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Changes to the New International Incoterms Rules

Changes to the New International Incoterms Rules

Changes to the New International Incoterms Rules

By David Hooper, September 22, 2019, Category: General News

As most people will be aware following our recent blogs and Newsletters the Incoterms® rules have now been updated for 2020. 

On the release of Incoterms® 2020, ICC Secretary General John W.H. Denton AO said:

“Incoterms® 2020 rules make business work for everyone by facilitating trillions of dollars in global trade annually. Because they help importers and exporters around the world to understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions, and help build confidence in our valuable global trading system.”

What are the main differences between the 2010 and 2020 rules?

The ICC have stated that there is a clearer demarcation and connection between the sale contract and ancillary contracts, a re-ordering within the Incoterms® rules giving delivery and risk more prominence, plus other changes which though cosmetic in appearance, are in reality substantial attempts on the part of the ICC to assist the international trading community towards smoother export/import transactions.

One of the major changes has been the change from DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded). For Incoterms 2010 there was little difference between DAT and DAP, other than for DAT the seller delivered the goods once unloaded from the arriving means of transport into a ‘terminal’ whereas in DAP, the seller delivered the goods when the goods were placed at the disposal of the buyer on the arriving means of transport for unloading. The terms have been changed to DPU to reflect the reality that the place of destination could be any place and not a ‘terminal’. If not a terminal the seller must ensure it is a place where they can unload the goods. As the seller is responsible for the unloading, the order of the terms has been changed so that DPU comes after DAP.

In terms of the actual abbreviations themselves the rest are the same as 2010, with EXW, FCA , CPT, CIP, DAP, DPU and DDP for any mode of transport and FAS, FOB, CFR, CIF for sea and inland waterway only. As before each of the Incoterms® needs to be carefully checked and agreed in the contract with the seller using the correct terminology, the port, place or point of delivery needs to be clearly stated to ensure the transfers of risks are visibly stated.

Our next Blog will again look at Incoterms but from the perspective of Brexit, as when we leave the EU, customs procedures will become common and the Incoterms® will become extremely important in the future.

To keep up to date with other freight-related news and articles please visit our website and follow us on LinkedIn to stay informed.

If you have any upcoming projects that we can support you on, please contact us directly on +44(0) 2476 343 037 and we’d be happy to help manage your freight journey.

5 things you need to know about customs after Brexit

5 things you need to know about customs after Brexit

5 things you need to know about customs after Brexit

By David Hooper, September 5, 2019, Category: General News

As the political situation stands, the UK is set to leave the European Union on the 31st of October 2019, regardless of whether the government secures a deal.

  “It is therefore important that you have some understanding of what to expect after this time to enable you to make the necessary preparations.”

1. An end to the customs union

The customs union that is currently in place makes sure that every member of the EU equally charges import duties to those outside the EU. This means that members of the EU are free to trade without being checked at borders. However, Brexit will see an end to this union. This means that you can expect customs checks at borders for both air and sea freight.

1. An end to the customs union

The customs union that is currently in place makes sure that every member of the EU equally charges import duties to those outside the EU. This means that members of the EU are free to trade without being checked at borders. However, Brexit will see an end to this union. This means that you can expect customs checks at borders for both air and sea freight.

2. Be aware of the origin of your goods

Ensure you know the country of origin for your goods being exported – for the goods to be classed as being of UK Origin they must have been wholly produced in the UK or are items that have been sufficiently transformed during a manufacturing process. The Tariff Heading of the product will determine which rule applies.

3. A change of business in Ireland

One of the many areas of contention regarding the UK’s exit from the EU is Ireland. In the event of a no-deal Brexit, or an EU exit with ‘unfavourable’ terms, exports could be subject to high tariffs and border checks could be introduced, making trading extremely difficult. Since the Irish ‘backstop’ is yet to be agreed upon, exactly what trading will look like post-Brexit is unlikely to be made clear until this time comes.

4. You may need an import licence

On certain goods after Brexit, you may require an import licence to be able to import your goods into the UK. You will need to pay for customs clearance and declare your imports. A commercial invoice from your supplier, which states exactly what has been sold and the cost of the item, is also likely to be required.

