Brexit Advice Pack

With the United Kingdom soon to leave the European Union, it is vital that businesses understand the consequent changes to how trade is conducted between both the UK and the EU and the UK and a number of other countries around the world. Companies should prepare effectively for the UK’s withdrawal from the EU and take the necessary steps to ensure they can continue trading effectively from the UK.

In this information pack, we highlight the four most significant changes that UK based automotive companies should be aware of, provide relevant background information and set out actions that can be taken to help businesses prepare.  

All the information in this pack relates specifically to what should be done if no agreement is reached on the terms of the UK’s withdrawal from the EU (hereafter called “no-deal”).

Customs

The majority of the information in this section is relevant for businesses that only trade within the EU, and have no experience of trade with so-called “third countries”. For businesses that already trade with countries outside the EU, the information provided here should be familiar. Below we look at the basics that you as a business need to have done to continue trading with the EU in the event of a no-deal Brexit.

VAT number

Are you VAT registered in the UK? If you are not and plan to import or export goods between the UK and EU then you must apply for one immediately.

Apply for a VAT number here - https://www.gov.uk/vat-registration/how-to-register

EORI number - UK and EU

If you are responsible for either importing goods into the UK or exporting them from the UK you will need a UK EORI number (starting with GB). If you recently received a letter from HMRC granting you a UK EORI number then you do not need to do anything more to obtain a UK EORI number.

If you did not receive a letter from HMRC or only recently registered for a UK VAT number then you will need to apply for your UK EORI number. 

If you export your goods to an EU country and are responsible for the import declaration then in addition to a UK EORI number you will need an EU EORI number.  

Apply for a UK EORI number here - https://www.gov.uk/eori

Apply for an EU EORI number here - https://ec.europa.eu/taxation_customs/business/customs-procedures/general-overview/economic-operators-registration-identification-number-eori_en

Note that you will not be able to receive a UK EORI number until you have a UK VAT number

Customs Declarations and Transitional Simplified Procedures (TSP)

In the event of a no-deal Brexit customs declarations will be required to move goods from the UK into the EU and vice versa. These are in addition to existing requirements for non-EU imports and exports. There are two ways to do this:

  1. Complete the declarations yourself if you have the necessary expertise and systems in place. If these are not in place already;
  2. Use a customs broker to complete the declarations for you. A broker will prepare and submit customs declarations on behalf of your business. To allow a broker to do this on behalf of your business you will need to issue the broker with a letter of representation.

More information on representation is available here - https://www.gov.uk/guidance/customs-debt-liability#representation-and-agent-liability

UK government have introduced Transitional Simplified Procedures (TSP) to reduce the amount of information businesses need to provide to HMRC upfront to move their goods from the EU to the UK. Registering for TSP will allow your company or customs broker to delay making a full declaration for up to 6 months and also defer paying any duty on the goods (see the trade section for more information on tariffs/duties).

HMRC recently wrote to businesses auto-enrolling them for TSP. If you recently received the letter then you do not need to apply. 

Apply for TSP here – https://www.gov.uk/guidance/register-for-simplified-import-procedures-if-the-uk-leaves-the-eu-without-a-deal

Note that your company must be established in the UK and hold a UK EORI number to register for TSP.

INCOTERMS and Contracts

Customs declarations include information on the terms of delivering the goods and who is responsible for each part of the process. These are known as INCOTERMS. These are agreed between the buyer and seller.

It is important you are familiar with INCOTERMS and agree the appropriate terms with your buyer and/or seller. With this in mind, companies should consider reviewing their contracts with both their suppliers and/or customers.

For more information on INCOTERMS visit - https://iccwbo.org/resources-for-business/incoterms-rules/

Classification

In order to import your goods to, or export your goods from, the UK the correct commodity code needs to go on the customs declaration.

Companies may wish to use a customs expert to ensure goods are classified correctly.

More information is available here - https://www.gov.uk/guidance/using-the-trade-tariff-tool-to-find-a-commodity-code

Valuation

In order to import your goods to, or export your goods from, the UK they must have a value. There are six methods by which to value your goods. The most commonly used method is the “transaction value”.

