Webinar | Brexit | The End Game | 19 Oct 2020
Transcript of Webinar | Brexit | The End Game | 19 Oct 2020
Brexit | The end game19 October 2020
2Brexit | The End Game
Deal or no deal?
3Brexit | The End Game
Agenda
Introduction & how the webinar works1
Latest Brexit developments from a business perspective2
The politics of Brexit | Insights into the negotiations3
Trade, customs & VAT4
Legal & regulatory 5
Supply chain | production & logistics6
Mobility & workforce7
Wrap-up9
Questions & answers8
4Brexit | The End Game
Practicalities
• The webinar is being recorded and will be available afterwards on Deloitte's Brexit Readiness Centre
• The slide deck can be downloaded in pdf in the module "Documentation & Links“ on your webinar console
• Don’t hesitate to drop questions or comments in the chatbox (anonymously)
• Questions will be addressed towards the end of the webinar or after the event
Brexit | Latest developmentsRichard Doherty | Deloitte Belgium Brexit Advisor
19 October 2020
6Brexit | The End Game
Brexit timeline
15-16
European Council
23-26European Parliament session
09UK government publishes internal market bill
Sep
tem
ber
Oct
ob
er
No
vem
ber19
Today
Practical deadline for conclusion of negotiations
Dec
emb
er
End of transition period
31
10-11European Council
7Brexit | The End Game
UK-EU negotiations
Level playing field (including State Aid)
Fisheries
Northern Ireland Protocol (Internal Market Bill)
Future Governance of the EU-UK relationship
Main sticking points
Brexit | The politics of Brexit | Insights into the negotiations Baron Frans van Daele | Minister of State
19 October 2020
9Brexit | The End Game
Frans van DaeleBelgian Minister of State and senior advisor to Deloitte Belgium
Trade, Customs & VATDaan De Vlieger and Jan Vrijsen |
Deloitte | Indirect Taxes
19 October 2020
11Brexit | The End Game
Status update – how important is a trade deal?
Will a trade deal be agreed and ratified by 31 December 2020
Critical challenges affecting trade remain:
• Rules of Origin
• Multilateral cumulation
• IRL-NI border process (& UK Internal Market Bill) – issues already agreed in Withdrawal Agreement
IF NO DEAL• Full customs consequences
• Withdrawal Agreement fallback at risk?
IF YES• New UK EU economic relationship
• Set to start on 1 January 2021
No Deal scenario
• Customs formalities
• VAT: import and export
• Tariffs & duties (UK and EU tariff schedules)
• Divergence of regulatory requirements (see Legal section)
• IRL-NI border issues become even more complicated?
Trade Deal scenario
• Customs formalities
• VAT: import and export
• No import duties if compliance with ROO
• Mutual recognition or agreed regulatory requirements?
• Established IRL-NI border process (based on Withdrawal Agreement principles) – depending on resolution of Internal Market Bill issues
12Brexit | The End Game
Status update – Customs and VAT formalities
Deal or No Deal, procedural requirements, border checks and increased costs will come into play. This will likely cause delays and other challenges for companies, supply chains and retailers in almost every sector of the economy.
UK-EU trade will be subject to customs formalities (whether deal or No Deal); and to duties if No Deal
• Full clearance procedure at EU side
• UK Border Operating Model (transitional implementation until mid-2021 – for some)
• UK tariff and EU tariff
• Need to meet Rules of Origin conditions to qualify for preferential duties
• Special status for Northern Ireland (still under discussion and vulnerable if No Deal)
Deal or No Deal, UK–EU trade will be treated as imports and exports for VAT
• Different reporting obligations
• Loss of simplifications
• Evidence requirements
• Update tax code determination
• Cash (flow) impact
So you’d better make sure you’re in the ‘green lane’
13Brexit | The End Game
Customs & Trade Brexit preparedness challenge – what to cover?
GAME OVER?
