10 days to go...

By: Peter Rodwell, UK Customs and Compliance Manager

March 18, 2019

10 days remaining, can the deal go through?

Theresa May returned to parliament with legal assurances from the EU in relation to the backstop to convince parliament to support her deal. However, at 7pm on March 12, MPs voted again on whether the deal should be accepted or not. Despite turning several conservative MPs to support the government, the vote was still lost by 149 votes.

Following the defeat, the prime minister stated "I continue to believe that by far the best outcome is that the UK leaves the European Union in an orderly fashion with a deal”  "And that the deal we have negotiated is the best and indeed only deal available”. The EU’s sobering statement of “Chances of a No Deal have significantly increased”, should leave many under no illusion as to what the UK could be facing in just under two weeks’ time.

How events unfolded;

  • 7.25pm GMT March 12, the speaker of the House of Commons announced the result of the second meaningful vote, which had been rejected by 149 votes.
  • March 13, parliament rejected No Deal, however, given that parliament do not have the legal power to rule out no deal, this remains the default position.
  • March 14, MPs were asked whether they support an extension to Article 50, which seeks to postpone the UKs departure from the block, this was supported by parliament. In order for an extension to be facilitated, the EU27 must agree unanimously.
  • A third meaningful vote has been fixed to take place on March 20. Given how close the UK is to a disorderly exit, support is expected to grow but still short of the numbers required for the bill to pass.

What can we expect during this week?

On March 20, Theresa May will again try and push the deal through parliament, and she will be hoping that MPs will accept that this deal is as good as it gets and given little time remaining, will support the bill. It is widely expected that the deal will be rejected by parliament again, which will leave the UK in a perilous position and will be need to look to the EU to decide its fate, which could;

  • Reject the idea of extending Article 50 given that the UK parliament are unable to agree, resulting in the UK exiting the EU next week.
  • Offer an extension, based on the UK offering a tangible solution to the deal lock, such as a General Election or accept a customs union. The length of which could be over a year and the UK would be required to take part in the EU parliamentary elections on May 23

Looking at preparations

Each week, we will try and place government advice and publications which we hope will assist;

Crane Worldwide Logistics brings you the most up to date information via our webinar series of Trade School, should you require further information, please get in touch.

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UPDATE 11th March

 

Can there be an orderly exit in less than 3 weeks?

 

Geoffrey Cox the UK’s Attorney General was tasked with returning to Brussels to request the re-wording of the Irish backstop text within the Withdrawal Agreement. After some frank exchanges, Cox returned to London after failing to achieve a breakthrough. March 29 is fast approaching and it is now unlikely that the bill will pass parliament on March 12, which is the day the new ‘meaningful vote’ takes place. 

 

Current events and position;

  • Cox claimed that the Irish backstop breaches protocol 1, article 3 of the Human Rights Convention
  • Theresa May is due to speak in Parliament in order to head off a second defeat
  • The EU offers reassurances on backstop, to the affect that they will make every effort to reach an alternative solution before December 2020.
  • The House of Lords passed an amendment calling on the government to negotiate a customs union with the EU. The amendment does not pass into law, but it does force Parliament to vote on it. 
  • Following any defeat, Parliament will have the chance to vote on a no deal exit or extend article 50 beyond March 29.
  • Calais customs work to rule, claiming insufficient manpower to deal with customs controls following Brexit. The action created long queues into the port, with delays of several hours.

Given another defeat, what will happen?

As pointed out all along, the default position is No Deal. In the event of the Withdrawal Agreement being defeated, Parliament may choose to request an extension of Article 50 to facilitate more time. Although this would be an agreeable decision, as far as the UK are concerned, it still relies on agreement from Brussels. Given that negotiations have been in progress for the last two years, without a final agreement being set in stone, there is a risk that the EU will not agree unless a tangible reason for the extension is put forward. In effect, Parliamentary stalemate is unlikely to be a good enough reason. Once the WA has been voted down, the UK will be required to have something in their back pocket to persuade the EU that an extension to Article 50 will facilitate a firm decision. Another referendum or general election maybe?

