What does Brexit mean for shipping goods into the EU from 1st January 2021?

Major changes will take place in shipping arrangements from the UK to the EU from 1 January, as Don Marshall of Exporta warns:

“This year has been tough on trading for many businesses due to the lockdown and restrictions imposed in response to COVID-19. We do not need any further disruptions to our export trade. But the threat of increased demand for ISM15 certified wooden pallets is very real . I would recommend anyone who relies on exporting to the EU to consider plastic pallets as an alternative. They can save time and money in the long term while ensuring compliance at all times.”

What is the problem?

Before Brexit, goods and people moved freely with minimal checks and documentation; moving goods within the EU was much the same as moving them within the United Kingdom. This is all set to change, as exporting goods to the EU will require hundreds of millions of customs declarations each year. The rules regarding Wood Packaging Materials (WPM) will also change as the UK Government website states:

“From 1 January 2021, all WPM moving between the UK and the EU must meet ISPM15 international standards by undergoing heat treatment and marking. All WPM may be subject to official checks either upon or after entry to the EU.

“Checks on WPM will continue to be carried out in the UK on a risk-targeted basis only. The plant health risk from WPM imported from the EU is not expected to change from 1 January 2021.”

What does this mean?

Essentially, all wooden packaging materials such as pallets, crates, boxes, cable drums, spools and dunnage must comply with the ISPM15 guidelines; ISPM15 stands for the “International Standard for Phytosanitary Measures No 15″. This certification, declaring wooden pallets have been heat-treated and are free from pests and fungus, is key to preventing the spread of foreign species from one geographical location to another.

Until now, any pallets used in the shipping of goods to countries within the EU were exempt from this requirement – any pallet could be used or reused when exporting goods. But from January, all wooden pallets, crates and boxes used to export outside of the UK (except for Ireland) will need to be certified and valid to comply with ISPM15.

We estimate this requirement will at least double the demand for certified wooden pallets almost overnight. Timcon, the industry body for wooden pallets, says this will not be an issue as they have been “planning for this for some time”.

But press headlines are more worrying, such as “How a no-deal Brexit will create shortages and could cripple UK food and drink firms”. There is real unease in the industry about the supply of certified wooden pallets. One alternative solution is plastic pallets,  they are already exempt from ISMP15 and completely suitable to use instead.

5 reasons to consider switching from wooden pallets to recycled plastic instead:

1. They are exempt from ISPM15

Plastic pallets, boxes, crates, and containers are naturally hygienic, and parasites, bugs, and fungi cannot live in or attach to them. This means that they do not require any specific certification for exporting to the EU, or any other country for that matter.

2. They are more cost-effective

It is often thought that plastic pallets are more expensive than those made from wood. This was the case when they were first introduced a few years ago, but they are far more common today, as production techniques have evolved to steadily reduce costs.

There is also now a shortage of sustainable wood sources. And with increased demand outstripping supply, prices have been increasing steadily for several years now. The price gap between wood and plastic is narrower than ever, before making plastic a viable alternative.

3. Plastic Pallets last longer than wooden pallets

Wooden pallets are generally only good enough for a few trips and can damage easily. Whereas plastic pallets are engineered for specific uses, scientifically designed to be more accurate, consistent, with guaranteed suitability for a range of different jobs. This means a plastic pallet can last for up to 10 years, at least 25 times the lifespan of a wooden pallet. This makes them a more robust, sustainable and cost-effective solution in the medium to long term than using wooden pallets.

4. Plastic Pallets are more sustainable and environmentally friendly

98% of all pallets sold by Exporta are made from recycled material, which helps to reduce plastic waste. Crucially, they do not end up in landfill, which is where the majority of old wooden pallets go at the end of their lifespan. Every plastic pallet sold by Exporta is recyclable and we offer a free plastic recycling scheme.

5. Plastic Pallets are scientifically designed and therefore more consistent 

Plastic pallets go through a very robust technical design and testing process before they come onto the market. The machines that make them are calibrated – so when a plastic pallet is designed to carry a one-ton on a rack, it is designed, tested, and approved to do so. Wooden pallets are obviously made from a natural material with natural flaws, grains and knots, which means it is not always 100% possible to guarantee exact tolerance and capacity.

