One can likely to feel sluggish on March 29th 2019 Friday due to the weekend, and start to think about the plans he/she will make for Saturday. The things which can be done after voting for the local elections on Sunday are started to be thought.
While one of our exporters was not thinking of the states of the products exported by him/her earlier, suddenly he/she received an e-mail which says: “The U.K. exited from the European Union without an agreement, therefore the British Pound decreased in value for 20%! Since this is a force majeure I will not be able to purchase the goods; the goods are waiting for you to take them back. My best regards” from the buyer he/she has been working with for years and who is also his/her friend.
An e-mail which says: “The United Kingdom exited from the UN without an agreement as of March 29th 2019 Friday at 23:00. As a result of this exit, the United Kingdom is not in the domain of the UN and the customs exemption will not be applicable for the products from Turkey. The commitments given by the United Kingdom to the World Trade Organization are applicable and in accordance with those commitments, 15% customs duty is added to the products sold by you to us. In accordance with the ‘Brexit Clause’ in the agreement we made, we will reflect this additional customs duty and give you a discount of 15% from the price you will pay to us” came to another one of our exporters who are doing business with United Kingdom.
One of our producers purchased a machine which he has needed for a long time from England since he found it at affordable price. However, an e-mail which says: “Pal, the United Kingdom exited from the EU. The machine you brought required both a tax and demurrage by logistician. What should we do?” came to his inbox from a customs consultant at night on March 29th 2019.
One of our companies which produces OEM products for a German company received an e-mail which says: “The United Kingdom exited from the EU without an agreement as of March 29th 2019 Friday at 23:00. We are cancelling the delivery of the products which will be delivered to the UK next week by revising our delivery plans. Those products will keep staying in your stocks. In accordance with the agreement, your account will not be credited. When the subject become clearer, we will inform you” from his/her German business partner.
Our entrepreneur who has a production facility in Bulgaria and also manages the businesses which he/she does with the EU members through this facility receives an e-mail which says: “The United Kingdom exited from the EU as of March 29th 2019 Friday at 23:00. As a result, the agreements on recognition and execution of the court decisions are inapplicable in the United Kingdom. Therefore, we cannot execute the decisions made by the Courts of Sofia for the buyer who has a debt for 400.000 € to you in England. We are waiting for your immediate orders on this matter. Additionally, we are also waiting for you to pay the remaining 10.000 Leva (5.000 Euro) related to the court costs and our counsel’s fee. Yours sincerely” from a Bulgarian legal advisor.
I hope the United Kingdom will exit consensually and smoothly from the European Union by keeping its seat in European Economic Community such as Sweden or Norway, so our international tradesmen will never receive such e-mails written above.
However, I regret to observe based on my experiences and researches that our international tradesmen are not ready at all for a no-agreement Brexit process. For some people, the problem can be solved straightaway by making a free trade agreement between the United Kingdom and Turkey. This is wrong. It is not possible for Turkey which has a customs union agreement with European Union to make a free trade agreement with a third-party country. If it will be possible to make agreement, the the debates related to those agreements continue at least for 5 years. I wanted to highlight the issue.
There is no possibility which can create a magic wand effect on solving the problems about the no-agreement Brexit. However, I think the subject became clearer for you with the correspondence examples written above which are really close but fictional, and you realize that doing nothing is not an option. The key points to achieve this process with a minimum damage are being in touch with your foreign trade partner, talking on some issues, doing researches, corresponding, revising the agreements and creating some mechanisms to adapt the agreement to the new conditions. I want to emphasize the most important ones of those issues:
1-)In Terms of Rate Fluctuation
A serious fluctuation on the British Pound took place after the annunciation of the results of the referendum on June 23rd 2016. In this regard, you should be ready for the fluctuations on rates (especially between Euro and Pound) and interests as of March 29th 2019 at 23:00 (British Standard Time) for the agreements you made on British Pound in case of exiting from the EU without an agreement.
2-)In Terms of Customs Controls, Tax-free and Non-tariff Barriers, Cumulations of Origin
As a result of an exit from the EU without an agreement, the United Kingdom will be bound only for the commitments given to the World Trade Organization. Within this frame, there will be serious changes on the customs controls, tax-free and non-tariff barriers and cumulations of origin. Some delays and expenses will arise as a result of those processes.
3-)In Terms of Intellectual Property
If your brand or design is registered as a Community Trade Mark or a Community Design in EU, protection for your trademark rights will terminate in UK with an exit without an agreement.
4-)In Terms of “Exclusive” Relations You Made within EU
The relations which contain exclusivity such as licencing, agency, distributorship, franchising agreements will be excluded by the United Kingdom as a result of the exit of United Kingdom without an agreement.
5-)In Terms of Expediting the Execution of the Court Decisions
There are some special agreements on execution of the court decisions made between the members of the EU. Those agreements will not be applicable as a result of the exit of United Kingdom without an agreement.
The issues I tried to summarize above have been analysed by both British and European legal experts, and they also evaluate the opinions, control lists and organizations which will enable them to make the disagreements to go in their favour.
I want to give some advices for my dear readers on this issue:
1-)You should talk to your trade partner primarily on adjustment or fixation clauses about the rate fluctuation. If it is not possible for you, you should discuss the hedging opportunities with your bank or financial advisor.
2-)It is crucial for you to evaluate your commercial relation with your customs consultant, solution partner on logistics and legal advisor, and to analyse the potential impacts of the Brexit. You should share this analysis with your foreign trade partner and also ask for an analysis from them. You should try to create a mutual mechanism on managing the costs and damages from tax-free and non-tariff barriers. You should carry out some evaluations especially on the ICC Incoterms delivery terms in your commercial agreement.
3-)Never trust the force majeure clauses in the current agreements. Do not let your trade partner to trust those clauses too. No court would suspend the obligations from Brexit unless it is clearly written in the agreement that Brexit is a force majeure If you have any doubt, you should contact with your trade partner to add special “Brexit Clauses” in the agreement.
4-)After the application of the EU legislation; you should clarify with your trade partner which standards will be applied on the fields such as labelling, packaging, product standard and environmental law which have an impact on your obligations. You should add some clauses on notification of such changes in a reasonable period in your offers and agreements.
5-)If there is a EU level exclusivity in your agreements, you should ascertain your exclusivity by especially mentioning the United Kingdom with the avoidance of any doubt.
6-)You should clarify dispute resolution processes in the commercial agreements.
I want to remind you by changing the title of my article that doing nothing is not an option until March 29th 2019 at 23:00. The issues I tried to explain above are just the tip of the iceberg. My aim is just to raise an awareness for you on the great impacts of no-agreement Brexit on the international trade. It is crucial for you to take realistic and grounded measures with your foreign partner, solution partner on logistics, customs consultant, financial advisor and legal advisor in terms of legal risk management due to the agreements of you, our tradesmen before being too late or suffering any damage.
If you want to know about our post “6 Articles We Need To Consider While Preparing International Commercial Contracts”, please do not hesitate to contact with us.