Looking at preparations

Each week, we will try and place government advice and publications which we hope will assist;

 

UPDATE 5th March

With more twists and turns than a Roller Coaster, the Brexit position appears to be no further forward. Conversations on the street invariably turn to this subject, and opinion is still split. The EU are reluctant to engage in any further protracted conversations but instead keen to divert their concentration to other pressing matters. 

 

What happened last week? 

  • Theresa May decides to postpone the meaningful vote that was scheduled to take place last Wednesday
  • A new vote is now scheduled for the 12th March, where an amended deal is hoped to be tabled
  • MPs debated Brexit on February 27th and voted as follows;
    • MPs voted to reject the amendment in the name of the Leader of the Opposition, Jeremy Corbyn, which laid out support for Labour's alternative Brexit plan
    • MPs voted against the amendment in the name of the Westminster Leader of the SNP, Ian Blackford, which stated that the House rejected leaving the EU without a deal under any circumstance and regardless of exit date.
    • MPs voted in favour of Yvette Cooper's amendment which further noted the Prime Ministers statement that she will return to the Commons in March for a series of votes on her deal, the prospect of leaving without a deal and extending Article 50.
    • The House of Commons also voted to approve an amendment in the name of Alberto Costa, which guaranteed the rights of EU citizens in the UK, regardless of the outcome of the UK's withdrawal from the EU which was carried without division.
  • The Labour Party, who are in opposition, pledge to support a second referendum
  • The Irish Government issue “No Deal” to business and individuals
  • DEFRA (The UK Dept. for the Environment, Food and Rural Affairs) publicly announced that they expect there to be a shortage of ISPM15 approved pallets post Brexit, when approved pallets will be required for EU/GB trade.

Will the UK leave on March 29th?

This is a difficult question, as Theresa May moves towards March 12th, where she has pledged the second meaningful vote, it would require a crystal ball to predict in which direction Parliament will go. The default position on the March 29th is No Deal, where the deal was voted down on January 15th, support could increase sufficiently to push the Deal through. Some MP’s would rather have something than nothing, whereas others who sit in leave areas will not want to see Brexit postponed which could result in cancellation given another referendum or general election. In the event that the Government loses the vote, it is likely that Parliament will take over and in which case a postponement to article 50 is plausible and there could be sufficient support for a second referendum.

Looking at preparations

Each week, we will try and place government advice and publications which we hope will assist;

Aerospace - https://www.gov.uk/guidance/the-aerospace-sector-and-preparing-for-eu-exit

Automotive - https://www.gov.uk/guidance/the-automotive-sector-and-preparing-for-eu-exit

Chemicals  - https://www.gov.uk/guidance/the-chemicals-sector-and-preparing-for-eu-exit

Construction - https://www.gov.uk/guidance/the-construction-sector-and-preparing-for-eu-exit

Consumer goods - https://www.gov.uk/guidance/the-consumer-goods-sector-and-preparing-for-eu-exit

Electricity - https://www.gov.uk/guidance/the-electricity-sector-and-preparing-for-eu-exit

Electronics, machinery and parts sector - https://www.gov.uk/guidance/the-electronics-machinery-and-parts-sector-and-preparing-for-eu-exit

Oil and gas production - https://www.gov.uk/guidance/oil-and-gas-production-and-preparing-for-eu-exit

Professional and business services sector - https://www.gov.uk/guidance/the-professional-and-business-services-sector-and-preparing-for-eu-exit

Retail - https://www.gov.uk/guidance/the-retail-sector-and-preparing-for-eu-exit

Science, research and innovation sector - https://www.gov.uk/guidance/the-science-research-and-innovation-sector-and-preparing-for-a-no-deal-eu-exit

 

 

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UPDATE 25th February

What's next? March 29th is looming... 