5. A new trade authority

The current system which manages trade complaints with the EU is managed by the European Commission. If the UK leaves the EU without a deal, it is believed that a UK Trade Remedies Authority (TRA) will replace this infrastructure. This body will similarly investigate trading practices and increased imports which are deemed as unfair and that may have a negative effect on UK trade.

At Independent Freight, we will endeavour to continue to assist with your freight shipping, regardless of whether we leave the EU with or without a deal. We are the best freight forwarders that can help you to continue to successfully operate your business, even in times of significant change.

A Canada Style FTA post Brexit – what are the positive and negatives from this arrangement?

A Canada Style FTA post Brexit – what are the positive and negatives from this arrangement?

A Canada Style FTA post Brexit – what are the positive and negatives from this arrangement?

By David Hooper, August 08, 2019, Category: General News

In 2016 Boris Johnson, now the UK Prime Minister stated that:

  “I think we can strike a deal [with the EU] as the Canadians have done based on trade and getting rid of tariffs. It’s a very, very bright future I see.”

He was at the time referring to the fact that the UK could agree a deal with the EU based on the Free Trade Agreement the EU had agreed with the UK.

Some argue a deal like this could still be reached with the EU either before we leave on the 31st October or afterwards. However, even if a deal like this is agreed which most would agree is better than ‘No Deal’ this is still not the frictionless trade which many Politicians carelessly suggest.

The practicalities and complexities may actually be the same as no deal for other trying to prove that goods qualify under preferential rules of origin it could be even more bureaucratic.

POSITIVES:

Unlike ‘No Deal’ Tariffs would be eliminated on most products wholly produced or manufactured in the UK and EU – however, see rules of origin under negatives.

Public Procurement – businesses in the both UK and EU may still be able to bid for public contracts

NEGATIVES:

Businesses would need to do a Customs Declaration at import/ export – Incotmers would become even more important in understanding where risk and responsibility starts and finishes.

Businesses would need to meet complex rules of origin to ensure their goods 

Duty would still be payable on goods consigned from third countries imported into the UK or EU and then exported out to the UK and EU – due to the UK leaving the Customs Union. E.g. -A shipment is imported from China to the UK goods are repackaged and distributed to EU customers under this scenario duty would have to be paid twice once at import into the UK and again in the EU.

UK businesses will need to pay Import VAT albeit the Government originally stated under a ‘No Deal’ this could be deferred until the VAT return is made – however, for EU customers they may have to pay VAT before they can receive their goods. If they don’t have a deferment account this may lead to cash flow issues.

Any deal may only grant limited access to service contracts by no means comparable to access under the Single Market.

Therefore our advice all along is prepare for ‘No Deal’ now. Independent Freight Solutions Ltd is ready to support all of our valued existing and new customers in ensuring shipments will managed as smoothly as possible in the event of a ‘No Deal’ but preparing now is important to ensure you’re your business is ready. Independent Freight is a HMRC approved Authorised Economic Operator for AEO (C) Customs and (S) Security.  Out sister Company Hooper and Co can provide additional support by way of training/audits and consultancy on a whole range of international trade and customs related issues. If you would like to find out more about our Freight, Customs or Training Services – contact us

 

Reports of a Post Brexit Free Trade Agreement Between the UK and USA

Reports of a Post Brexit Free Trade Agreement Between the UK and USA

Reports of a Post Brexit Free Trade Agreement Between the UK and USA

By David Hooper, July 16, 2019, Category: General News

There has been a lot of talk in the media about a US / UK Free trade agreement post Brexit. Recent reports suggest that if Boris Johnson becomes Prime Minister this will be the first thing he will look to secure. However, how easy will this be? And how long will it take?  Some argue that the economic benefits to the UK will actually be quite small and be more beneficial to the US than the UK. It has also been commented that the US will also have the upper hand in that any agreement has to be in the interests of US firms or else what’s the point as there is no desperate requirement for the USA in the grand scheme of things. 

The Economist in 2018 also stated that one of the reasons for large scale investment by the US in the UK in the past was to access the EU Single Market a point made the US Chamber of Commerce. Therefore, in reality would the UK actually still be of interest to the USA?

What Progress has been made so far?

So what progress has there been so far behind the scenes, well the groundwork for a future deal began in 2017 with the establishment of US/UK Trade and Investment Working Group. In November 2018 President Trump notified congress that once the UK leaves the EU he intended to negotiate a trade agreement with the UK. 