Join Ready for Brexit today to download our Brexit toolkit – The Brexlist checklist, the detailed No Deal Brexit planner and the Brexsure audit tool for your supply chain partners

It’s now just 5 months till the UK leaves the EU Single Market and Customs Union. Yet a new survey by the Institute of Directors confirms that most businesses have been far too busy coping with the Covid pandemic to even think about preparing for the change.

Only a quarter of businesses say that they are fully ready, as the IoD note:

“Nearly half of the 978 company directors polled in late June said they weren’t able to prepare right now, with one in seven distracted by coronavirus and almost a third saying they needed the details of any changes to be clear before adjusting. Those in the financial sector were most likely to be ready while manufacturers in particular had more to do. Directors in services felt especially unable to prepare at present, whether due to pressures of the pandemic or because they needed more clarity on changes.”

Most businesses are still hoping against hope that a deal will be reached with the EU, to enable business to continue more or less “as usual”. But the UK government doesn’t seem to share their concerns.

It has now published its new Border Operating Model – a detailed 206-page guide to what businesses need to do.  It is also spending £705m on building a major new lorry park near Ashford in Kent, to serve lorries waiting to cross the Channel, and hoping to recruit 50,000 new Customs officers to deal with the extra 215 million Customs Declarations needed each year

Officials have also told industry leaders there will be a new “Smart Freight” app to enable lorry drivers to obtain a ‘Kent Electronic Access Permit’ – with fines for those who fail to do this. As the Financial Times notes:

“It seems quite late in the day to be launching these initiatives, however well intentioned. Building such an app is one thing — getting lorry drivers to download and use it effectively in the real world is quite another.”

Companies will no doubt continue to hope that a deal will be done at the last minute, to allow ‘business as usual’ to continue. But this is looking less and less likely as every day ticks by, as the CEO of Make UK warned last week:

“Should the UK fail to reach a comprehensive trade agreement with the EU, then those regions with a high concentration of manufacturing and a dependence on Europe as a major market will suffer a triple hit, given the impact of Covid-19. For some companies the combination may prove fatal.”

The risk of doing nothing is growing by the day.  5 months is really very little time to prepare for the scale of changes ahead if there is No Deal.

The Ready for Brexit Directory contains lots of practical advice on what you need to do to prepare

The chairman of the UK’s Chemical Business Association (CBA), representing companies who employ 8700 people and have a turnover of £2.75bn, has warned in a message to their 1300 members that they are living in “times full of commercial, financial and health dangers”. Focusing on Brexit, he warned that companies must now take the necessary steps to secure EU market access after the end of this year:

“CBA has continued to call for an end to uncertainty and, like most of UK business, close regulatory alignment and continuing frictionless trade with the European Union. Our advocacy campaign will continue to secure market access and frictionless trade with the EU – the destination for 60% of the UK’s chemical exports and the source of 70% of the UK’s chemical imports.”

“But the UK Government has made it clear that it has no intention of even attempting to achieve regulatory alignment with the European Union as far as chemicals are concerned.

“CBA is therefore now advising member companies trading with the EU to pursue the following options – before the end of the transition period – in order to secure EU market access.”

(1) Either use an existing subsidiary or create a new one in the EU and transfer any EU REACH registrations to that subsidiary.

(2) Establish a partnership with a company in the EU and transfer any EU REACH registrations to that company.

(3) Support CBA’s plan to create or contract with a collective Only Representative entity in the EU for member companies – the CBA office can provide further details of this option.

“CBA remains absolutely committed to providing you with practical information, support, and solutions to help your business navigate the post-Brexit regulatory and trading environment.”

Budd also praised the contribution being made by CBA companies during the Covid-19 pandemic;

“I’m proud to say that member companies have put their shoulders to the wheel to help in the crisis. Member companies have maintained critical supplies to the NHS as well as the main utilities, such as water and energy. They have also responded to the shortage of hand sanitisers by producing industrial alcohol and other companies have supplied glycerine.”

There is information on how to set up a business in the EU in the Ready for Brexit Directory

Last week’s election result crystallised the choices ahead of the new Government. “Get Brexit done” was a great election slogan, but in reality 31 January will mark “the end of the beginning,” in Churchill’s famous words. At that point, the UK will move into a new era where the need will be to ‘Get Brexit begun.’

