What are the practical implications of Brexit for the superyacht industry?
For many, it is a comedy of errors, a confederacy of dunces. Nobody knows if Brexit will happen at the end of October or January or if at all. The UK parliament keeps kicking the decision down the line every few months. If it does happen without the UK and the EU reaching a compromise we certainly know the practical implications for free trade. Much of this is on the UK government website and what is not there, we can draw conclusions of what will happen.
Over the next month or so we are going to be looking at various aspects of the superyacht industry and considering how Brexit will affect the various sectors.
Ships spares and stores from the UK into the EU.
We spoke to a logistics specialist London Express Cargo as this will be one of the first industries to suffer the impact of border control. This will happen on day one unless there is an agreement.
At the moment, shipping from, say, London to Antibes is as easy as shipping from London to Manchester. There are no borders, no paperwork, free movement. One open market sharing a set of trading standards and a Union Customs Code.
Immediately on Brexit, the UK will be a third country to the EU which means everything – and we mean everything, from screws, lightbulbs, engine parts, provisions, crew purchases from Amazon, the whole kit and caboodle – will need to be customs cleared out of the UK and into the EU. The usual VAT arrangements are suspended. Duty and taxes need to be paid. Customs declarations will need to be made. Customs authorization needs to be given to proceed into the EU.
Death and Taxes
Once cleared into the EU third-party goods can travel freely. Unless they have been bonded at the point of entry which means they have to travel on a customs bond and at a certain point that bond has to be released. At this point, the customs declaration and authorization which would have been done at first point of entry has to be completed. There is no way around this. A bond just postpones the problem. And they come at a cost. Non-compliance with discharging the bond can incur heavy fines.
Customs control may be a big deal and it may not be. Border control is going to affect transit times, and increase the cost of logistics. Let us say a crewmember buys something from Amazon – a pair of swimming goggles. This will have to be cleared into France. The EU may decide that the goods under a certain value don’t have to pay VAT and duty. But it is still subject to a customs regime as a third-party origin. Expect a bill for this. Nothing is free.
One solution is to build up consolidations of multiple orders. London Express says a typical consolidation can consist of as many as 70 individual orders of different components. At present this all gets packed into tri wall pallet boxes and flows in free circulation. The company does not need to know what is in each box just as long as it’s not hazardous or contains lithium. Free movement of goods. No customs or border control.
Once there is border control every logistics company will need to know the contents of each package and the value. Customs will be required by EU law that each item be cleared into the EU. This is not just about taxes. The EU is very concerned about trading standards and conformity to safety rules. The EU says Customs Control is just as much about consumer safety as it is about tariffs.
So why can’t the UK be allowed to carry on conforming to EU standards? Surely problem solved. No. Because the mechanism that enforces that all countries comply with trading standards is the EU legal framework which the UK will no longer be bound by. Hence, the impasse.
Low-cost goods will be allowed into the EU without payment of taxes. The figure is still yet uncertain – €45 has been mentioned. But some form of clearance document will still need to be provided. In which case, there is a trade-off between customs clearance of each low-value item and the saving on a multi-order consignment with a combined value above the threshold. Clearing the whole consignment as one order will be one clearance cost.
There used to be a catch-all customs tariff for ship’s spares in transit but that has been phased out. Every item now has to be codified. This is a laborious process. TARIC is the integrated database of commodity codes.
Any good news?
Goods exported from the UK are exported free of VAT which is a potential 20% saving for yachts that are not VAT registered and cannot reclaim VAT charged by the supplier. If the exporter is reticent to ship because they do not have an EORI number, London Express Cargo can act as the exporter. Local agents can then export the goods onto the yacht. London Express has a VAT refund scheme ready in place.
More good news though is that most of the teething problems of Brexit will likely be happening during the winter season, This is when most ships stores in transit are sent to the Caribbean , Maldives and non-EU destinations and so nothing changes in that respect.
Yachts sourcing from the UK for delivery to the Med will need a database of purchase orders. This should include: Order number, Supplier, Commodity, Value.
Whether Brexit does happen on October 31-and it looks as if there might be another extension – captains, purses, engineers, yacht managers, all need to be aware that the flow of stores and parts will be impacted. There are ways to mitigate this and with a bit of forward planning, any adverse consequences can be minimized.