More information on how to value your goods is available here - https://www.gov.uk/guidance/how-to-value-your-imports-for-customs-duty-and-trade-statistics

Origin

In order to import your goods to, or export your goods from the UK, the correct origin of the products needs to be stated on the customs declaration.

An origin declaration is mandatory and it does not allow a tariff reduction unless origin requirements set by specific trade agreements are met (see Trade chapter - section 4 "Preferential Rules of Origin")

In principle, origin is conferred to a specific country if:

  1. The product was “wholly obtained” in that country, so if no imports were used in its production, or
  2. The product underwent its “last substantial transformation” in that country.

The EU has a set of rules to determine where the last substantial transformation took place

More information on EU origin rules for specific products is available here -https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/nonpreferential-origin/table-list-rules-applicable-products-following-classification-cn_enhttps://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/nonpreferential-origin/table-list-rules-applicable-products-following-classification-cn_en

 

Trade

As a member of the EU the UK benefits from over 35 trade agreements with some 70 countries on preferential terms that the EU has negotiated on its behalf. The result of this is that the UK gains reduced or no tariffs on imports and exports between the trading partners along with reduced regulatory barriers. The UK government has been working to replicate these trade agreements.

In addition, as an independent trading nation the UK will set its own tariff schedule and have its own trade policy.

Tariffs

The UK will implement its own tariff schedule. UK import duties would apply to all imports from countries with which the UK has no trade agreement, including EU imports.

The UK tariff schedule is temporary and will be in place for at least 12 months. Government’s current intention is to begin a consultation on the schedules in January 2020.

The UK tariff schedule applies exclusively to imports; duties on UK exports depend on EU and other trading partners.

Key automotive tariff rates for imports into the UK are:

Passenger Cars

 

Tariff

All cars for the transport of < 10 persons, including driver

10%

 

Commercial Vehicles

 

Weight

CC

Tariff

 

Petrol engine

< 5 t

< 2.800 (e.g. 2.8 litre engine)

10%

< 5 t

> 2.800

10%

> 5 t

 

10%

 

Diesel engine

< 5 t

< 2.500 (e.g. 2.5 litre engine)

10%

< 5 t

> 2.500

10%

> 5 t

 

10%

No spark ignition engine

N/A

N/A

10%

 

Buses

 

CC

Tariff

Petrol engine and petrol/electric hybrids

< 2.800

10%

> 2.800

16%

Diesel engine and diesel/electric hybrids

< 2.500

10%

> 2.500

16%

Electric and others

N/A

10%

 

Most automotive components will attract 0% duty upon importation into the UK.

We would advise that businesses regularly check the UK’s proposed no-deal tariff schedule.

More information on the UK’s tariff schedule in a no-deal scenario is available here - https://www.gov.uk/government/publications/temporary-rates-of-customs-duty-on-imports-after-eu-exit/mfn-and-tariff-quota-rates-of-customs-duty-on-imports-if-the-uk-leaves-the-eu-with-no-deal

Trade Agreement Replication

UK government have been working to replicate the effects of the trade agreements it has been party to as a member of the EU. Not all of the 40 trade agreements will be rolled over in a no-deal scenario.

If your business makes use of any of the EU agreements that the UK currently benefits from today, it is extremely important that you understand whether the UK has replicated the effects of those agreements. If it has then you should read the appropriate provisions in the agreement. If it has not then you should understand the impact in terms of tariffs and regulatory barriers that trading with this country will have on your business.

The trade agreements that the UK government have negotiated in a no-deal scenario are available here - https://www.gov.uk/guidance/uk-trade-agreements-with-non-eu-countries-in-a-no-deal-brexit

The trade agreements that the UK benefits from as an EU member are here - https://ec.europa.eu/trade/policy/countries-and-regions/negotiations-and-agreements/index_en.htm

Market Access

Today, if an EU business believes it faces a trade barrier that limits or prevents them exporting to a third country, they can report this to the European Commission who will investigate and take appropriate action to rectify the barrier.

