A “hard Brexit” will result in customs controls being reintroduced on trade routes to and from the UK. Customs controls will inevitably impose extra administrative costs on businesses. Matthew Broadstock and Elaine Long discuss the possibility of customs controls being reintroduced.
Customs controls will inevitably impose extra administrative costs on businesses. Coupled with this, there is also a risk of significant disruption to trade as it is not clear whether Irish ports have the necessary infrastructure to deal with the application of customs controls to the high volume of imports from the UK and nor is it clear that the UK ports have the requisite infrastructure in place to deal with goods being exported from Ireland. This is likely to impact on any business that uses the just-in-time inventory system. It may also result in contractual disputes where goods are not delivered in time which may in turn lead to legal arguments founded in force majeure being raised. Please see our piece on Brexit and Contracts: a Practical Guide here. It will also be important for parties to have clarity as to who has responsibility for importing and/or exporting goods and also who will incur any cost arising from the imposition of customs duties.
One item which all businesses involved in trade with the UK will need to be cognisant of is the requirement to provide a classification code for the customs clearance of each of their goods. The classification code determines the rate of customs duty applicable on the importation of goods and also determines whether certain levies apply, such as anti-dumping duty. It is essential that goods are correctly classified to avoid delays or seizures of goods at the point of entry which could result in businesses failing to fulfil their contractual requirements. Failure to classify goods correctly could lead to the imposition of penalties which can be severe from both a financial and reputational perspective. Misclassification could also result in further scrutiny by Revenue of all of a business’s wider affairs.