future relationship between the UK and EU are ongoing, albeit delayed, despite the coronavirus pandemic. Both parties have said they are committed to achieving a deal by the end of the year, when the current transition arrangements come to an end. However, this still remains an uncertainty.
In May 2020, the Government announced a new UK Global Tariff (UKGT) which will replace the EU’s Common External Tariff from 1 January 2021 at the end of the transition period.
It is described as a ‘simpler, easier to use and lower tariff regime’ and is aimed at scrapping red tape and reducing cost pressures, to help UK businesses compete in terms of global trade.
We have carried out a Brexit risk assessment to see if Incora has any specific vulnerabilities. As part of the risk review, we have modelled different scenarios would impact Incora including the financial impact of the UK and EU reverting to World Trade Organization rules if no trade agreements are reached during the transition period. We are assessing delays in the supply chain, and issues with recruitment, impacts on importing and exporting and the consistency of Regulatory issues post-Brexit.
We have Offices in the United Kingdom, Italy, France and Poland. Our European Warehouses are in Poland, Germany and France.
The UK Government has committed to sign REACH into UK Law and recognize EU-based Authorizations should there be a “No Deal” scenario; however, the EU have not yet indicated that they would reciprocate. Should this scenario happen, we would be unable to import Chromates covered by our Authorizations into the EEA; this will be a commercial issue for Wesco and a production issue for customers in the EU where we are the sole Authorization holder. Where we are not the sole Authorization holder, we will be able to purchase from European-based members of the CTAC and CCST consortia where appropriate. As a Distributor, not a manufacturer, we do not believe that we can appoint an Only Representative (OR) within the EU. We are unsure if we will be able to transfer the Authorizations to a European Legal Entity. We are currently taking legal advice as to our options.
So far, we have not seen any significant loss of staff who are EU Nationals within the UK or vice-versa. We are continuing to monitor the situation closely in the run up to the Brexit date.
It is difficult to predict how the end of the transition period will impact supply chains, so many businesses may not be 100% ready. However, there are some sensible steps Incora can take.
First, Incora has conducted a thorough review of the supply chain in order to get a full understanding of the network and where any potential risks lie. For example, if Incora’s supply chain crosses the EU-UK border, what will happen if there are delays in the event that no trade agreement is reached at the end of the transition period in December 2020? We are implementing strategic inventory controls, repositioning and relocation in an attempt to mitigate risk as much as possible. Incora has tested the risks in different Brexit scenarios and identified mitigating actions – such as working with different suppliers, or building in contingencies for any delays.
The Government has confirmed plans to introduce import controls on EU goods at the border when the transition period ends on 31 December 2020. Traders in the UK and the EU will have to submit customs declarations and be liable to goods checks. The EU has also said it will enforce checks on UK goods entering the Eurozone.