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Business & Regulation Business Practice, Quality & Compliance, Supply Chain

Leading by Example

Preparing to leave the European Union is one of the most challenging issues facing UK companies today – for many businesses, it will be their number one priority in the months to come. However, there is little certainty regarding what the actual terms of the UK’s departure from the EU will be (if indeed there are any), nor when the UK will leave. 

My company, Morningside Pharmaceuticals – a manufacturer and supplier of medicines to the UK and international markets – has taken a number of steps to ensure the business is ready for every eventuality. I hope our example may be of use to other UK companies navigating Brexit’s murky waters. 

To ensure a continuous supply of our medicines, we have taken advice from the UK’s Department of Health and Social Care (DHSC) and stockpiled a minimum of six weeks’ worth of drugs, to cover any shipping delays at ports caused by a No Deal Brexit. We have also almost doubled our stock levels since December 2018, which has meant finding extra storage space that provides temperature and humidity control. A large number of manufacturers and suppliers are doing the same, which has meant the costs of storage have increased. 

When it comes to importing, it’s likely that a No Deal Brexit would cause delays at the border, as the free movement of goods ends and goods become subject to customs checks and procedures. The government has stepped up efforts to ensure businesses are ready to trade post-Brexit by automatically allocating more than 88,000 VAT registered companies across the UK with Economic Operator Registration and Identification (EORI) numbers (1), which must start with GB (2). You can also use the Common Transit Convention (CTC) to move your goods more quickly so that customs declarations are not required at each border crossing (3). 

As an interim measure, the government is also rolling out Transitional Simplified Procedures (TSP), which make it easier to import goods from the EU in a No-Deal situation by delaying declarations and the payment of any relevant import duties and/or VAT. This is something we have signed up to as part of our contingency planning. I would advise looking into setting up a Duty Deferment Account too, which will enable you to make a single customs duties payment per month instead of paying for individual shipments. You must set one up if you plan to use Transitional Simplified Procedures (4). You will also need to check the rate of tax and duty to pay, as you will need to pay customs duties and VAT on all imports (5).

For exporting, a customs declaration will be required for all EU shipments. The rule for pharmaceuticals entering the EU is that any product that is being used in the EU and going to an end patient there, has to be released by a qualified person (QP) within the EU. In the event of a No Deal Brexit, we have made contingency plans to release batches for our customers in the EU. Having an office in the EU will also be vital for preparing for regulatory changes brought about by a No Deal Brexit. In particular, having an EU base will enable us to comply with EU regulations around pharmacovigilance. It also means that license for a medicine in the EU must be held in an EU territory.

Other export advice from the government includes: making sure your business has an EU EORI number that starts with GB, checking your importer has an EU EORI number, checking the rate of tax and duty for your goods and checking what you need to do for the type of goods you export (6). 

Supply chain holdups, particularly at the Port of Dover, where the majority of goods come across from the EU, is a concern for many businesses. To help alleviate delays at Dover, the government plans to bring in new measures that will improve Kent’s resilience if services across the English Channel are disrupted. This is called Operation Brock (7). 

To ensure delays are kept to a minimum, the government is running a number of schemes to secure ferry space. They plan to buy space with the ferry operators, which will give businesses like ours the opportunity to register for space and use it for priority orders. The government is also introducing an “Express Freight Service”, which will be rolled out if there are any shortages of essential goods, such as medicines. This will see a courier service contracted out to guarantee priority orders have minimal delays.

A facility in the port of Ostend, in Belgium, has been set up too, so if there is a problem, manufacturers can apply for a coupon to move stocks through there efficiently in the event of a No Deal Brexit. Our haulage providers are also taking part in alternative routing, which will look into alternative routes to avoid delays at Dover and Calais. 

We are also applying to be an Authorized Economic Operator (AEO) – an accreditation given by HMRC, which shows that our supply chain is safe and secure. To achieve this, a business must submit an application to HMRC, followed by an audit of their supply chain (8). To help prepare for the audit, we carried out a gap analysis to further improve our processes. During this audit, our procedures were reviewed in line with the criteria, which identified any gaps.

Companies can also apply for a Training Grant, which is for any company that has to do additional work with regards to customs procedures because of Brexit. This grant will be paid by the government to the company applying, which will then be able to fund the training from their supplying partner (9). 

In short, Brexit creates a number of challenges for UK businesses, but with careful contingency planning – including an exploration of the various government-run schemes available – there are ways to mitigate the risk.

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  1. HM Treasury, “Chancellor accelerates Brexit preparations for businesses” (2019). Available at: bit.ly/2NdgaEP. Last accessed 25 October, 2019.
  2. UK Gov, “Get an EORI number” (2019). Available at: bit.ly/2NdgaEP. Last accessed 25 October, 2019.
  3. HM Revenue & Customs, “Get ready to move goods between or through common transit countries including the EU” (2019). Available at: bit.ly/364gu1l. Last accessed 25 October, 2019.
  4. HM Revenue & Customs, “Register for transitional simplified procedures to import goods in a no-deal Brexit” (2019). Available at: bit.ly/2BLKReQ.  Last accessed 25 October, 2019.
  5. UK Gov, “Get your business ready to import from the EU to the UK after Brexit” (2019). Available at: bit.ly/2pNLYbx. Last accessed 25 October, 2019.
  6. UK Gov, “Get your business ready to export from the UK to the EU after Brexit” (2019). Available at: bit.ly/345yuH0. Last accessed 25 October, 2019.
  7. Highways England, “Operation Brock” (2019). Available at: bit.ly/3416mED. Last accessed 25 October, 2019.
  8. UK Gov, “Authorised Economic Operator for imports and exports” (2019). Available at: bit.ly/2JmPnVH. Last accessed 25 October, 2019.
  9. HM Revenue & Customs, “Apply for grants if your business completes customs declarations” (2019). Available at: bit.ly/342U2E6. Last accessed 25 October, 2019. 

About the Author

Nik Kotecha

Chief Executive of Morningside Pharmaceuticals Ltd, Department for International Trade (DIT) Export Champion and a CBI Regional Councillor, UK.

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