Webinar | Brexit | The End Game | 19 Oct 2020

Brexit | The end game19 October 2020

2Brexit | The End Game

Deal or no deal?


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


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


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


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


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


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


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’


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


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


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))


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


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


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”


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


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


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


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)


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


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


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


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.


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?


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.


Managing Brexit alongside COVID


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?


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Who to contact for help?


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• Corporate & withholding tax

• Customs and trade

• Legal

• Location strategy

• People

• Public funding

• Risk management

• SMEs

• Supply chain

• Technology

• VAT

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Webinar | Brexit | The End Game | 19 Oct 2020

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Transcript of Webinar | Brexit | The End Game | 19 Oct 2020