Tick the boxes to know how ready you are…
Deloitte C&T readiness checklist15 Critical areas to determine your readiness level
KnowledgeImpact
assessment
Beneficial
regimes
Clearance
responsibility
Clearance
process
Registrations
and
authorisations
Brokerage vs
in-house
Communication
lanesSystems
Customs data
incl.
classification
RegulatoryLiability and
mandates
ValuationPreferential
OriginVAT
14Brexit | The End Game
Clearance process
Customs & Trade Brexit preparedness challenge – Some concrete steps to be taken
Knowledge Impact assessment Beneficial regimes
Clearance responsibility Clearance process
Brokerage vs
in-houseCommunication lanes
Customs data incl.
classificationRegulatory
Valuation
Obtain an EU/UK EORI number
Assess and improve your
product classificationAssess and ensure
regulatory compliance
Appoint a UK/EU declarant Quantify duty impact
This list is not exhaustive!
Agree on who will customs
clear (customs vs VAT)
Set up clearance process
and controls
Pursue simplificationsAssess need for (and
obtain) UK VAT number
Manage (contractual)
liability
Engage with third party
logistics providers
15Brexit | The End Game
Analysis
• Conduct analysis to understand
– Are any product re-classifications required/ possible?
– What is the Duty Impact?
– Are duty suspensions applicable post Brexit?
– Will up-front agreement (e.g. rulings) be required with HMRC and/or EU Customs authorities?
Classification will be a key area of compliance and a key part of the declaration process, regardless of a deal or No Deal scenario
Customs & Trade Brexit preparedness challenge – a specific example
Comparison
• Compare existing tariff codes with new UKGT to identify:
– Where codes no longer match (8 or 10 digit)
– EU Duty Rates versus UK Duty Rates
Data Download
• Download all tariff codes currently in use (ROW movements, Intrastat and those authorised under Special Procedures (where applicable))
16Brexit | The End Game
Customs & Trade Brexit preparedness challenge – top 3 questions
Knowledge Impact assessment Beneficial regimesAm I ready? Is there still time to prepare? What should I do first?
Legal & regulatoryAlexander Baert and Matthias Vierstraete |
Deloitte Legal
19 October 2020
18Brexit | The End Game
Contracts – Time is ticking
• COVID-19 may have delayed review of Brexit-sensitive contracts – but now it’s urgent, to avoid problems arising in 2021
• All contracts with UK parties need to be checked to ensure that they remain enforceable once the Transition Period is over
• Brexit does not constitute Force Majeure in contractual disputes
• The best practice approach is as follows:
31 December 2020
Step 2Mapping of the contract structure
Step 1Mapping of the parties
Step 3Screening of the contract
Contract impact
Impacted clauses
Intellectual property
Data protection | GDPR
Pricing | Fluctuations
Standards | Norms
(e.g. CE-labels, packaging)
Delivery
Territory
EU funding
Applicable law |
Competent court
Sectoral regulations
Duration | Timings
Step 4Actual renegotiation
Renegotiate existing contracts
Urgency:
• Highest priority
• Necessary changes must be
made before 31 December
2020
Method:
• Single general addendum vs.