The US then set out its specific negotiating objectives in Feb 2019. These objectives looked at addressing tariffs with non tariffs. For some UK companies opening up the US market could be very beneficial especially if trade tariffs were reduced to zero and other barriers to entry are lowered, however, the same applies the other way, whereby US firms unable to target the UK due to existing EU/UK tariffs and non tariff barriers could start importing into the UK. 

Concerns from the UK side

Some of the concerns raised in the UK concern the fact that the UK would need to relax certain rules around food hygiene as well as healthcare contracts. Although US firms already compete to deliver NHS contracts which go out for tender the issue is that the US uses different mechanisms for pricing medicines. There is currently a huge gap between what the NHS can afford, and the price certain US firms demand. This may be an area that President Trump will want to address before any deal is signed. Something that could impact on healthcare in the long term in the UK, The US may also demand that tariffs are scrapped on all US cars.  

It should also be noted that Mr Trump may not actually be President after 2020 and that the World may have changed again – therefore any chance of a quick deal being agreed and in place with the USA may take years to complete in reality, if at all!

For more information on the benefits and issues of exporting and importing using free trade agreements including:

  • how and when to use them 
  • paperwork for shipping and 
  • the evidence needed to support them 
  • Implication now under EU rules and in the future post Brexit

Please do not hesitate to contact us if you would like to know more.

Half Day Workshops Available

In the near future Independent Freights sister Company, Hooper and Co will be running a series of half day practical workshops on Free Trade Agreements (FTA’s). If you are interested or have employees who you may like to send, please do not hesitate to contact us.

 

Brexit Club at the Coventry & Warwickshire Chamber of Commerce

Brexit Club at the Coventry & Warwickshire Chamber of Commerce

Brexit Club at the Coventry & Warwickshire Chamber of Commerce

By David Hooper, Jan 31, 2019, Category: Events

On the 23rd January I attended the Chamber Brexit meeting, which was chaired by Coventry and Warwickshire Chamber and included businesses and representative of various bodies from around the region. The Group had met before the first occasion was in January 2017. The purpose of the meeting was so that businesses can provide feedback via the Chamber to Government on the issues that are affecting them and the type of support they may require post Brexit. There was also a presentation by Coventry City Council who had conducted some research on the impact of Brexit thus far.

On the positive side those who attended the meeting reported that so far business was still good including businesses in the manufacturing sector. Investment was continuing and businesses were carrying on as normal. However, there was also a lot of frustration mainly aimed at Government and politicians especially as we are now only weeks away from the 29th March and businesses are in the dark as to how they should prepare for Brexit. 

The media also attended the event and I gave a brief interview to BBC Midlands today and Touch FM on the issues affecting the industry from both the freight side based on our experiences at Independent Freight through to the work I am doing with businesses through Hooper and Co around customs compliance which now includes helping businesses start to look at the potential impact of Brexit.

The main frustration for business is that they want to know whether there will be a transitional period and they want to know what the final deal will look like. If we do exit the EU on the 29th March without a ‘deal’ then this could have serious repercussions for a lot of companies especially for those who have never exported or imported further than the EU regardless of whether they support Brexit or not. There are thousands of businesses which fall into this category.

There is also lots of confusion around the various types of deals that could be agreed with the EU, from a Free Trade Agreement similar to the one the EU has recently agreed with Canada and Japan to joining EFTA sometimes confusingly referred to as a Norway model. Some of these deals would still require new processes and systems and could cause supply chain issues for a lot of companies including understanding the regulations around rules of origin. For all ‘deals’ there will probably need to be additional paperwork and customs declarations. Some detail on the treatment of import VAT has been provided by Government but even with this there is no specific information just a lot of assumptions as to how it might work.

My advice to those businesses that attended this event and to businesses in general is if you currently import and export to Non EU countries then they should review their exiting customs procedures and policies and review their supply chains and talk to their customers and suppliers. This is good practice regardless of Brexit. For those not currently involved in supply chains outside the EU, they should look at what procedures they may need to implement, there are a number of steps they can take including understanding the Tariff code for their product, ensuring they know the origin of that product if they do not manufacture themselves, checking the amount of duty their customers will pay on the product if they exported to the EU and speaking to their customer regarding future processes and Incoterms. A similar process can be done for imports from the EU.

For more information about my experience discussing BREXIT email me at David@independent-freight.com