Chris Beck

Don't wait for a Brexit deal - three things manufacturers can do now

Features
4 mins read

The end of the Brexit transition looms large, with the deadline expiring on 31st December 2020. Despite this, there’s still no agreement on an exit trade deal, with UK Government and the European Commission still haggling over finer details including competition policy, governance and fishing rights.

This so-called last leg of negotiations is enough to send a shiver down the spines of British manufacturers and throughout supply chains. If the finer details can’t be agreed, there’s the real prospect of a no-deal exit, which brings gloomy expectations of more expensive and complex trading conditions with the EU.

With such a lack of clarity about exactly what a post-Brexit trading environment could look like, it’s understandable that manufacturers are pressing pause on planning and delaying any major changes to their operations. They fear that any resource and capital invested in these areas could be wasted and would be better saved until the time is right. While this seems logical, it can leave companies on the backfoot and clambering to play catch-up after 31st December 2020.

Irrelevant of whether it’s a deal or no-deal, there are three key areas where manufacturers can start to prepare for a post-Brexit era. These include contract clauses that can help protect their own trading agreements with international customers and partners, customs declarations to help reduce any potential delays of cross-border trading, and intellectual property rights to safeguard innovation and research and development.

Contract clauses

Businesses which have agreements with parties based in the EU are advised to check the terms of existing contracts and consider amending or inserting clauses to protect their position from the end of the Brexit transition period. Whilst there is no magic 'Brexit clause', there are key considerations to be made to future-proof contracts, including:

  • Ensure the flexibility of a contract in light of the forthcoming uncertainty
  • Deal adequately with pricing and payment. For example, tariffs and additional duties will apply to many imported goods, so contracts should clarify how such fees will be calculated and who is to bear the responsibility for paying them. Furthermore, the UK's exchange rate is likely to be more volatile around the time of the end of the transition period, which may lead to long-term implications. This means manufacturers should ensure they are contractually protected from fluctuating exchange rates
  • Consider the impact on the supply chain. For example, border checks are almost guaranteed to cause at least some disruption and there may be interruption of supplies which prevents or hinders a party from performing their contractual obligations. All businesses need to be aware of the impact of such delays, and should consider whether any termination rights can be exercised in the event of delay, and whether any damages would be payable during such eventualities
  • Think about reviewing contract clauses in respect of the appropriate governing law (may vary from country to country) and jurisdiction. These clauses will need to be reconsidered because the UK will no longer be part of the EU. Similarly, changes will also need to be considered where territories are defined by reference the EU or EEA, and any references are made to EU bodies, laws, and regulations

    • Regardless of the form that Brexit will take, it is not too late to seek advice and make amendments to contracts to ensure businesses are as well protected as possible.

    Customs declarations

    To provide manufacturers with extra time to make necessary export and import arrangements, whilst also recognising the impact of COVID-19, customs declarations will be introduced in three stages up until July 2021. At this point, any traders moving goods between the UK and EU will have to make full declarations and pay relevant tariffs.

    Experts such as CustomsLink are aware of the forthcoming changes and have created a digital solution – the CustomsLink declaration software – to tackle the new requirements for importers, exporters, brokers and hauliers. This platform simplifies the processes and intends to make customs declarations quick and easy by enabling members of supply chains to contribute information into smaller data entry sections on the online platform. The CustomsLink solution complies with all HMRC codes of practice and enables users to track data and keep a date-stamped recorded audit trail.

    Manufacturers can start planning now for customs declarations and a grant is available for customs support funding, which will partially reimburse the costs of recruitment, improving IT and software and staff training. The deadline for applying for the grant is 31st January 2021.

    Intellectual property rights

    The impact on businesses of intellectual property rights (IPRs) after the transition period will largely depend on the IPRs a business owns on the deadline of 31st December 2020, and the IPRs it intends to own in due course.

    Of all IPRs, trademark practice is likely to be the most affected by the end of the transition period. Whilst domestic UK trademarks will be unaffected, the territorial coverage of EU trademarks (EUTMs) will no longer include the UK. Nevertheless, EUTM holders who would lose UK protection on 1st January 2020 will automatically receive alternative UK protection via a 'comparable UK trademark' (under the UK government’s current proposed implementation regulations). This is restricted to EUTMs which are registered in time, so for businesses intending to obtain trademark protection across the EU, it would be advisable to file separately for UK and EU trademark protection.

    From the end of the transition period, UK businesses and UK-resident persons will not be eligible to register new '.eu' domain names and any existing '.eu' domain names held by such businesses or persons will no longer function. Manufacturers may want to consider their position on this now and whether they need to act before the end of the year.

    Amidst all of the Brexit uncertainty, one factor remains certain for manufacturers, that time is running out. There will be no extensions to the transition period and manufacturers should strive where they can to make preparations for the future. Doing so will leave them in a much stronger position moving into 2021 and give them an edge in a market that will continue to feel the disruption of COVID-19, while also adjusting to new trading conditions with the EU.

    John Pickervance is a partner and head of commercial at Forbes Solicitors. He leads the law firm’s specialist manufacturing and engineering sector group, advising clients nationwide on a range of complex matters and contractual agreements governing the provision of goods and services.