Brexit

As you are probably aware there is much speculation about why Britain chose to leave the EU, this will be argued by scholars regardless of the outcome for many years so we won’t dwell on that today.

Whilst the governments of Great Britain and those of the EU have disclosed little about what to expect in the future days, months, years following Brexit, the following is what we have pieced together from various industry and government sources.

Europe is a continent divided into around 50 countries. 28 of those countries are members of an economic/political organisation called the European Union. (EU)

The EU is primarily a free-trade area, working as one single market, where goods, services, people and capital can flow freely between the member countries.

Brexit was the result of a growing discord within the UK at our sovereign state being administered and often over ruled by a non-elected foreign government.

So to clarify, the UK will be leaving the EU not Europe!

ANYWAY, enough of politics, It is now I would like to turn our attention to matters of International Trade.

Great Britain established a trading post here in Hong Kong in 1841, that was a long time ago and things have moved on in many ways, but here we are 178 years later and still doing the same thing we were doing all that time go, trading foreign goods.

Today the UK’s largest global trading partner is the United States of America, and that is a trade relationship that has lasted for over 400 years.

This trade lane with the USA operates seamlessly and quite happily without any special deals in place, as does trade with Great Britain’s various Commonwealth partners including Australia and Canada.

For that matter, Great Britain trades happily without any special trade deals with just about everyone, Scandinavia, China, South East Asia, India, Africa, South America (sorry if I missed someone out)

So it gives me a great deal of confidence that even without a special deal in place with the EU or a No deal Brexit as it has now been termed, it will still be business as usual for the UK.
To summarise our position in the event of a no deal Brexit.

  • If the UK remains in the EU, nothing changes.
  • If the UK leaves but with a one of the multitude of sub agreements being discussed by our governments, nothing changes.
  • If the UK leaves without agreement, ( Hard or No deal Brexit )it is expected to revert to WTO trade rules until alternative more permanent structures can be introduced to facilitate the flow of goods. (namely EFTA, Canadian model, Norway Model).

It is worth reminding those present that Brexit is only expected to affect the flow of cargo between current EU member states, all other International traffic will have existing customs border processes already in place which will remain unchanged.

I will now draw your attention to the UK‘s current trading practices and how they affect the flow of cargos to and from our country in the case of a No Deal Brexit.

Exports from the UK

Goods being exported from the UK to Europe may very well attract Import duties at the country of destination, however, this will be for EC to decide what it will and what it will not allow to be imported into Europe for Free.

Imports into the UK

All goods arriving from Europe will almost certainly require a customs clearance to take place to calculate Customs duties.

At this stage we still do not know whether Duty will be payable on the day of arrival at the border or whether payment can be deferred and paid retrospectively.

There are already in place several scenarios which could seamlessly facilitate a No deal Brexit, especially when considering the many countries which already trade happily and for free with the EU

EFTA is a preference status; its current members are Switzerland, Norway, Iceland, and Lichtenstein; all of which enjoy free trade with current EC members.

EFTA movements are Duty free however are subject to T1 transit document requirements. A T1 transit document is required to be in place during transit across foreign borders and be discharged upon arrival in the final country of destination.

ATR1 (Turkey) is another trade model similar to the above but quite often subject to greater scrutiny given the location and proximity of its Eastern border.

TSP -Transitional Simplified Procedure is another solution designed to make it easier for goods to be imported from the EU. TSP allows a registered UK Importer to lodge a simplified frontier declaration to clear goods from the EU arriving at a designated UK Port. Goods can theoretically flow freely, as the Importer is required to make a full retrospective Import declaration at a later date.

The problem we have identified with the TSP model is that if your goods are consolidated on a groupage service with non TSP cargo, they may be delayed anyway until all consolidated cargo has been clear through customs before its onward journey.

Duty payments.

UK Customs announced only days ago that Duty may be waived on the vast majority of products (87%) for an interim period of at least 12 months in the event of a ‘no deal Brexit.”

