Seventeen months ago my first blog on the likely impact of Brexit on the Food & Beverage sector was based on certain assumptions. None of these assumptions materialised and the current government commitment is that the UK will exit the European Union on 31 October 2019 with or without a deal. As it stands with “no deal” Brexit being the adopted preparedness model this article will look at the impact of no deal on the sector from the international trade and domestic compliance perspectives.
Exporting in the event of a “no-deal” Brexit
Being a part of the EU means UK businesses have had access to EU markets without having to concern themselves with tariffs or duties on their dispatched or received input or finished products. This will change after Brexit and so businesses should have already assessed whether they will continue to send their goods to EU markets via export or whether they need to buy in products from those markets (imports). To carry on with the example of our fictional UK company NuOatCo; if it wishes to continue trading internationally then it will require an Economic Operator Registration and Identification number (EORI) for trading generally and an EU EORI for trading with the EU. The application process is a simple online one and it takes from 10 minutes to 4 days to obtain your EORI depending on HMRC verification. The EU EORI is obtained from the customs authority in the EU country you first conduct trade with. NuOatCo will not need an EORI to move goods between the UK and Ireland and Northern Ireland.
Importing from an EU country
However, if NuOatCo or any other company is importing products from the EU then it will have to address the matter of import duties. You will need to declare goods imported into the UK by submitting a customs declaration. Once the goods have been cleared by HMRC, you’ll need to pay any duty and tax owed. The business has to consider whether it wishes to handle the importing process itself or rely on third-party agents. It will have to look at whether the frequency with which it imports and its cash flow status demands the use of the deferred duty payment facility which allows for monthly payment by direct debit. Again there is extensive guidance on the process that can be found here.
Watch out for changes in regulations
A thorny issue for businesses that export into the EU is the question of regulatory alignment or in this case divergence. UK F&B regulation has derived from regulations and directives agreed by the EU member states forty years ago. This means the regulatory regime has been consistently applied across member states. Brexit means an end to the regulatory regime and the possibility of adaptation or change in regulation which may not align with EU legislation and possibly thus having an impact on the export of UK goods to EU markets. The government has already said it will not rule out regulatory divergence and so businesses will have to stay alert to changes and be prepared to be advocates for themselves during consultation periods on rule changes.
Example: labelling and distribution of organic products
There are a number of areas we could look at from labelling to marketing standards and nutrition and health claims compliance. But let’s look at just one area today: labelling and the distribution of organic products. While organic standards will remain similar to the EU and EU labelled organic products will be accepted in the UK the EU will not accept UK labelled organic food unless the EU and the UK agree to accept each other’s standards or the EU recognises the UK body which issues the organic compliance status. Further, the EU organic logo will have to be removed from any UK product which currently bears the mark. This can have an impact on the marketing and sales of these products in international and EU markets. UK organic control bodies will be able to verify organic standards for UK markets and those marks will not be affected by Brexit.
Businesses have to make an assessment on how they intend to position themselves in a post-Brexit market, whether to shift focus to domestic markets based on accessibility of products and managing one regulatory regime or whether the size of the EU market makes alignment with those regulatory standards a better economic bet. What is clear is that there will be some discomfort at the start as businesses iron out the technical, administrative and legal puzzles Brexit will inevitably throw up.
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