The EU is the closest and largest market for UK firms and so should be viewed by many managers as an opportunity. Fergus McReynolds, Director of EU Public Affairs at the Chartered Institute of Export & International Trade (CIOE&IT) says: “There is a perception that trading between the UK and the EU is harder than it is. If your company manufactures or transforms goods in the UK, and if your business model can absorb the additional cost and time, then you should be looking for an opportunity to trade with the EU.”

But Ruth Corkin, Principal for Indirect Tax at Hillier Hopkins and member of ICAEW’s Duties Committee, says that although “the opportunities are out there, the pitfalls can be quite stringent”. She suggests managers should “do your research and carefully assess whether exporting is going to be economically viable”.

Those running SMEs should consider the following steps when weighing up whether to trade with the EU.

Understand the criteria for tariff-free trade

McReynolds notes: “The starting point for SMEs is to determine whether the goods or services they are producing qualify for tariff-free trade or not.” 

Goods need to meet the Rules of Origin criteria outlined in the EU-UK Trade and Cooperation Agreement (TCA). Those not deemed to be of UK or EU origin are liable for customs duties; the government website has much more detail. 

To determine if these criteria apply, companies need a clear understanding of their supply chains. This means reviewing where materials are being imported from, understanding what processes are being undertaken in the UK and whether there is a substantial enough transformation of those goods in order to qualify for tariff-free trade.

Get to grips with the technical aspects of trade

Companies also need to familiarise themselves with non-tariff barriers such as customs declarations, regulation and other administrative requirements. 

“Compared with a domestic sale, which typically requires a tax invoice and is relatively simple, the paperwork trail for international sales is much more intense,” notes Corkin.

“Understanding in detail the commercial relationship with your European customer and knowing your Incoterms – who is responsible for each part of the process in terms of entry and exit requirements – is vital,” adds McReynolds.

Understand sector-specific documentation

Different goods have varying regulatory and documentation requirements, so it is important for SMEs to understand their specific obligations. For instance, companies in the agricultural and pharmaceutical sectors, and those supplying chemicals or military equipment, require additional licences and authorisations. 

Carbon-intensive products are now subject to tariffs via the Carbon Border Adjustment Mechanism. “While that is a requirement on the EU importer, UK suppliers should be aware of the information that their partner needs,” says McReynolds.

There are also different certification requirements. If products require a CE mark, UK exporters need to ensure that certification is granted by a recognised EU institution.

Goods and services are also treated differently. “Services are less well catered for than goods under the TCA. But there are some goods plus services models that are permitted, for example if you’re supplying machinery that requires maintenance, installation or training,” says McReynolds. 

Financial services firms have their own set of agreements, while providers of professional services, such as architects, lawyers, and accountants, need to understand the recognition requirements for their qualifications in EU markets. Any services firm should also be clear on the differences between permission to travel and permission to work, which varies at the member state level. 

Understand local market specifics

In addition to understanding pan-European requirements, it is also vital for companies to be aware of the specifics of the market they are exporting into. Individual member states may all do things slightly differently, particularly when transposing European directives into national law. 

McReynolds points out that “while there is a common set of regulations, there are in fact 27 different markets and regimes. In some countries, such as Belgium, there may also be federal considerations.”

“It is important to know the local laws that your products could be subject to,” adds Corkin. “Not just in terms of VAT or import duty, but whether there are any other taxes, duties, registration requirements or plastic packaging taxes, for example.” 

McReynolds advises that “it is important to go to the source to understand the requirements for each country – including potentially travelling to that market and understanding what support your trading partner can give you.” 

Monitor divergence with EU regulation

Companies need to be cognisant of the ever-evolving regulatory landscape. Post-Brexit, increasing regulatory divergence between the EU and the UK presents growing challenges.

There are a number of changes currently in the pipeline and an increase in regulatory focus from the EU on issues such as the monitoring of supply chains, forced labour and deforestation. Being aware of regulatory changes ahead of time is important. Although many of these requirements will land on the EU importer, UK exporters will need to ensure that they have the right documentation to support their customers’ needs.

Seek expert support and advice

Government resources are a good place to start for information and advice, along with specific country guides. The gov.uk website contains a step-by-step guide to exporting goods, while the Department for Business and Trade’s UK Export Academy, and UK Export Finance can help SMEs access export markets. Chartered accountants, of course, are also a great resource.

Chambers of Commerce and organisations such as the CIOE&IT are useful sources. For example, the Institute provides both free and paid-for training resources, from short courses on the mechanics of trade, to longer courses on the specifics of customs declaration forms. 

“Unless you’ve got the in-house capability to do your customs paperwork, you will probably also need the services and advice of a specialist agent,” adds Corkin. Customs advisers, freight agents, logistics partners and accountants can all help businesses successfully access new markets and stay on the right side of customs and duties regulations.