No Deal? London says Belfast should ask Dublin
This morning in Newry, Enniskillen and Derry, vans and lorries are being loaded for short delivery runs to Dundalk, Cavan and Letterkenny. Business people with half an eye on television news will be aware that the UK Department for Existing the EU has issued a series of notices on what preparations they should make for Britain crashing out of Europe without a deal.
They will be aware that there has been much discussion of a Backstop for the north, but they certainly should be aware that it has not been agreed. So as things stand, Brexit Secretary Dominic Raab’s advice applies to them.
We dipped in for a look at the import/export section and had difficulty seeing how it could be of much practical benefit to the people loading those vans and lorries.
Brexit Day is Friday 29th March next year, and one could easily gain the impression from Raab’s website that all the measures discussed would, or at least could, be in place early on Monday 1st April. We don’t think so; here we highlight just a few issues that have been dealt with in some breadth and depth in Brexit Border Blog since 2016.
“In the event that the UK and the EU does not have a Free Trade Agreement (FTA) in place in a ‘no deal’ scenario, trade with the EU will be on non-preferential, World Trade Organisation terms.”
Well, yes and no. Although the UK would still technically be a member of the WTO on leaving the EU, its precise status would be a matter for discussion with every other member. Last week Roberto Azevêdo, head of the WTO, said it was very unlikely that there would be 100% agreement on their status among all WTO members between now and 29th March. “The moment that other countries begin to sense an opportunity to increase their market share or increase the quota here or there, they’re going to go for that. There will be a lot of uncertainty here, there will be a lot of unpredictability.”
“Put steps in place to renegotiate commercial terms to reflect any changes in customs and excise procedures, and any new tariffs that may apply to UK-EU trade.”
Happy indeed the company that can renegotiate so their customer pays the tariff. But the arithmetic is brutal; if a company in Newry is exporting to Dundalk with a profit margin of 10%, a tariff rate of just 5% will probably demolish its business proposition. In fact, a huge proportion of cross-border business is in agri-food where tariffs start around 30% and go to twice that level for particular products.
“(Companies should) consider how they will submit customs declarations for EU trade in a ‘no deal’ scenario, including whether they should engage the services of a customs broker, freight forwarder or logistics provider.”
But where will they find these customs brokers? Twenty-five years ago the border was lined with them, but now there are only a handful on the island of Ireland. The ones we spoke to suggest, as does Customs, that their work would expand 700-1000% in a No Deal scenario. Upscaling would take years.
“Before importing goods from the EU, a business will need to:register for an UK Economic Operator Registration and Identification (EORI) number.”
The Authorised Economic Operator (AEO) system is basically an EU scheme for trusted traders to bypass much of the Customs red tape involved in import and export. However, if the UK crashes out, it cannot be taken for granted that the EU will continue to recognise existing British AEOs. On the other hand, we can be pretty sure the EU will not recognise the flood of new British AEOs that would be necessary unless and until there is some sort of formal trade agreement in place.
In any event, all our information suggests getting AEO status is a lengthy, complicated process that even the best-run business could not complete in less than 2-3 years. It requires quality assurance of every element in the supply chain including inspection of processes in supplier enterprises and has been compared to acquiring an ISO.
The guidelines have a special section on ‘Businesses in Northern Ireland importing and exporting to Ireland’ which contains a lot of generalities about the border and the Good Friday Agreement: in a No Deal scenario, “the UK would stand ready to engage constructively to meet our commitments and act in the best interests of the people of Northern Ireland.” Good to know that. And they will “provide more information in due course.”
But they do provide one solid, useful piece of advice for our friends in Newry, Enniskillen and Derry: “We would recommend that, if you trade across the land border, you should consider whether you will need advice from the Irish government about preparations you need to make.”