The Retailer Winter Edition 2022

WI NT ER 202 2

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the direct transport rule. The new landscape presents many complexities; however, it is not always necessary for retailers to lose out on the benefits of tariff free trade or to sacrifice their existing supply chains due to this impact of Brexit. However, what is for sure is that importers and exporters will need to address and adapt to this specific element of the new customs environment if they wish to take advantage of the tariff savings which remain available to them.

The Vietnam-UK FTA has a non-alteration arrangement. Therefore, if we consider a scenario whereby the goods are entered into a Customs Warehouse in Germany; if the goods always remain under customs control when outside of Vietnam or the UK, then it should be possible to claim preferential duties on goods that are further shipped onto the UK. Finally consider a final scenario whereby the same supply chain exists but the goods have been sourced from South Korea. South Korea has an FTA with both the UK and the EU that contains a direct transport arrangement. Therefore, anymovement into Germany; even if entered a CustomsWarehousing arrangement, would not meet the requirements of the FTA and therefore goods would not qualify for tariff preference on import into the UK. This barrier is not insurmountable, however in caseswhere direct transport agreement exists a change to the physical flowwill be necessary. We’ve worked with some businesses who sell product to jurisdictions subject to this requirement in high quantities and high values. The supply chain sees the business source goods from the EU (which originate for cus toms purposes in the EU) and imports them into a CustomsWarehouse in the UK before making a sale to a final customer. Whereby a sale occurs to a customer in a direct transport location the goods can still benefit from the agreement if shipped from the EU. We’ve worked with businesses to obtain opinions from various authorities as to whether it would be permissible to ship the goods subject to a sale back to the EU, before dispatching them to the destination. The authorities stated that this would not break the ‘principle of territoriality’ as the goods always remained in Customs control when outside of the EU and as they would be ultimately shipped from the EU to destination would satisfy

Caroline Barraclough cbarraclough@deloitte.co.uk +44 20 7007 9287

Sam Kiely skiely@deloitte.co.uk +44 20 7007 2886