The BFC is communicating with the government to emphasise the importance of clarity in terms of arrangements for 1st January 2021. The government continues to negotiate a free trade agreement with the EU: businesses should note that regardless of whether a free trade agreement is agreed or if we enter a no deal situation, the 1st January will bring major changes for business and citizens, and preparations should be made now.
The government has prepared a number of checklists to prepare, the fashion industry sits between two of these, so we recommend you look at both:
Consumer goods: Find out more here
Creative Industries: Find out more here
The BFC recommends that businesses in the industry undertake a full analysis of their operations and prepare as much as possible for any outcome. It is important that businesses take a proactive approach to understanding the implications, particularly as the potential impacts, delays and increased costs may be incurred across the supply chain.
Whilst every effort has been made to ensure that the information is as full and as up to date as possible this is a fast-moving situation and we recommend that businesses read Government guidelines (gov.uk/transition) that are constantly being updated and seek their own independent advice in preparation.
Businesses should ensure they:
- Have a UK EORI number
- Have access to a duty deferment account
- Have access to a business that can submit declarations on your behalf (generally a customs agent) to ensure that the appropriate customs declarations are made
- Review your contracts and Incoterms to ensure clarity of terms and conditions and responsibilities between you and your buyers
- Understand that the fashion definitions of “samples”, ie pristine product, will be subject to full duty
- Existing EU staff have registered for Settlement Scheme and apply for an Employer Sponsor Licence if employing new EU and non-EU nationals from 1st January.
- Review intellectual property portfolios and file in UK if required
Border Operating Model
The government has produced a guide on how the border with the EU will work for traders, hauliers and passengers. Click here to find out more
From the 1st January there will be a new “simplified arrangement” for imports, under which businesses that are not used to dealing with import arrangements and/or customs agents can elect to use a simplified important arrangement, which means that a declaration at the border won’t be required. You will then have 6 months to submit a supplementary declaration which provides the full detail of the goods you are importing and the financial details, at which point the duty and import VAT will be accounted for. This postponed VAT accounting will be mandatory for any business using the simplified arrangements, you should ensure you have the information required to make the import declaration within the 6-month period. Apply for a duty deferment account here.
On 1st July 2021 the simplified entry arrangements will be removed, and you will need to make customs declarations in the normal way. The UK government is introducing a new declaration systems, the details of which are not confirmed.
- From 1st January 2021 importing from non-EU destinations should remain the same, but there may be changes to the tariff applied to goods as part of the UK setting new tariffs when it ceases to be part of the EU. Note the UK will have its own customs legal framework, as opposed to the EU regulations that member states need to adhere to.
- Around 80 fashion tariff lines will be subject to import duties of 8-12%. The government has stated that yarns and fabrics will be duty free for a year.
- Note that customs have the legal right to seize, destroy and even sell on goods that are not properly imported.
- Temporary rates of customs duty (tariffs) on imports after no-deal Brexit can be found here.
- In the event of a no deal the UK will revert to World Trade Organisation (WTO) rules, which will mean between 6 and 12% tariff on exported product. This represents a significant increase in costs that may come back to your business.
- Ensure you keep on top of your admin relating to importing and exporting, and ahead of, and post, visiting international markets to show/exhibit. Customs can demand to inspect paperwork from the past 7 years.
Exporter Operator Registration and Identification (EORI) Number
- You will not be able to export goods from the UK to the EU without an EU EORI number. Detailed advice and the application for an UK EORI number is here.
- You should check that the entity receiving your goods in the EU can provide you with their EU EORI number. In the event that they can’t, or if you are exporting to an EU branch of your own business, you will need to apply for your own. There are several ways in which to apply for an EU EORI number and these are listed below, however we strongly advise you to seek guidance (preferably from a lawyer) on which process is best suited to your company.
- Apply for an EU EORI number through the Customs Agency within the country you trade with most
- Register your company within the EU
- Nominate a third party (this will be a ltd company, VAT registered and a place where business is done and not just a post box address in the EU)
- You can apply for an EU EORI number here
- Note you do not require an EU EORI number for goods morning within the EU
Value Added Tax
- The EU has decided to review the rules for the e-commerce sector so that VAT can be applied consistently from the 1st July next year. This is called the ‘one stop shop’ scheme. Make sure you prepare for the new VAT rules for e-commerce from the 1st July 2021.