In a no-deal scenario UK businesses will no longer report trade barriers to the European Commission and instead report them to UK government. UK government will take on the responsibility to investigate and take appropriate action.

A UK business can report a trade barrier here - https://www.great.gov.uk/report-trade-barrier/

Preferential Rules of Origin (RoO)

Free trade agreements accord lower “preferential” tariffs or eliminate tariffs entirely on products originating from the countries that are part of the agreement. 

If your business is trading with countries with which the UK has concluded a free trade agreement at the time of withdrawal, showing compliance with RoO set by the specific agreement is necessary to access preferential tariffs/claim preferential treatment.

Exporting Controlled Goods

Controlled goods are regulated through a system of export licensing.

One category of goods are dual-use goods. These are products and/or technologies that have applications for both civilian and military purpose. Some automotive products fall into this category. If you are exporting dual-use items from the UK to the EU then you will need a new export licence to allow you to do so.

More information on exporting controlled goods is available here - https://www.gov.uk/guidance/exporting-controlled-goods-after-eu-exit

 

Regulation

While the UK is an EU member state, the rules of the single market must be complied with. Should the UK leave the EU with no-deal, companies looking to import and/or sell goods on the UK market will have to comply with UK regulations. Moving forward these UK regulations may differ to EU regulations. We set out below three key regulations, which will change in the event of no-deal.

Type Approval

European Community Whole Vehicle Type Approval (ECWVTA) is required for the registration and placing on the market of whole vehicles, vehicle systems and separate components. It ensures products meet EU standards and is accepted throughout the EU.

Following no-deal ECWVTAs issued outside of the UK, will no longer be automatically accepted for registering certain vehicles in the UK.

Similarly ECWVTAs issued by the UK will no longer be valid for sales or registrations in the EU.

To help ensure the continued supply of automotive products into the UK, a new UK Type Approval Scheme has[LM1]  been put in place by government.

This does not apply to individual component type approvals, National Small Series Type Approvals (NSSTA) or Individual Vehicle Approvals (IVA). The UK will continue to recognise these, along with United Nations Economic Commission for Europe (UN-ECE) approvals for systems and components. The EU will continue to recognise UN-ECE approvals issued by the UK.

The UK will issue ‘provisional’ UK type-approvals, upon application prior to the UKs departure from the EU with a no-deal, to manufacturers that can prove they hold valid EC type-approvals. This will be an administrative conversion of valid ECWVTA’s into UK type-approvals. It will ensure that products can continue to be sold and registered in the UK. Provisional approvals will be required for vehicle categories – M (passenger vehicles), N (goods vehicles), L (2/3 wheelers) and T (tractors). The UK will accept either a ‘provisional’ UK approval or a valid EU approval for category O (trailers) and NRMM.

Manufacturers currently holding a VCA-issued ECWVTA, who intend to continue placing their products in the EU27 following a no-deal exit, must transfer that approval to a new ECWVTA from a type-approval authority in an EU country.

Manufacturers wishing to place new products on the EU market after the UK leaves the EU will need to follow the existing procedure for obtaining a new EC type-approval. Full testing and certification must be done by an EU type-approval authority and a technical service designated by that authority.

More information on UK type approvals is available here – https://www.vehicle-certification-agency.gov.uk///brexit/brexit.asp
 

CO2 Regulations for Cars and Light Commercial Vehicles

EU legislation sets mandatory CO2 reduction targets for new passenger cars and light commercial vehicles.

Should the UK leave the EU without a deal, the obligations and enforcement of CO2 legislation will become the responsibility of UK government from day one of exit. At this point, manufacturers will have UK CO2 reduction targets, with compliance based on UK registrations only.

Compliance in the UK will be based on registrations for the final two months of 2019 and then the full year for 2020 onwards (UK registrations for the first 10 months in 2019 would not be counted by the EU).

Any excess premium for missed targets becomes payable to UK government (£83 per gram of exceedance per vehicle registered). Domestic approval of eco-innovations will be required (any approved eco-innovations prior to exit day will be automatically recognised by UK government).

