The uncertainty around Brexit has continued for longer than many expected, with concerns in all corners of the business world continuing unabated – and the pharmaceutical industry is far from the exception.
Earlier this year, the Royal College of Physicians called on the government to be more transparent around the issue of stockpiling medication, and the Healthcare Distributors Association has voiced similar concerns, amongst many others.
When it comes to Brexit planning, one option is to sit back and wait to see what happens. In many ways, this approach is tempting, particularly with so much still up in the air.
However, we can also look at the ‘extra time’ we have gained around Brexit as an opportunity to plan for a number of outcomes, ensuring the best chance of returning to business as usual once a deal is agreed and implemented.
Like so many Brexit concerns, the issue around access to and availability of pharmaceuticals is primarily a logistics one. How do we get our products transported legally, safely and on time to ensure business continuity?
The key is to take a scenario-based approach to planning for any potential supply chain disruption, which will deliver a pathway for distribution no matter what Brexit agreement lies ahead.
Planning for a hard and soft Brexit
Whatever the final outcome – either hard or soft Brexit – come the withdrawal date the UK will, effectively, become a third country when it comes to border controls and customs arrangements.
The restoration of the customs border between the UK and the EU will usher in customs formalities as well as non-customs controls (sanitary and phytosanitary controls). Failure to comply with any of these is likely to lead to delays and disruption of your supply chain.
Planning needs to start at the very beginning of the process, right at the heart of the commercial agreements. If you only trade with EU countries, chances are you may have Incoterms (these are pre-defined commercial terms that communicate tasks, costs and risks) that open your company to VAT based risks when complying with zero rating requirements. In other words, can you really prove that your goods left the country?
There are a number of key points that you need to know and be aware of to prevent any delays:
Customs paperwork and procedures
This may seem an obvious one, but you need to have these ready in place to keep your transit time as tight as possible and prevent delayed loading. Does your business have any in house skills to understand the customs compliance requirements for making declarations? Probably not.
You need to consider upskilling your key staff and there are a number of training courses available to support you with this. Simultaneously, you should also speak to your current logistics partner, who should be able to offer you a springboard to quickly get up to speed with the latest requirements and easements that HMRC offer.
Payment of customs duties
You need to understand both UK to EU and EU to UK duties, and get these right, including the payment of duties and taxes around any reusable packaging. If you are a regular importer then you should consider having your own Duty Deferment account with HMRC. In particular, if you take up any of the special import procedures then this will be a requirement. There is a cash flow benefit to having this account, and you may have up to two months to settle your import duty account with HMRC.
Change in VAT rules
You must have an understanding of the change in VAT rules and what these mean for your business. Post-Brexit changes include not having to report your EC sales, which will mean you must have evidence that will support your claim for zero-rating your supply. If you make sales in any EU countries, you may now find the need for fiscal representation, to account for and comply with local VAT reporting requirements for non-established companies.
For a hard Brexit only
This landscape is a bit tougher. You’ll still need to take into account all of the above, but also consider:
This covers any rules around temporary arrangements, how these will work, and how long they’ll be in place for. You might consider some form of Customs Warehousing to suspend the duties that become due by way of importing into the UK. There are other forms of duty suspension that you may qualify for.
Failing to prepare is preparing to fail
As with any supply chain planning, your focus of activity should be on keeping the chain flowing and minimising risk.
Whilst preparing for every single eventuality is perhaps impossible, preparing for the things that we know will happen in the event of hard Brexit, soft Brexit or no deal is essential. It means that, as an industry, we are best placed to respond to this new era of trade and customs arrangements. It also means we can do our part to ensure the continued supply of pharmaceuticals within the UK and increased levels of business security and continuity.