- You will still be able to use the EU VAT registration number validation service, but UK VAT registration numbers will no longer feature on it. HMRC is developing a system to validate UK VAT numbers should there be a no deal. Further information on VAT Rules for businesses in a No deal scenario can be found here.
- International VAT guidelines can be found here.
- The Northern Ireland Protocol means that Northern Ireland maintains alignment with the EU VAT rules for goods, including on goods moving to, from and within Northern Ireland. However, Northern Ireland is, and will remain, part of the UK’s VAT system.UK VAT rules related to transactions in services will apply across the whole of the UK. HMRC will continue to be responsible for the operation of VAT and collection of revenues in Northern Ireland. Under the obligations in the Protocol, import VAT will be due on goods that enter Northern Ireland from Great Britain. The same will also broadly apply to goods entering Great Britain from Northern Ireland. However, existing flexibilities within the EU VAT rules have been used to ensure that the Government priority to minimise business impacts is met. In particular, Articles 201 and 211 of Directive 2006/112/EC mean that it is for the UK Government to determine important practical details as to how this will operate. Our approach will preserve the integrity of both the UK and EU single markets. Further information can be found here.
Moving Samples Internationally: Sample vs Example vs Finished Goods
- In the eyes of customs, a “sample” is something that you could not resell: it is cut-up or in parts and is stamped in indelible ink “SAMPLE”. See below link for full rules on Samples from HMRC. Samples can be declared using Customs procedures with no duty due.
- An “example” looks pristine and could be sold, which most fashion samples are, and would be subject to full duty.
- Definition of a Sample -Customs Rules and how to import Samples duty free can be found here. See 2.4 for definitions of sample and example.
- Examples can be taken into international markets in two ways:
1. Under a Temporary import procedure
The temporary admission rules according to HMRC for bringing in goods duty suspended
2.Using an ATA carnet
ATA carnets will be available to businesses when temporarily moving goods between the UK and EU countries.
Government guidance on ATA carnets can be found here, and broader guidance on taking goods out of teh UK temporarily here
- Customs explanations on the use of a CARNET for moving goods temporarily
- Organise applying for Carnet
- Hand carrying items into foreign markets in suitcases without complying with customs regulations is illegal in most countries, we recommend you review the rules for each country you import to. Find out more here.
Contracts and Incoterms
- It is recommended that you review your contracts and Incoterms to ensure clarity of terms and conditions and responsibilities between you and your buyers.
Please click here for Incoterms 2010 ( e.g. EX Works) and link to International Chamber of commerce explanations.
- Note that the Brexit date falls on a Thursday, therefore the changes will be implemented on Friday, therefore you need to ensure consignments that are travelling at that time have both old and new customs requirements and identification.
- From April 2021 all products of animal origin will require pre-notification and the relevant health documentation.
- The Department for Environment, Food & Rural Affairs (DEFRA) is looking to implement import permits from day 1 for products using alligator or crocodile skin.
- Note that an import permit from DEFRA can take 15-20 days to process.
- Consideration should be given on how returns are managed.
- Although not suitable for all businesses, if you have a high level of customer returns you may want to look at Returned Goods Relief, which is available in the UK if you can match your export to the returning import. Find out more here.
Government guidance on visiting Europe from 1st January 2021.
UK nationals will be able to travel visa-free to the Schengen Area for short-term visits (up to 90 days in 180) for tourism and a limited number of business activities, including business meetings, attending conferences, receiving training, sporting and cultural events, and short-term study. Member States also allow additional permitted activities as part of their domestic immigration regimes for short-term visits.
If you plan to stay longer than 90 in 180 days, or are carrying out activities not authorised by a Member State’s visa-waiver, you may need a visa, work permit or other documentation. Whatever you are doing, we advise you to check the website of the relevant Member State to find out if you need to apply.