As negotiations continue between the UK Government and the EU, the clock continues to tick. In order for the UK parliament to agree to the Withdrawal Agreement, there must be an amendment to the text in relation to the Irish Back Stop. Although both sides have agreed to place some urgency to the matter, another week has passed with very little being announced on the progress, other than both sides being agreed to focused on concluding a successful deal as soon as possible. The EU are anticipating that in any event the UK will request an extension to article 50 now, most likely a further three months of possibly kicking the can down the road.

As mentioned in last week’s bulletin, the main parties in the UK parliament are fracturing, the fabric of the political system could potentially change forever. This week we have seen defections from both the Labour Party and the Conservative Party, so far eight MPs from the former and three from the later to form an Independent Group of MPs who currently have no leader or formed an official parliamentary party at this point. Even within the rank and file, both parties are at odds which other over which direction the UK should go all having varying opinions on what the British Public want.

The Irish government have published the Brexit Omnibus Bill, which is a comprehensive outlining the next step in contingency planning; https://www.dfa.ie/brexit/news/news-archive/withdrawal-of-the-united-kingdom-from-the-european-union-bill-2019-and-explanatory-memo.php

What about business?

Last week Honda announced that they are to close their flagship plant in Swindon threatening 3,500 jobs, although the closure was not directly linked to Brexit but instead linking it to “Unprecedented changes in the industry”. Given the recent trade deal between Japan and the EU, the UK’s departure would certainly have had a bearing on the decision. Interestingly 55% of those who voted in Swindon chose to leave the EU.

The Aerospace industry would be heavily impacted in the event of a No Deal exit, both with safety certification and frictionless trade with the EU, such as Airbus who significantly employ approximately 15,000 personnel across several sites.

However will the negatives that Brexit brings also present opportunities? 

  • Low Sterling, which certainly promotes exports
  • Low inflations, promoting increased investment, improve economic stability and growth and maintain international competiveness

Still sitting on the fence?

Following on from the comments on last weeks update, we have added in some useful links;

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UPDATE 18th February 2019 

As the clock ticks down towards the 29th March, the chances of the UK leaving the EU with a deal is diminishing. The issue has caused rifts within the main parliamentary political parties, only this week seven MPs from the UK’s opposition party Labour, have pulled away and set up a new political party and the ruling Conservative party at odds with each other over Brexit. To put this problem into perspective, the House of Commons only have 24 working days remaining, Theresa May has promised another meaningful vote on the 27th February, this only leaves 18 days before the EU departs and very little time to pass legislation.

The government’s current deal is not palatable to many MP’s in its current form:

To Brexitiers the Deal is seen has being too closely aligned to the EU. By not agreeing this deal which does actually deliver Brexit, they risk a last minute push by parliament to force an extension to article 50 and a possible people’s vote, which could result in the UK remaining.

Remainers believe it is a bad deal and that the only good deal is to remain in the EU, many pushing for a second referendum. Ironically by not supporting the deal actually risks the UK leaving without one at all. Several private member’s bills have been put forward, which were designed to either remove No Deal from the table, or to achieve an extension to article 50. Currently No Deal is still the default position and March 29th is still the day the UK leaves.

Those in the minority that do support the deal, largely only support it because they feel it is the only possible deal that can be agreed with the EU.

Without any unity within Parliament, the government are completely ham strung.

What next?

Theresa May has been touring Europe, attempting to rally support from other EU country leaders in order to obtain some sort of adjustment to the Back Stop arrangement. With unity around Europe appearing strong, the reality is that an amendment or re-wording is unlikely. Some opposition party members in Parliament believe that Theresa May will wait until the European Council meeting on 21st and 22nd March, and return to parliament with a final choice, that being her deal or no deal, with no time left to reject both.

Still sitting on the fence?