So, in summary Great Britain looks likely to leave the EU with a No deal Brexit and without any special deal in place with the EU. However as we have outlined above, Great Britain is ready for such an event and will look forward to making the most of new trade agreements with its global trade partners when free from historic restrictive EU directives.

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Please Note

Our address has changed

Nucleus International Cargo Ltd
Kingswick House, Kingswick Drive
Sunninghill, Ascot
Berkshire
SL5 7BH

IncoTerms.

The incoterms define the role between seller and buyer at an international transaction. In the contract between the seller and the buyer, the following is determined:

  • The duties of the buyer and the seller.
  • Who takes care of the insurances, licences, permissions and all other formalities.
  • Who arranges the transport until which point and who is responsible for this.
  • The point where the costs and risks pass on from the seller to the buyer.

There are thirteen different incoterms in Incoterms 2000 and 2010. These incoterms take care of the international rights and duties from the buyer and the seller. Six of the thirteen incoterms are about ocean freight. The remaining seven incoterms are regarding all transport modalities. The Incoterms are being prepared and published by the International Chamber of Commerce (ICC). The most common terms are:

EXW – ExWorks (2000 and 2010)
This term represents the seller’s minimum obligation since they only have to place the goods at the disposal of the buyer. The buyer must carry out all tasks of export & import clearance. Carriage & insurance is to be arranged by the buyer.

FCA – Free Carrier (2000 and 2010)
This term means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. Seller pays for carriage to the named place.

CPT – Carriage Paid To (2000 and 2010)
This term means that the seller delivers the goods to the carrier nominated by them, but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all costs occurring after the goods have been so delivered. The seller must clear the goods for export. This term may be used irrespective of the mode of transport (including multimodal).

DAT – Delivered at Terminal (named terminal at port or place of destination) (2010)
Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal.

DAP – Delivered At Place (named place of destination) (2010)
Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer.

DDP – Delivered Duty Paid (2000 and 2010)
This term represents a maximum obligation to the seller. This term should not be used if the seller is unable to directly or indirectly to obtain the import license. The terms mean the same as the DDU term with the exception that the seller also will bear all costs & risks of carrying out customs formalities including the payment of duties, taxes & customs fees.

FAS – Free Alongside Ship (2000 and 2010)
This term means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. The seller is required to clear the goods for export. The buyer has to bear all costs & risks of loss or damage to the goods from that moment. This term can be used for ocean transport only.

FOB – Free On Board (2000 and 2010)
This term means that the seller delivers when the goods pass the ship’s rail at the named port of shipment. This means the buyer has to bear all costs & risks to the goods from that point. The seller must clear the goods for export. This term can only be used for ocean transport. If the parties do not intend to deliver the goods across the ship’s rail, the FCA term should be used.

CFR – Cost and Freight (2000 and 2010)
This term means the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs & freight necessary to bring the goods to the named port of destination, BUT the risk of loss or damage, as well as any additional costs due to events occurring after the time of the delivery are transferred from seller to buyer. The seller must clear goods for export. This term can only be used for ocean transport.

CIF – Cost, Insurance, Freight (2000 and 2010)
The seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the cost & freight necessary to bring goods to a named port of destination. Risk of loss & damage is the same as CFR. Seller also has to procure marine insurance against buyer’s risk of loss/damage during the carriage. The seller must clear the goods for export. This term can only be used for ocean transport.

CIP – Carriage and Insurance Paid (2000 and 2010)
This term is the same as CPT with the exception that the seller also has to procure insurance against the buyer’s risk of loss or damage to the goods during the carriage. This term may be used for any mode of transportation.

DDU – Delivered Duty Unpaid (2000)
This term means the seller delivers the goods to the buyer, not cleared for import, and not unloaded from arriving means of transport at the named place of destination. The seller bears all costs & risks involved in bringing the goods to the named place other than “duty” (which includes the responsibility for customs formalities & payment of those formalities, duties & taxes) for import into the country of destination. Buyer is responsible for payment of all customs & duties & taxes.