UK Settlement Scheme
- Unless you have been granted UK citizenship then all EU/EEA/Swiss Nationals (and their dependent family members) must register via the Home Office's Settlement Scheme: you will be granted either pre-settled (if have spent less than 5 years in the UK) or settled status (if you have been a resident in the UK for at least 5 continuous years). You must still register for settlement status if you have been granted permanent residency. Applications can be made via Android or iPhone 7 or above devices or via post/online. Proof of ID (passport/ID card) and residence in UK will be required. You might be asked for additional evidence in some cases to prove presence in UK.
- The deadline for applying under the Settlement Scheme is currently 30 June 2021. However, it is strongly suggested to register as soon as possible.
- Further information can be found here and further Information for employers can be found here.
New UK Immigration System
The UK is introducing a new immigration system, that will treat EU and non-EU citizens equally, regardless of whether there is a no-deal situation in January. Note that this is only for new migrants from 1 January 2021. For EU employees already in the UK under the settled scheme you do not need an employer’s sponsor licence. They are in the UK under the scheme and will become eligible for settled status once in UK for 5 years.
Under the new immigration system there are a number of routes available including Skilled Worker route, Global Talent route, Graduate Route and Tier 5 visas for temporary workers and freelancers. Note all need planning in advance. Further information on immigration can be found here.
Skilled Workers “Points-based System”
This will include a route for skilled workers, the requirements are that:
- It is a job offer from a Home Office licensed sponsor
- The job is at skill level of RQF3 or above (equivalent to A level)
- The job holder can speak English
- The job salary is at or above £25,600 or the going rate required for the Standard Occupational Code for the role, whichever is higher
If the salary for the role is less than this, but no less than £20,480, you may still be able to apply by “trading” points on specific characteristics, e.g. the role on offer is on the shortage occupation list or you have a PhD relating to the job. Find out more here.
Employer Sponsor Licences
As employers cannot employ EU and non-EU nationals without a sponsor licence from January, it is recommended that you apply for one as soon as possible as demand will be high. Apply for a sponsor licence here. The fee for a sponsor licence is £536 for a small business, £1,476 for a larger one. Employers should note there are also additional fees for companies, e.g. an Immigration Skills Charge and a NHS surcharge.
Right to Work
Right to Work checks will still need to be completed for any applicants for roles to check that they have the right to work in the UK. Ensure when doing Right to Work checks that they are applied consistently across all candidates: adopting one approach for all will help you avoid any potential discrimination claims.
During the Covid-19 pandemic, the Home Office will permit right to work checks to be undertaken remotely if employers are working from home rather than the office. The remote checks are undertaken using video conferencing and must be undertaken in a prescribed manner. Please see the attached information sheet. When your office re-opens, you will need to conduct an in-person check as usual.
Global Talent Visa
You can apply for a Global Talent visa to work in the UK if you’re a leader or potential leader in arts & culture, under which there is a fashion designer stream. Applications can be made here. The Arts Council is the endorsing body for visas in arts & culture, including fashion. Further information can be found here.
From the summer of 2021 a new “Graduate” route allowing a 2-year post-study work visa.
Potential Changes to Employment Law Post-Brexit
A lot of UK employment law is derived originally from EU law. Brexit is unlikely to have an impact in the immediate term and before the end of the transition period. After the end of the transition period, the Government may decide to make changes.
The most up-to-date government guidance on intellectual property can be found here. Registration for webinars can be made here.
EU wide Trade Mark and Design Registrations and Applications
- From 1 January 2021, it will be necessary to file separate applications in the UK and EU where trade mark and design protection is required in both territories.
- On 1 January 2021, the UK Intellectual Property Office (UKIPO) will create 'cloned' UK rights based on existing EU Trade Marks (EUTMs) and Registered Community Designs (RCDs). This will happen automatically. The new rights will be renewable separately at the UKIPO where the renewal day of the EU right falls on or after 1 January 2021.
- Check your records in relation to your EU portfolio are up to date at the EU Intellectual Property Office (EUIPO) so the correct details are taken across to the UK register. Check also the impact of Brexit on your IP-related agreements and disputes.
- Where applications at the EUIPO are pending on 1 January 2021, there will be a nine month window to file new UK applications and retainthe original filing / priority date of the EU application. This will not happen automatically, i.e. you need to take positive steps to make the application at the UKIPO and there will be a separate fee.
- As an application for an EUTM filed now will not register before 31 December 2020, there is no particular advantage in waiting for this nine month window and dual UK and EU filings should be considered now.
