New Year – new trade rules for agri-business

By Ciara Dillon – head of food/drink and agri-business, tax director, BDO Ireland

A new era has dawned; Great Britain (GB) has left the EU Single Market and Customs Union. As a result GB no longer benefits from the free movement of goods within the EU.

While the deal struck on Christmas Eve provides for tariff and quota-free trade for goods originating in the UK or EU, non-trade barriers still exist for agri-business in both Ireland and GB.

As part of the overall agreement, trade between the Republic Of Ireland (ROI) and Northern Ireland (NI) remains unchanged. However, new rules have been introduced for imports from GB to NI which mirror the rules for import into ROI from GB.

Short-term implications for agri-business

Immediate implications:

  • Non-trade barriers take the form of additional customs paperwork, phytosanitary and sanitary (SPS) checks, health certificates and increased transport costs;
  • Customs documentation: From January 1, 2021, it is estimated that the level of customs documentation will increase from circa 1.6 million declarations per annum to circa 20 million per annum. The cost of a single customs declaration is about €50. Along with customs declarations, entry summary declarations are required to be lodged for imports and, ultimately, a Pre Boarding Notifications (PBN) needs to be provided to customs at the port;
  • Rules of origin: Under the terms of the agreement where goods qualify as originating in the EU or UK, then they will not be subject to duty on import into either territory. If goods do not qualify as originating then World Trade Organzation (WTO) rates will apply.

In order to qualify under the rules of origin goods must either be wholly produced in the UK or EU or be “substantially transformed” in line with the specific origin rules applicable to the product being exported.

Further immediate implications include:

  • Proof of origin: To claim the 0% duty rate, the importer will be required to declare they hold proof that the goods comply with the rules of origin. This can be done either by providing an approved statement from the supplier on the commercial invoice, or other commercial documents that describe the goods or by way of a self-declaration based on your own knowledge and analysis. For consignments over €6,000 EU exporters will also need to be authorised in the Revenue Registered Exporters system (REX) to provide this export statement of origin;
  • Technical regulations and standards: For imports of certain food products e.g. products of plant or animal origin a business may also need to: register with Department of Agriculture, Food and the Marine (DAFM), the Food Safety Authority of Ireland (FSAI) or the Health Service Executive (HSE); register with Traces-NT; obtain health certs, or phytosanitary certs from the UK; provide DAFM with 24hrs notice of import; complete your traces declaration and upload a copy of your certification; and ensure you have the original certification with the driver on import;
  • Import VAT may apply depending on the product being imported, e.g. a second-hand tractor may attract import VAT at 21% (temporary standard rate). For VAT-registered agri-businesses, any import VAT should be recoverable via postponed VAT accounting treatment. However, in some circumstances it could have a cash-flow impact where any import VAT is payable at point of import;
  • Transport considerations: For goods moving through the UK landbridge, it may take longer as there is increased paperwork for users of this route, therefore worth considering an alternative supply chain route. Additional ferry options have come on board which include direct sailings from Rosslare to Dunkirk. However, for many agri-businesses the use of the UK landbridge is necessary to get their product to market in the optimal condition;
  • Customs agents/brokers: Along with the added costs and time of additional customs paperwork, there is also an immediate shortage of experienced personnel to carry out the role. To help alleviate this burden, BDO in conjunction with Fexco have developed Declaron – a customs clearance solution;
  • €100 million Brexit scheme for primary processing in beef, pigmeat, sheep meat, poultry and dairy: This capital investment scheme is for the processing and marketing of these agricultural products and is due to open on January 28, 2021.

Long-term implications

Longer-term considerations:

  • As the UK looks to negotiate trade deals with New Zealand, Australia, and the US, this may have implications for Irish meat and dairy products in the UK market place if cheaper imports can challenge the Irish share of the UK market. In this scenario the much talked about ‘level playing field’ and the upholding of standards will need to be invoked by the EU;
  • Irish agri-business will need to continue to develop other markets and promote the quality and high standards of our agri-produce;
  • Introduction of an Export Credit Insurance Scheme in Ireland should be considered. The UK and a number of EU member states already have export credit insurance support. The lack of a state-backed export credit insurance scheme may leave agri-food and drink businesses at a competitive disadvantage;
  • Significant access to the €5 billion Brexit Adjustment Reserve Fund is important for Irish agriculture.

A trade deal is extremely welcome despite the prolonged effort it has taken to get to this point. However, for many Irish and UK businesses, they have had to assess their supply chains and continue to consider how they structure interactions and delivery terms with both suppliers and customers.

In many cases, we have seen Irish companies having to establish UK companies to deal with import requirements and to ensure their product reaches the UK marketplace and vice/versa for GB companies needing to establish a presence in Ireland.

The close interaction with our nearest and largest trading partner remains and Irish agri-business will need to continue to adapt and enhance this relationship as we head into a new trading era.