Manufacturing sector tools up for Brexit

The UK’s exit from the EU single market and customs union on 31 December will have a number of important consequences for UK-based manufacturing businesses.

There are basic considerations which are similar to those faced by all businesses trading with the EU, but also some more complex issues more likely to face businesses involved in manufacturing supply chains.

1 January 2021 – the basics

Material and other goods purchased from EU suppliers will now need to cross a customs border before they can be delivered in the UK.

The responsibility for this will depend on the contractual relationship with the supplier, but it is most likely to be the customer who will be responsible for the customs documentation.

If there is no Free Trade Agreement (FTA) with the EU, there may also be customs duties to pay.

Customs documentation can be handled internally or via a freight forwarder or customs agent.

Finished products which are sold to EU customers will also need to pass through the customs barrier before delivery to the customer, and the responsibility for organising the importation will depend on the contractual relationship.

The cost to the customer may increase if there is no FTA with the EU.

There may be wider implications for a UK business which needs to be the importer of goods into the EU.

1 January 2021 - more complex supply chains

Some manufacturing supply chains involve the movement of parts and products between the EU and the UK at various stages in the manufacturing process.

The insertion of a customs barrier in these supply chains can result in issues including:

• the need for temporary importations into the EU or the UK for processing, packing etc.
• inward or outward processing reliefs to avoid customs duty costs in the supply chain (in the absence of an FTA)
• Call off stock held in the EU may no longer qualify for the EU simplification, 
• Triangular transactions involving the movement of UK owned goods between two continuing member states will no longer be covered by the EU simplification.

In all these cases further consideration of the impact will be needed and additional VAT registrations or changes to commercial relationships may be required in order to avoid VAT or duty costs arising in the supply chain.

Further reference

For more specific information, check out our International Advisory Hub and Manufacturing Hub.