After Brexit Day, Irish exporters using DDP (Delivered Duty Paid) Incoterms will find themselves responsible for customs compliance on any shipments moving into the UK.
What impact might Brexit have on these DDP contracts, what are the customs costs likely to be, and what can Irish exporters using DDP Incoterms do to prepare?
What does DDP mean?
Put simply, DDP (Delivered Duty Paid) is a type of contract that makes the seller of goods responsible for the costs and risks involved in every stage of a shipment’s journey, from the moment it leaves their warehouse to the moment it arrives at the buyer’s premises. DDP is one of the 11 standard international trading arrangements defined in Incoterms 2010.
How does Brexit impact DDP contracts?
For most Irish businesses exporting to the UK (and vice versa), any goods sold under a DDP contract will already have the costs of transport and insurance built in to the price that the seller has quoted the buyer. Under DDP rules, sellers are also technically responsible for customs declarations and taxes, but this hasn’t been an issue for Irish exporters whilst the UK and Ireland have shared a single customs zone in the form of the EU. As soon as Brexit takes place, it’s possible that a whole range of new customs rules will apply to goods being exported to the UK. Goods moving in and out of the country could suddenly fall subject to high import taxes and administrative compliance costs, which under the terms of a DDP contract, would need to be met by the seller in full. If the UK leaves without a deal on 31st October, sellers won’t get much warning about the kind of costs they’re likely to have to bear.
How exporters can prepare for DDP after Brexit:
If you’re exporting from Ireland or continental Europe to the UK, or vice versa, there are a number of steps you can take now to prepare for what might happen on Brexit Day:
Familiarise yourself with your HS codes:
You can use our tariff codes page to find the customs codes that apply to everything you sell. If you make a note of the relevant codes now, you’ll be able to quickly and easily find out about any customs requirements as soon as they’re announced on Brexit Day.
Start pricing in the risk of a no-deal Brexit:
Information on the UK’s pages of the WTO website can help you calculate the likely costs of customs compliance if the UK leaves without a deal. If the UK leaves with some form of a deal, then customs duties will probably be much lower than WTO rates, possibly as low as 0% for most goods. If the UK leaves with a deal, Irish exporters will still have higher customs compliance costs than they do currently, because they’ll have to factor in the time taken to make all relevant customs declarations. In any case, it’s best to price in the risk of no-deal on all orders due for fulfilment after Brexit Day.
Consider alternative Incoterms:
If you’re writing new contracts or renewing existing contracts, it may be worth moving to different Incoterms that share the customs burden more equally between buyer and seller. Take a look at our Incoterms guide for more information.
How Baku GLS manage uncertain costs
When Baku GLS was founded, we were still using Irish Punts, so we’re no strangers to managing the day-to-day uncertainty of fluctuating exchange rates and fuel prices. While we still can’t be certain what the customs landscape will look like 7 weeks from now, we’re keeping a close eye on Brexit developments and doing everything we can to ensure our clients can ship their cargo with certainty. If you need up-to-the-minute transport quotes or guidance on November bookings, get in touch with your planner today.