Now is the time to get down, and review your currently supply chain and determine what impact you can expect given No Deal. Although work is continuing behind the scenes in order to mitigate a melt-down situation on day 1, there will be the inevitable disruption. Consider the risks to your European movements;

  • Free movement of goods between the EU and the UK will end
  • All goods will become subject to current tariff rates
  • Export and import clearances will be required
  • Traders will require EORI numbers
  • All goods will require classification
  • Certain goods will become subject to possible licensing, and certification
  • Carriers will be required to submit Security filings prior to boarding Ro-Ro vessels
  • Reduction in the availability of International Haulage Permits
  • Free movement of people will end, this could have a knock on affect to the logistics industry that has a reliance on EU workers.
  • Trade Deals agreed by the EU with other 3rd countries will cease as far as the UK is concerned, unless trade continuation deals are in place. Duty, where applicable, will be applied. see last week’s update.

 

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Update 7th February

Events this week... 

Despite being forewarned by Brussels that the withdrawal agreement is not open for further negotiation, Theresa May went back to meet Jean-Claude Junker in the hope of agreeing changes to the Irish backstop. The Irish border issue was the main road block from early on in the negotiations, and it appeared that the only way to protect the free movement over the border, should a long lasting solution not be found, would be the Back Stop Agreement. The Back Stop would align Northern Ireland closer to the EU, where the customs border would be established at the Irish Sea. The majority in Parliament have rejected this part of the agreement, mainly due to the fact that there would be no end date and the UK would not be able to unilaterally withdraw from it. Crucially the DUP, who support Theresa May’s minority government have rejected an open ended agreement. After tense discussions in Brussels, the UK are no further forward, at the time of writing, Theresa May is meeting with the Irish Prime Minister Leo Varadkar to discuss the issue with him, if there is an alternative solution, it will be crucial that the Irish government are on side.

A busy time for customs...

This week HMRC have been busy compiling information in relation to a No Deal exit, depending on what business you have between the UK and the European Union. The Partnership Pack contains a wealth of useful information in relation to legislation changes that could prove very useful;

https://www.gov.uk/government/publications/partnership-pack-preparing-for-a-no-deal-eu-exit?utm_source=bd162f25-610e-46f0-b90e-1e81ba44f0e7&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

If you are trading goods from Europe into the UK, the method of declaring goods will change. The changes are designed to prevent delays entering the UK.

The following outlines the arrangements for Ro-Ro Ports and Eurotunnel; https://www.gov.uk/guidance/moving-goods-to-and-from-the-eu-through-roll-on-roll-off-locations-including-eurotunnel?utm_source=99ff9c88-3d51-4bbd-a654-18e9482411fd&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

The government have announced a very important simplification to assist UK established VAT registered traders involved in the importation of EU goods, allowing simplified declarations under a Transitional Simplified Procedure:-

https://www.gov.uk/guidance/register-for-simplified-import-procedures-if-the-uk-leaves-the-eu-without-a-deal?utm_source=d8949cdc-7b04-4027-8668-839286a85f85&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

 

What deals are in place with other nations once the UK exits the EU?

 

In 2017 EU Free Trade agreements accounted for around 12% of UK trade, which also facilitated market access for a range of opportunities that these deals offer. At this time, the UK has the following agreements in place, which is a reflection of several months of back room negotiations:

 

Switzerland – although not formally signed off, the agreement has the backing of both nations. Offering continued free trade to one of the few trading partners that the UK has a trading surplus with, last year the UK exported GBP 19.04 Billion worth of goods and services, seeing growth over the last five years of 41.1%

 

Chile – The UK and Chile have signed a new trade continuity agreement, enabling preferential trading arrangements between the two countries. Bilateral trade in 2017 was worth GBP 1.8 Billion.

 

Faroe Islands - The UK and The Faroe Islands have signed a new trade continuity agreement. In 2017, the UK imported GBP 200 Million worth of crustaceans and fish, this agreement facilitates continued tariff-free imports into the UK.

 

Eastern African Community -  The UK is an important export market for Eastern Africa, as an example, over 28% of all EU exports are destined to the UK. Officials representing the UK and the EAC have agreed  to ensure trade continuity post Brexit.