Case-by-case renegotiation
Future contracts
19Brexit | The End Game
Changes in: status of EU exporters and importers, regulatory compliance
Trade in goods – Regulatory issues and non-tariff barriers
Goods entering the EU from the UK: Need forEU-valid Certificates, authorisations, markings,& labelling
Chemical products (to be governed by REACH)
• Certification by EU bodies
AND
• Union labelling requirements required
• Registration with (or “by”) an EU manufacturer or importer
• Properly registered as “downstream user”
20Brexit | The End Game
Transfer of personal data from the EEA to the UK
GDPR – Impact on personal data transfers
Transfers to UK only allowed if:
• The EU adopts an adequacy decision for the UK (unlikely given recent European Court of Justice judgment?); or
• Appropriate safeguards are implemented in line with GDPR
Starting point: personal data transfers outside of the EEA are only allowed if certain conditions are met
Brexit: UK will not be part of the EEA anymore
21Brexit | The End Game
Transfer of personal data from the EEA to the UK
GDPR – Impact on personal data transfers
Identify clients, service providers, subsidiaries and others to whom personal data are transferred01
Check whether, under such personal data transfers, data are transferred from within the EEA to the UK02
Verify whether appropriate safeguards are already in place or implementation is planned before 31 December 2020:
• (Standard) Contractual Clauses
• Binding Corporate Rules
03
In case no safeguards are planned or in place yet, identify the most appropriate safeguard(s) and implement before 31 December 202004
Update documentation (e.g. Register, Privacy Policy, Data Processing Agreement) in order to comply with the GDPR05
• Code of Conduct or Certification
• Exceptions
Supply chain | Production & logisticsLieven Comeyne | Deloitte Consulting
19 October 2020
23Brexit | The End Game
Following the UK government’s “Yellowhammer” report (2019), which warned of travel and shortages in the UK from January 2021, the recent UK Cabinet Office report says:
What is the worst case scenario for logistics delays in the UK ?
Update September 2020 – Official UK Cabinet Office document
In its reasonable worst-case scenario*, there may be "maximum queues of 7,000 port-bound trucks in Kent and associated maximum delays of up to two days".
"Both imports and exports could be disrupted to a similar extent.“
“The disruption is assumed to build in the first two weeks of January, and could last three months, or longer should France rigorously apply Schengen passport checks on hauliers.”
*BBC News equates this to a No Deal scenario
24Brexit | The End Game
The ongoing COVID-19 pandemic has raised multiple vulnerabilities in supply chains which will be further exposed in a ‘no-deal’ Brexit scenario. An integrated response to both crises makes sense.
Brexit in COVID-19 times
COVID-19 challenges
1. Supply shortages and Business continuity at risk due to dependency on critical suppliers
2. Cost of stockpiling leading to liquidity challenges
3. Less than full production capacity due to distancing requirements
4. Countries restricting exports of critical input products
5. Longer transit times and suppliers unable to fulfil orders due to local lockdowns
COVID-19 & Brexit response
Supply Chain resilience
• Visibility: track and monitor
• Flexibility: adapt quickly
• Collaboration: work effectively with supply chain partners
• Control: ensure the proper procedures and processes are followed
Orchestrated centrally (special task force)
25Brexit | The End Game
Companies need to be ready for immediate disruption as well as long-term impacts
Impact of Brexit on Supply Chains (alongside COVID)
Quantify the risk you run with your current supplier base, and increase/
diversify collaboration structures to mitigate risk02
UK manufactured products placed on EU market will be subjected to
additional regulatory and customs requirements, and visa versa03
Reduced UK EU logistics capacity & increased transit times04
Identify critical products to ensure business continuity.
Factor in potentially substantial border delays for certain products01
26Brexit | The End Game
Companies need to understand the immediate impact of Brexit and start acting now
The Day 1 impact of Brexit on supply chains
Regulatory/Customs implications
Check:
• Licenses and certificates
• Originating status of goods
• Labelling changes and product standards
For imports and exports to avoid supply chain disruptions
Supply chain Operations
• Be ready for higher volume of customs declarations for imports & exports.
• Ramp up your operational response capability to manage disruption
• Review contractual commitments and penalty clauses relating to delivery times
• Reflect additional transit times into service levels
Resilience
• Build critical inventory to ensure production
• Secure financial scope to manage disruption period potential
• Mitigate critical supplier risk
– Robustness of Brexit plans
– Hot line and contingency plan
– Do I get priority in case of disruptions?
