UK-EU trade: What German firms need to know

Businesses in the UK and in Germany are concerned about what Brexit could mean for trade. In Germany, a DIHK survey found that German companies are concerned with the added red tape at the border. Similarly, UK exporters have reported considerable difficulty adapting to post-Brexit bureaucracy.

There can be no disputing that Brexit has added additional layers of bureaucracy and complexity to trade between the UK and Germany. However, in many cases, the bureaucracy is not insurmountable. Successful trade is still viable, but it often requires planning and expertise. 

Here are some of the essential points you need to know to effectively manage trade between Germany and the UK, and ensure your goods get to market, effectively, efficiently and without any avoidable delays or costs.

Customs procedures

Now that the UK has left the EU, UK-EU trade is subject to border inspections and customs controls. In order to get goods past customs, you will need to comply with a number of procedures, such as a customs declaration, and furnishing the appropriate EORI number and commodity codes. 

You will also have to account for import VAT and duties. In some cases, you will be required to provide licenses or certificates.

Delayed declarations 

Imports into the UK from the EU now require ordinary customs processes to be fulfilled. You will be required to keep records of goods imported and make a customs declaration. 

If you import ordinary goods, you can take advantage of a delayed declaration, and complete your customs declaration up to six months after import. In addition, duties will only be payable when you make the declaration. 

EORI number

An EORI number is required on both import VAT and customs documentation. Note that if you had previously been issued with a pre-Brexit EORI number by the UK, you may need to apply for a new one. 

You can validate your EORI number using HMRC’s online EORI number validation tool. 

Commodity codes

You will need to provide accurate commodity codes customs authorities. These codes help determine what duties and quotes apply (when duties are applicable). Fortunately, the codes are standardized according to the WCO system. 

Licenses and certificates

In addition to ordinary customs procedures, some goods require additional certification. For example,  you will require a licence to import items such as hazardous goods and medicines.

Agricultural products will often require an accompanying health certificate. Where certificates are required, these will need to be certified by the relevant authority. For example, animal products may require certification by a duly authorized veterinarian. 

In addition, when importing products of plant or animal origin into the UK, you will have to pre-notify border control authorities. 

Duties and quotas

Following Brexit, trade between the UK and EU is now, in many cases, subject to duties and quotas. 

For some businesses, duties are an unavoidable additional cost. Unlike import VAT, duties cannot be reclaimed. 

Fortunately, not all trade between the UK and EU is subject to duties. The Trade and Cooperation Agreement, which regulated trade between the UK and EU, specifies no duties or quotas on goods that originate in the UK or EU.

In order to take advantage of preferential trade, importers need to demonstrate that Rules of Origin criteria have been met. This can be a reasonably straightforward process. However, RoO criteria are not always clear cut. For example, in the case of manufacturers that produce composite goods partly from raw materials sourced from abroad, demonstrating RoO will be more complex. As the minutiae of Rules of Origin criteria can be very complex, manufacturers and exporters should seek clarity from officials or experts in the case of any ambiguity or doubt. 

Postponed VAT 

If your business is registered for UK VAT then you can apply to postpone paying import VAT. The UK’s Postponed VAT system lets you account for import VAT when you file your tax returns rather than at the point of entry. 

Postponed VAT offers a cash flow advantage, as you can account for output VAT and input VAT at the same time. 

Postponed VAT is optional. However, in cases where you choose to postpone your customs declaration (as discussed above) then you will also be required to elect for Postponed VAT.

Duty deferment

If you make frequent imports, it may be more efficient to pay your duties and import VAT for multiple consignments in a single payment.

You can apply for a duty deferment account, which allows you to make a single payment each month via direct debit for all your duties and import VAT. 

Optimizing imports 

There’s no getting away from the plain fact that Brexit means additional red tape and costs.  However, these issues can be mitigated with effective planning. 

Businesses can optimize cash flow and reduce costs by taking advantage of deferments or other appropriate mechanisms, eliminating duties where possible, and ensuring all paperwork is in order to ensure goods get through customs without delays. At the same time, exporters need to ensure they are fully VAT compliant, and meet all customs requirements, to avoid penalties or costly delays.

VAT IT has designed a holistic Brexit solution that will ensure your business trades as efficiently as possible. Brexit may present an unwelcome wall of red tape. Fortunately, we can devise a customized Brexit solution for your business to help you scale that wall affordably and effectively.

German businesses trading with the UK

For many German businesses, navigating through customs, shipping and international VAT compliance (especially in a post-Brexit market) can get overwhelming and confusing. Download our guide to help you navigate your business through murky waters.