 

Southern African Economic Partnership – Trading between the Southern African economies and the UK is worth around GBP. 10 billion annually. The UK government signed a deal which will be ready to enter into force as soon as the UK exits the EU.

 

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UPDATE 31st January 

57 days to go without agreement

There is never a dull day in British politics right now, as the UK sails directly into the Brexit storm at full speed ahead. This week we have seen Private Member Bills that have been designed to steer Theresa May away from a No Deal Brexit and returning cap in hand to the EU leaders.

On Tuesday January 29th, two significant parliamentary votes took place;

  • “The Cooper Bill” tabled by Labour MP Yvette Cooper, which would have instructed the government to delay Article 50 and seek an alternative deal with the EU. This was defeated by 321 votes to 298
  • “The Brady Amendment” tabled by Conservative MP Sir Graham Brady, chair of the 1922 Committee, demanding that Theresa May returns to the EU and negotiates an alternative to the contentious Irish Backstop. This amendment was approved by 317 votes to 301

A full list of tabled amendments as selected by the Speaker of the House, John Bercow, in the below link to the UK’s Guardian newspaper: https://www.theguardian.com/politics/2019/jan/29/amendments-to-may-statement-brexit-bill

Theresa May now has a mandate to return to the EU, in order to renegotiate the Irish Back Stop, but the EU has little appetite to re-open discussions. In response to the approval of the “Brady Amendment”, Michel Barnier issued a warning that there is too little time to agree an alternative to the back stop and that the deal already agreed is not open for renegotiation. Each day that now passes, a chaotic Brexit becomes an increasing possibility.

Political Maneuvering

As it stands, the UK will be leaving the EU on March 29, 2019, however, we still do not know whether it will be with a deal or not. We think it is unlike that the EU will move on the Back Stop, therefore given the positon, it is likely that Theresa May can now put forward a straight forward choice to force a definitive decision;

  1. Accept the current deal; or
  2. No Deal exit

It is probable that given that stark choice, she may garner sufficient support for the current Withdrawal Agreement and Future relationship with the EU within Parliament. In which case the UK has a deal and the transitional period until December 2020 will apply.

No Deal is a possibility

If you are a business dealing with EU/UK trade, you must prepare for the worse case outcome:

•       EORI Number – All traders involved in International movements are required to hold an EORI number, ff you do not already have one, you should make an application with HMRC.

https://www.tax.service.gov.uk/shortforms/form/EORIVAT

 

•       Product Classification - Obtain commodity codes for all of your products.  There is an A-Z of classified goods at the top of the page in this link 

https://www.gov.uk/trade-tariff

 

•       Import Duty – Understand what the current level of import duty will be from third countries. In the case of no deal we default to WTO rules (Given that would be too time consuming to re-write the Customs tariff, we believe that the UK would adopt the current one into domestic law / legislation including current tariff rates – but the UK would potentially lose most preferential agreements currently enjoyed as a member).

 

•       Advance Documentation - Encourage your suppliers to supply commercial paperwork in advance of goods dispatch.  The minimum documentation required for clearance are; i) commercial invoice ii) Packing List iii) shipping details. In some cases it may be required to supply a Certificate or declaration of origin, check with your forwarder.

 

•       Government Publications - Read through the government publications in relation to No Deal, there may be further information in there that impacts your business;

https://www.gov.uk/government/publications/uk-governments-preparations-for-a-no-deal-scenario/uk-governments-preparations-for-a-no-deal-scenario

 

•       Adequate Stock Levels - ensure you have sufficient stock to ride it out for a month or so, as a contingency (finances permitting)

 

•       Prohibitions & Restrictions - Determine whether any of the goods are restricted in any way (Export Licensing, Health & Safety Certification, CITES, etc. etc.) Much of this information is contained within the customs tariff under bullet point two.