- IP rights in goods put on the market in the UK after 1 January 2021 will not be 'exhausted' when those goods are subsequently exported to the EEA (i.e., parallel trade). It may be necessary to obtain the consent of the EU rights holder before such goods can be exported.
- Ensure that steps have been taken with both UK Border Force and EU Customs Authorities in relation to Customs enforcement concerning counterfeits.
- If you own an .eu domain name, the registration details must be in the name of an EU established entity or EU citizen; otherwise it will be withdrawn on 1 January 2021 and you can no longer use it for a website or email (and from 1 January 2022, it will be available for others to register).
Unregistered Design Rights
- Existing Unregistered Community Designs will continue to be protected in the UK for the remainder of their 3 year term. The UK has legislated to provide a similar right in the UK after 1 January 2021, where the design has been first disclosed in the UK.
- Unregistered Community design. The new UK right will cover only the UK.To rely upon the Unregistered Community Design, a design must first be disclosed in the EU (and disclosure elsewhere may destroy novelty in the design preventing registration, if the disclosure was outside of the grace period). You should therefore consider registering key designs or take steps to arrange simultaneous disclosure of designs. If you show in London, the British Fashion Council will propose a programme of LFW live streams to an invited audience of guests in key EU markets in order that first disclosure is within the EU and UK simultaneously. Note however that this approach has not yet been tested.
- Copyright protection remains available and there are no substantive changes.
- On 1 January 2021, the EU General Data Protection Regulation (EU GDPR) will no longer directly apply in the UK. However, the 'UK GDPR' will be in force, adopting the same principles and approach as the EU GDPR. If you have an establishment in the UK or if you offer goods and services to individuals in the UK or monitor their behaviour, you will need to comply with UK GDPR.
- Further, if you have an establishment in the EEA or if you offer goods and services to individuals in the EEA or monitor their behaviour, you will also still be in scope of the EU GDPR. If you do not have an establishment in the EEA, you may need an EEA representative. The UK Information Commissioner's Office (ICO) has guidance available on its website.
- Your privacy notices and related documents such as terms and conditions for websites and terms of business will need to be updated to take into account the regulatory regimes that you will be subject to after the end of the transition period, i.e., the UK GDPR and/or the EU GDPR.
- Post 1st January 2021 the UK will be a 3rd country under EU GDPR for the purposes of transferring personal data from the EEA to the UK, consider when selling online. The easiest solution is if the EU confirms that the UK is safe to receive personal data. It is hoped that the EU commission will give its decision by the end of the year. If they don’t see us as adequate, you can transfer personal data from the EEA to the UK, but there are more obstacles. Once we have clarity, we advise that you revisit your privacy policies to explain how transfers of personal data will take place.
- Monitor announcements and guidance from the ICO
Financial Planning & Management
- Businesses should review their key contracts to check exposure, as well as existing financial and non-financial regulation and compliance obligations (including tax, legal, audit, financial reporting and insurance) to mitigate the impact of Brexit.
- Businesses should map their supply chains to identify any risks, as well as review suppliers’ terms. Inventory levels and working capital will also need to be reviewed to prepare for any disruption to the supply chain in the event of a no deal Brexit.
- Forecasting and in-depth financial modelling can mitigate risk. Businesses will need to forecast and plan out profits. It is important to consider any negative exposure to foreign exchange and ensure that there is enough capital for any bumps on the road.
- The advice is to run an impact assessment and stress testing and financial modelling to highlight key areas for concern.
- Businesses should review their structure to mitigate risks. Sole Traders could consider becoming LTD to secure personal liabilities. LTD should review all contracts to ensure they are in the company name. In addition, reviewing your stance and exposure to the global macro conditions and how to improve either productivity or business efficiency should be considered as a priority.
Further general information and updates can be found from the following sites:
- Get Ready for Brexit
- Mayor of London Brexit resource hub - Find out more here & here
- Weekly business updates from the Department for Business, Energy and Industrial Strategy Email email@example.com
Put the following in the Subject line of your email: Business Intermediary EU Exit Bulletin Subscribe
- UKCA labelling rules when this will be required, rules for applying and how/when to utilise.