Preparing for Brexit by achieving AEO status

In just under one year the UK will formally leave the European Union and the realities of Brexit are beginning to dawn on everybody. Whatever the outcomes of Brexit negotiations, Brexit will impact your business and it is crucial that businesses begin preparations now. Irish trade relies heavily on free access to the UK market. Currently around 14% of Irish goods and services are exported to the UK. Ireland’s export market will be significantly impacted by border controls, tariffs and excise duties post-Brexit. The impact of Brexit may see an overall reduction in organisations’ procuring goods and services from the UK to limit their exposure to future tariffs which may be imposed on UK imports.

A free trade agreement (FTA), similar to that currently in place with Canada and South Korea, is the only workable solution for the UK according to President of the European Council, Donald Tusk. If a free trade agreement (FTA) comes into place, customs, tariffs and services will still require careful consideration. The UK will become a ‘third country’ for VAT purposes post-Brexit. This means there will be a significant impact on cash flow arising at points of entry attributable to customs duties and additional documentation requirements. Businesses will have to pay VAT at possibly 23% to the Revenue Commissioners on every import, and claim a deduction or refund in their VAT returns. For businesses importing goods from the UK on an ongoing basis, this will permanently tie up approximately three months VAT on the value of goods coming from the UK with the Revenue Commissioners.  Significant cost implications are going to arise post-Brexit as a result of:

  • direct costs
  • hidden costs
  • working capital implications
  • competition
  • consumer spending
  • customs duties
  • VAT
  • contracts

Customs requirements are set to be particularly arduous, whereby some businesses, who so far have only operated within EU member states, will now have to become accustomed to import and export customs formalities. Where the UK has been used as a land bridge for goods entering the EU markets these will now also be subject to customs procedures.

Traders need to be considering customs simplifications and authorisations to reduce the impacts of Brexit. Authorised Economic Operator status is a well-established ‘trusted trader’ customs programme created by the World Trade Organisation (WTO) in 2008. AEO status shows that the supply chain you’re involved in is secure and compliant and that you can be regarded as a Trusted Trader. It’s a non-mandatory ‘fast track’ that simplifies certain customs procedures. It also provides potential reductions in guarantees required to operate Customs special procedures such as warehousing and inward/outward processing regimes.

Brexit is making AEO status a necessity and has seen an increase in demand by customers who are involved in European Logistics. The international professional body for individuals and companies involved with logistics and transport said it has noted a rise in the question ‘Do you hold AEO status?’ on the list for preferred supplier listing and tenders. The institute is now urging government and the profession to “wake up to the advantage of being an AEO”. Kevin Richardson Chief Executive of Chartered Institute of Logistics and Transport UK stated that “Holding AEO status is going to be key to experiencing the frictionless border that industry wants and needs post-Brexit. Only AEOs will be trusted to be self-policing and sufficiently knowledgeable to be granted such ease of movement. Non-AEOs will undoubtedly get left behind and be at a disadvantage.”

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