 

•       EU Safety & Security Filing (Summary Declarations) – Exports from the UK into the EU will require the carrier to file electronic Security declarations, which are separate from your export declaration, ensure your carrier/haulier has made provision to undertake this formality

 

 


UPDATE 28th January

The Withdrawal Agreement Defeat

Following parliament’s emphatic reject of the Withdrawal Agreement on Tuesday 15th January 2019, Westminster has been busy considering the Prime Minister’s Statement on the 21st January 2019 which sets out the steps towards a plan B. The most significant point put forward was the scrapping the £65 application fee for EU citizens applying for settled status. The speech also hinted that there could be a possibility of compromise, as talks between various factions continue.

Points to note from Theresa May’s statement:

  • Unwillingness to extend Article 50
  • Ruled out taking No Deal off the table
  • More parliamentary input to reach a compromise

On the January 29, the House will be debating a “Take Note” motion on the subject. “Take Note” is a procedure used to debate a subject without needing to take a specific decision. It is hoped that this will bring to the surface opinions on the way forward for that long awaited break through.

Motions to take note always begin “That this House takes note of …” The debate may be on any subject, but the motion must be phrased in neutral terms.

19 Amendments have already been tabled for the motion, the Speaker selects which amendments are then voted upon.

A private members bill “Coopers Amendment” seeks to remove the risk of no deal but instead force Theresa May to seek an extension to article 50 to December 31 2019 if no way forward is found, however, the Bill would need to be selected by the Speaker of the House in order that it is given time for debate, so may not see the light of day.

 

Preparations

No Deal is still a real possibility, in the event that parliament are unable to agree and no extension agreed, the UK will leave the European Union without a deal.

Work behind the scenes by civil servants, government officials and key personnel from the private sector in order that a workable frame work is in place following exit, however, these details are being kept quiet, which is not helpful for those of us involved in customer facing roles in the logistics industry.

Grants have been provided in order to train customs processing clerks in the private sector and recruitment has been underway to onboard new customs officials in order to accommodate the dramatic increase in customs declarations following Brexit.

The new customs system CDS is not ready, therefore the existing CHIEF system has been upgraded to accommodate the increase from 75 million entries to approximately 350 million entries, with much faster processing times.

Infrastructure is in place to accommodate waiting vehicles , under the name “Operation Brock” which will provide;

  • A20 Tap holding location to sort incoming vehicles destined for Dover
  • M20 J8-J9 contraflow and HGV holding area
  • HGV holding area at Manston Airport
  • A256 holding area
  • M26 HGV holding area

 

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UPDATE 18th January

Vote of no confidence in the government

On Tuesday 15th January 2019, the UK Parliament voted on whether to accept the government’s Withdrawal Agreement. It was widely expected that it would be rejected by a margin of around 100 votes, however, the loss was actually much more severe with a rejection by 230 votes.

Following the defeat, the opposition called for a vote of No Confidence which was held on Wednesday 16th January 2019. The government won the vote by 325 to 306.

 

The next steps...

Theresa May spoke in the House of Commons following the defeat of the No Confidence vote and pledged to engage all senior political MPs from both sides of the house in order to understand the consensus of opinion and what an acceptable deal might look like.

Labour have refused to engage unless No Deal is completely taken off the table, however, this is unlikely to happen given that No Deal is the default position should nothing be agreed.

The government has until Monday 21st January 2019 to outline the plan to Parliament.

 

What are the options?

  1. Hold a further vote in Parliament on the Withdrawal Agreement and the Framework for the future relationship.
  2. Departure on the 29th March with No Deal, which would involve no transitional or implementation period following exit.
  3. Request an extension from the EU to seek a renegotiation of the deal or alternative deal, such as changes to the existing deal, agreeing a Canada or Norway type arrangement or becoming members of EFTA and the EEA.
  4. Returning to the people with another referendum, which would also require an extension to Article 50

The experts at Crane Worldwide Logistics held an informative webinar on 15th January to discuss possible outcomes to Brexit, full recording and slides CLICK HERE


 

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