What does the proposed Custom Union look like post Brexit?

The government has indicated two proposals that could be adopted to shape the future customs landscape with the EU:

  • a ‘highly streamlined customs arrangement’; or
  • a ‘new customs partnership with the EU’.

Both solutions closely mirror the existing EU customs position; they effectively seek to achieve the same overall benefits of the single market and customs union under a different guise. If this becomes a reality it will be welcomed by importers and exporters alike.

At the heart of both proposals are plans for simplifications in the customs process that, if agreed, will inevitably require some form of registration to enable business to benefit. To qualify companies must have the right infrastructure in place to effectively manage their customs affairs. 

Should some form of simplification become a reality, UK businesses would be expected to achieve Authorised Economic Operator (AEO) status to leverage any new streamlined customs structure. 

What is AEO?

AEO is available to all companies regardless of size and allows businesses that demonstrate supply chain compliance within internationally agreed parameters to benefit from simplifications for security and safety matters, or customs requirements, or both. It is broadly thought that AEO status will act as a passport to customs simplifications introduced by EU countries and that businesses with AEO status will have an edge over non-AEO authorised businesses post Brexit. Additionally, achieving AEO status may also be a requirement for businesses to benefit from any simplified customs formalities for goods traded across the Irish land border.

It is fair to say that the benefits of AEO for consumer businesses increase with extensive and dynamic supply chains. The AEO concept is based on the Customs-to-Business partnership introduced by the World Customs Organisation (WCO), where companies who voluntarily meet a variety of criteria and work cooperatively with customs authorities to ensure supply chain security will enjoy benefits throughout the EU. The basic structure and scope of AEO is unlikely to change post Brexit and it is reasonable to assume that these benefits are likely to become of considerably greater importance once the UK leaves the EU during early 2019.

There may also be indirect benefits, AEO approval will increasingly confer an element of confidence in a business’s supply chain security and customs procedures, this benefits both the customs authorities as well as suppliers and customers. Furthermore, AEO approval may assist with gaining new sales and procurement contracts, as it demonstrates that the business is compliant in respect of its processes and procedures, is financially solvent, and should accordingly be a safe pair of hands with which to do business.

If the UK leaves the EU absent of the UK’s proposed simplifications or the retention of a customs union, customs duties and VAT will be payable at importation from the remaining EU members. This potential increase in customs liabilities will have a similar impact on deferment accounts. The impact of this scenario could be mitigated by securing AEO status.

As a final but perhaps critical point in the post Brexit environment, the lighter touch controls and priority treatment for physical and documentary controls AEO provides, will help companies import goods into the UK faster.

What do you need to do to gain AEO status?

As an initial step to gaining AEO status, businesses should review their existing supply chain and customs operations and critically review them against AEO authorisation criteria.

We can assist you with this process leading to a gap analysis that will identify the changes that may be necessary to the businesses procedures to place the business in the position to seek authorisation for AEO from HMRC or other EU customs authorities. We can also assist and guide you through the complex application and authorisation process.

If you have any questions please get in touch with Brad Ashton.