• Identify potential staff shortages in critical operational areas
27Brexit | The End Game
Companies need to understand the resilience of their supply chains in the face of key Brexit challenges, and adapt where necessary
The long term impact of Brexit on supply chains
Suppliers visibility, mapping and assurance
• Extend visibility and awareness of multi-tiered global supply chains
• Re-evaluate supply base
• Understand potential to near/reshore suppliers
Operating model
Evaluate operating model post-Brexit – due to change in UK circumstances
• Financial performance could be impacted by additional customs duties, processing costs and compliance cost
• Operational performance will be impacted by longer lead times, increased complexity of supply chains, and limited network capacity for transport and storage of goods
Resilience
• Identify potential risks to contractual obligations created by suppliers’ shortcomings
• Factor lead times into decision timeframes
• Redesign supply network in post-Brexit for flexibility
• Consider more centralised planning at HQ
Mobility & workforceErin Clor | Deloitte | Global Employer Services
19 October 2020
29Brexit | The End Game
Key considerations – whether there is a Free Trade deal or not
Mobility & workforce
Immigration
SocialSecurity
Professionalqualifications
Otherconsiderations
Free movement of workers/people ends on 31 December 2020:
• EU nationals already in UK by 31 December 2020 must submit application to stay by end-June 2021, to benefit from current right to work/stay. New arrivals as of 1 January 2021 to be dealt with under new UK immigration rules. Belgium to treat UK applicants as “3rd country”.
• Increased complexity for work permits, visas, residence permits: uncertainty, long lead times and cost
No EU-wide coordination of social security arrangements with UK
• For new assignments as of 1 January 2021, current EU-wide social security coordination will be replaced by bilateral UK-EU Member State agreements (either reverting to pre-EU arrangements or based on new accords to be negotiated country by country).
• Difficulties and delays in application of new rules are very likely
• Even if there is a breakthrough in negotiations, existing mutual recognition of professional qualifications will legally end: and recognition may not be re-established in time for 1 January 2021.
• Challenges for regulated professions, including lawyers, health care professionals, pharmacists, architects, engineers
UK driving licenses accepted across EU until 31 December 2021 – after which UK nationals living in EU must apply (and qualify ) for a new local license. Visitors from UK may require additional documents to drive in EU.
European Health Insurance Cards (which previously provided access to EU public health care) will no longer be issued by the UK, and UK travel insurance policies may no longer cover all EU Member States.
UK citizens travelling in the EU (and vice versa) should review the requirements and confirm that their travel coverage is sufficient to cover both work and personal days within any trip or assignment to or from the EU.
30Brexit | The End Game
Ensure internal understanding of policy changes, budget and project planning
Brexit workshops on HR & Talent issues recommended for senior executives, and project managers
Roll out communication to employee and internal stakeholders – and key clients/government agencies
What action should employers take now?
Mobility & workforce
HR and TalentReadiness
Brexit communication
Individual guidance
Step 1Step 2 Step 3
• Brexit FAQ: support employee self-assessment to answer basic Brexit HR questions
• “Brexit surgery”: Bespoke analysis of individual cases or projects
• Assistance with immigration applications, social security formalities, coverage and driving licenses.
31Brexit | The End Game
Managing Brexit alongside COVID
Mobility & workforce
Brexit impacts
• End of free movement of people between UK and EU
• Difficulties in deploying UK employees to work in Belgium/EU – and vice versa
• Introduction of new UK immigration system, with its tougher conditions on skills levels of immigrant workers
• Businesses must adjust timing and cost projections for impacted cross border projects
• Employers should review talent pool and ensure that key skills are available in the right locations- costs to move employees will increase
COVID-19 effects
• Challenges to source workers across all borders due to travel restrictions and lockdowns
• Almost complete end to fly in and fly out services provision
• Businesses may have to reduce workforce when BE government support to companies ends
• Company policies must confront new ways of working, and ensure they are legally sound
Questions & answersAll
19 October 2020
Wrap-up19 October 2020
International Business Traveller Lab 34
The time to act is NOW
What’s next?
35Brexit | The End Game
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