Fixed derogation thresholds will be changed to thresholds based on each manufacturer’s historical share of European Economic Area (EEA) sales occurring in the UK. At the point of exit, the average mass figure will be retained but will be updated at the first due update to reflect the average mass of UK vehicles only.

More information on CO2 regulations can be found here - https://www.gov.uk/government/publications/reporting-co2-emissions-for-new-cars-and-vans-if-theres-no-brexit-deal/reporting-co2-emissions-for-new-cars-and-vans-if-theres-no-brexit-deal

Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH)

The regulations on REACH aims to reduce the risk from chemicals to humans and the environment and encourages the substitution of substances of very high concern.

In the event of a no-deal Brexit, the UK will replicate EU REACH regulations and the Health & Safety Executive (HSE) will become the relevant regulator.

There will be a dual registration regime (UK and EU). This will have an impact on:

  • Automotive production facilities – plants that are users of industrial chemicals but do not themselves place those chemicals on the market (e.g. vehicle paints, adhesives, body sealers). 
  • Automotive aftersales distribution centres and dealerships (including vehicle manufacturers with no UK manufacturing presence) – users/distributors of automotive aftermarket chemical products that are placed on the market and sold to professional and private users (e.g. top-up screenwash, engine oil refill, leather cleaner).

From day 1 after a no-deal Brexit, REACH registrations/authorisations of UK companies will become invalid in the EU. Those will be grandfathered (including registrations existing 2 years before exit and transferred to EU) to UK system – subject to initial validation and later full data submissions

In the UK a new IT system has been set up to manage the REACH registrations. Companies with registration requirements (producing or importing substances above 1 tonne per year) would have to enter basic information on the chemicals into the UK system within 120 days post exit. Companies will then have to provide the technical information within 2 years of the UKs exit date.

If companies (UK based downstream user or a distributor) wish to access the UK market they will have to either:

  1. Procure substances or mixtures (directly or in articles) from a UK-based entity – no further action needed
  2. Procure substances or mixtures (directly or in articles) from an EU/EEA-based entity and then:
  • Enter basic information onto the UK’s REACH IT system within 180 days of the UK’s exit and;
  • Provide technical information required under UK REACH – 2 years post exit
  1. Convince the EU/EEA supplier to appoint a UK-based Only Representative (OR)

If you are a UK based registrant (manufacturer or importer) who wants to access the EU27 market then you will have to either:

  1. Transfer your registration(s) to an EEA-based entity (e.g. affiliate or OR) before the UK exits with no-deal
  2. Support your EEA-based importers to comply with EU REACH.

More information on the UK REACH system is available here - https://www.hse.gov.uk/brexit/reach.htm

 

Immigration

EU, EEA and Swiss citizens already in the UK

EU, EEA and Swiss citizens resident in the UK by the time the UK leaves the EU, who wish to stay post exit will need to apply to do so through the EU Settlement Scheme.

Applicants will be granted either pre-settled status if they have been resident in the UK for less than five years or settled status if they have been resident in the UK for more than five years.

Pre-settled and settled status will allow EU, EEA and Swiss citizens to live, work and study in the UK after Brexit.

The application is a free, three step process requiring basic information on identity, proof of residence and a criminality check.   

The scheme is already open; EU, EEA and Swiss nationals have until 31 December 2020 to apply. 

Apply for the EU Settlement Scheme here – https://www.gov.uk/settled-status-eu-citizens-families

EU, EEA and Swiss citizens travelling to the UK

For EU, EEA and Swiss citizens coming to the UK once the UK has left the EU will be able to come and go as they do now up to December 2020.

Nationals who wish to stay passed December 2020 will need to apply for European Temporary Leave to Remain (Euro TLR). This will give those nationals 36 months to stay in the UK from the date eligibility is granted. After those 36 months if they wish to stay in the UK they will need to do so through the UKs new immigration system. 

Euro TLR will not be in place until the UK has left the EU.

For EU, EEA and Swiss citizens who wish to move to the UK from January 2021 they will need to apply through the UK’s new immigration system.

 

 

Please note all information on this page is correct as of 30 September 2019