The Government’s first decision will be whether to retain the red lines famously set out by then premier Theresa May on taking office in 2016. Given the tight timescale for a decision, which has to be made by the end of June, its alternatives are probably limited:

• Either the UK decides to maintain more or less complete alignment with the EU on standards, regulations, etc. and adopts a Norway-type relationship with the EU27.
• Or it decides to leave with No Deal when the transition period comes to an end on 31 December 2020, and then begins to negotiate a completely new type of deal.

The reason for the binary choice is that there just isn’t enough time between now and the end of 2020 to negotiate and ratify a totally new working arrangement between the UK and the EU. It would take at least two years, and so far the Government has said that it will not request such an extension.

We look forward to continuing to support you over the coming year as these momentous decisions are made. The Ready for Brexit newsletter will move onto a monthly basis, to support you in your contingency planning for a No Deal outcome.

It will focus on providing more detail on the key areas that will be impacted by a No Deal decision – Customs and Tariffs, Finance, Legal, Services and Employment and Supply Chain. Our team knows how these areas used to operate before 1993, when the Single Market and Customs Union began.

In the meantime, we would like to wish you a Merry Christmas and a Happy New Year.

Anna

UK food and drink exports saw the largest growth in sales to China in the third quarter of 2019, finds the Food and Drink Federation (FDF) after analysing the latest HMRC trade statistics. Anna Tobin reports

The FDF’s latest analysis of HMRC trade data, shows that UK food and drink exports rose by 8.3% to £6.2 billion in the third quarter of 2019 and that this rise was driven by a 13.1% growth in sales to non-EU countries.

The most significant increase in food and drink exports outside of the EU was to China, where sales rose by £64.6 million, the largest value increase in over two decades. Approximately 17% of UK food and drink exports to China was branded product, with infant prepared food the fastest growing product.

Sales of branded goods to the EU fell -3.2% in quarter three, this is thought to be the result of the uncertainty surrounding Brexit. The FDF say this reinforces anecdotal evidence that key buyers are starting to look elsewhere due to current uncertainty in the UK.

“This is the fourth consecutive year of food and drink export growth in quarter three,” explained FDF president Gavin Darby. “While the overall value of UK exports across all industries has declined for the year-to-date, food and drink has shown great resilience to buck that trend, delivering growth of 6.3% on 2018 already. Although sales of branded goods to the EU have declined, encouragingly our sales to non-EU countries has increased by over 9% so far in 2019.”

The full FDF exports report can be read here.

Ott Vatter, managing director of the Republic of Estonia’s e-Residency programme, which enables business people to establish and manage an EU-based company paperlessly from anywhere in the world, explains how UK businesses can benefit from the service after Brexit

Can you explain how e-Residency works?

e-Residency is an Estonian Government programme. It’s a transnational identity that is issued by the Estonian police and border guard. Estonia has had a digital identity programme for fifteen or sixteen years and we can’t imagine our lives without it, so 99% of our Government services are online. We communicate with the Government using this identity all the time. And in 2014 we thought why not make it available for foreigners who are already attached to Estonia to a certain extent. And, to our surprise, it came out that there were many more people who could benefit from a digital identity and who wanted to have companies in the EU, without actually physically being in the EU.

Has Brexit boosted the scheme’s popularity?

Yes, we have seen a significant increase in applications for e-Residency since Brexit. e-Residency is useful for Brits because it means that they can still have a  company within the EU and still remain in the EU’s legal framework without actually physically leaving the UK space. It is a virtual gateway to the EU, without being in the EU.

How has Estonia managed to lead the way in creating virtual EU residencies for UK companies?

When we became independent from the Soviet Union [in 1991] we had few resources to begin with and Estonians in general were reluctant to communicate with public officers, so we made the communication with the Government non-physical and we have been using digital identities for more than fifteen years. We didn’t have to invent anything new, we replicated the same infrastructure and system that we have for our citizens for non-citizens and we called it e-Residency, although the name e-Residency can be a little confusing, because it’s not actually residency. You can’t move to Estonia, you can’t travel with an e-Residency card, but it’s your virtual identification.

Will UK residents have to pay tax in Estonia if they set up an e-Residency for their businesses there?

Before e-Residency, you could create a company in the EU by travelling to Germany or Estonia or France, for example, and pay quite an expensive fee to a lawyer and create an EU company. So its conception, e-Residency is not anything new. What’s different is the fact that you can do it from the comfort of your home using your computer from anywhere in the world and when you become an e-Resident there are no obligations. It doesn’t mean that you become a tax resident or a resident of Estonia. There are no strings attached when you apply for e-Residency. It’s a personal status. Now, when you create a company using e-Residency then that company is automatically a tax resident of Estonia, but if your main customers are still in the UK and your permanent establishment is in the UK then you will probably have to pay your corporate tax in the UK.

The general rule is where you create your value, there you pay your tax. It gets a bit more complicated with cross-border services and service-based industries. And, if you are travelling around a lot as a freelancer and you don’t have one permanent establishment, then we see that the benefit for them might be to pay your taxes to Estonia, because you don’t have one permanent establishment.

Does your programme offer additional support to businesses looking to set up e-Residency?

Absolutely. There is an entire industry built upon servicing e-Residents. You need a virtual address registered in Estonia and there are a lot of private companies that will help to establish a company and business consultation services, for example, if you need legal or bookkeeping advice. Every inch of the administrative part can be dealt with, so that you can focus on your core business.

How much does it cost to create an e-Residency?  

The state fee for e-Residency is €100 and the state fee for establishing a company is €190 and many companies also pay a fee for services, such as bookkeeping, and that is roughly around €35 to €50 per month, depending on how many transactions you have per month. It’s very cost effective way in terms of establishing and running a company inside the European Union.

How many UK residents have taken up this offer?

We have around 3,200 e-Residents and about 450 companies who are based in the UK.

Do you have a base in the UK where people can come and find out more about your service, or is it all online?

Our base in the UK is the Estonian Embassy. When you apply for e-Residency you go through a background check and not everyone is accepted, but those that are have to then make an appointment with the Estonian Embassy. You go to the Embassy and they will issue you with the physical card there and you have to have one face-to-face meeting there with the representatives of the Government, because it is a national document, it requires the highest level of security in the EU according to the eIDAS [Electronic Identification, Authentication and Trust Services] act, so we want to see you and verify that you are as you claim to be and then we give you the key to enter our virtual systems.

How long does it take to set up?

It takes roughly two months, sometimes a little quicker and the company registration will take you thirty minutes. Once you have an EU company through e-Residency you have the right to offer goods and services across the EU and in accordance with the EU’s legal framework, even if you are based in the UK after a No-Deal Brexit.

The representative of the UK’s largest manufacturing exporter, the Chemical Industries Association (CIA) is calling for a frictionless, free trade agreement to protect the industry through Brexit and beyond. Anna Tobin reports

With his new political mandate in place, Steve Elliott, the chief executive of the CIA, is urging Prime Minister Boris Johnson to negotiate a frictionless free trade agreement with the EU. He said: “The Country now has the political clarity and certainty which business has been seeking. Now we have that we must get Brexit right and secure an exit and future trading relationship between the UK and the EU that enables broader manufacturing and the chemical industry to maintain and grow its contribution to the whole of the UK economy and to people’s everyday lives.

“We now look forward to working with the Prime Minister, his Government, all political parties across parliament and the devolved  administrations to ensure a strong UK manufacturing presence across the country. Our industry in this country and throughout Europe will be supporting both our Government and the European Union to ensure there is a friction-less, free trade agreement in place as soon as possible. We also believe that it is in our environmental and commercial best interests to secure close regulatory alignment with the European Union and to ensure that we can continue to attract and retain the very best skilled, specialist people from anywhere around the world.

“After three and half years of political stalemate, I hope we can now make rapid progress on our EU exit and future relationship and start to tackle some of the great challenges that are before us. As the Prime Minister said, delivering net zero emissions by 2050 is central to those challenges and it can only be achieved through the products and technologies of chemical businesses. Our industry supports this ambition and we look forward to working with the new Government to secure the investment in technology and infrastructure that will help us reach this.”