Running your business

Public sector EU tenders post-transition

We informed you some time ago a bit about the new setup for applying to EU tenders post-Brexit. More details have this month been published.

What will happen?

Tenders Electronic Daily (TED), AKA the European public procurement journal, where many of you currently find EU tenders, will no longer be available after Transition. It will be replaced by a similar system on the gov.uk website called Find A Tender.

Find A Tender will go live at 11pm on December 31, 2020. If you currently use ContractsFinder (for UK public sector contracts) you'll be able to log in with the same details. If not, you can register for Find A Tender now ahead of 31 December.

Until the 31^st, continue to use TED.

Get contracts ready

As your business gets ready for Brexit it is time to review your existing commercial contracts, both where you are the Supplier and where you are the Customer.

For each current agreement an assessment should be made of the potential impact of Brexit.

Could Brexit....

Impact on how the contract is performed?
Prevent the prevent the performance of the contract?
Lead to additional costs for one of the parties, and if so, what are those costs likely to be?

And, of course which party will have to bear any additional costs?

Where Brexit is likely to have an impact on performance or cost of performance, of a current contract, then you need to know if the terms of the current contract will give you the protection that you need. Review each contract and ask:

Is there scope to vary the terms of the current agreement?
Is there an absolute obligation on you as a Supplier to supply goods, or can you decline any orders?
Will you be liable for delay in delivery or other performance of the contract?
What are the terms around relief from liability for delay or non-performance? For example exclusion and limits on liability, and Force Majeure clauses.
Is there a price escalation clause that allows increases in the event of material change?
If necessary, can you terminate the contract before the expiry date?

Current contracts may also need to be reviewed and varied if they contain specific terms or relate to specific goods or services:

Does the contract relate to the import or export of restricted products, services or data?
Does the performance of the contract rely on a licence to produce, sell or distribute goods or services for use in the "EU"? Will any licence need to be amended to include the UK?

Having reviewed existing contractual arrangements, you will also need to consider the impact of BREXIT on new commercial contracts. Whether you are terminating current agreements and re-negotiating new terms, or entering into new deals with new suppliers or customers.

Where you are the Supplier you may want to include:

Terms which allow you to vary the contract
A price escalation clause to enable you to pass on additional costs
Limits on your liability for delay or failure to perform

Where you are the Customer you may wish to consider:

What terms you need to maintain continuity of supply, for example non-exclusivity, to enable you to buy from alternative suppliers
Terms that limit any price increases
A re-think of "just in time" supply chains
Obligations on the supplier to maintain stock-holdings

Finally, both parties should be prepared for possible future disputes. The governing law and jurisdiction of the agreement will be more important than before Brexit, as will any dispute resolution clauses.

Managing currency risk

Following the postponement of the Brexit vote, the pound fell sharply again - it slumped to a 20-month low against the US dollar and an 18-month low against the euro. In fact, Brexit is the key factor contributing to the weakness of sterling, and the continuing uncertainty means exchange rates are likely to remain volatile. With a weaker currency making imports more expensive, you've voiced concerns about rising costs - so we've put together some tips to consider.

a. Use dual invoicing

Dual invoicing, simply put, is getting two prices for anything purchased from abroad - one in sterling and one in the supplier's domestic currency (then paying the cheaper).

How it helps:

Saves you money and reduces currency conversion costs
Gives you more information to choose the best international payment option
Strengthens your company's buying power with international suppliers

b. Set forward contracts

A forward contract is an agreement with the bank to exchange an agreed amount of foreign currency on a specified date in the future, with the exchange rate fixed at the time the contract is entered into.

The benefits are:

You know your cashflow in sterling terms, making budgeting and forecasting easier.
You can take advantage of attractive foreign exchange rates prevailing in the market for delivery at a date in the future

On the other hand, you can't benefit from a favourable move in the exchange rate which happens after the date on which you entered into the contract.

c. Set up a multi-currency account

A multi-currency account allows you to hold multiple currencies within a single account (and one account number/set of login details!). It's even more convenient than having a number of accounts in different currencies.

Advantages include:

Helps you avoid paying excess foreign exchange fees
Allows you to manage your different currencies all in one place - you can get paid by a customer in one currency and then pay suppliers or employees out in another.
Can hold up to 20 or 30 currencies (depending on your provider) and often add a new currency using online banking

Reassuring customers

Many of you have been contacted by customers seeking information about your Brexit plans. Top of their list of worries might be that you won't be able to continue to fulfil contracts in a timely way, or that your charges will increase. Some of these contacts have been informal queries, others have been comprehensive surveys with specific questions about steps you've taken to prepare. In such uncertainty, what can you do to set your customers' minds at rest?

1. Remember that your customers are probably very worried about how Brexit will impact them - and how they will meet their obligations in turn. Chances are they're contacting all their suppliers (see item 3) so don't feel you've been singled out!

2. Open a dialogue and clarify that you're aware of the need to prepare for Brexit, whether we leave the EU with or without a deal. Reassure that you're intent on mitigating risks, remaining competitive and continuing the usual good service.

3. Outline steps you're planning to take, sharing only the information you're happy to. For example:

a. You could let them know that you're checking your supply chains and contracts to ensure continuity. If you have Authorised Economic Operator Status, or are planning to apply, this can be help set minds at rest that goods will be flowing as smoothly as possible.

b. Your customers will be concerned that if tariffs are imposed, those costs will have to be passed on. While of course you can't guarantee against price rises, let them know that you're checking WTO tariffs that might be applied on your imports, noting that paper and board incur a 0% tariff.

c. Let them know that you're in touch with your trade association and are taking guidance regarding preparation. This includes on tariffs, non-tariff barriers such as customs delays, staffing (if you have EU staff) and so on.

4. Pledge to keep them updated, and ask to be included in their plans - for example, are they planning to place orders earlier than usual in 2019, ahead of exit?

5. As in all things, face-to-face contact is often the most effective way to build or improve trust so it could be a good time for a catch-up over a cup of coffee!

Carnet system

If you move items temporarily within the EU (for example, materials for trade shows or exhibitions, samples etc) you may currently use the ATA carnet system. Organisations which issues carnets charge a fee for the carnet and require the holder to provide them with a guarantee, or other security, in case the goods are incorrectly used or not re-exported from the country visited. The carnet must be presented to customs each time the goods are imported, exported or pass through a country. Currently the EU is treated as a single territory so a carnet does not need to be presented in each EU country visited, only at the place of first entry and exit from the EU. If you use the system, contact your issuer regarding any changes following Brexit. However, the most likely circumstances are:

Leaving the EU with a deal - ATA Carnet procedures and the documents used should be as they are at present during the transition period.

Leaving with no deal - this would leave the UK to operate on WTO terms. Whilst confirmation is awaited, the ATA carnet system is expected to still be available for UK-EU temporary exports and imports (with a minor change to the information on the front cover).

Electronic permits for post-Brexit travel

The European Commission has this month confirmed that visas will not be required for UK citizens to travel to EU countries, on short term visits, after Brexit. However, you will need what's called a an ETIAS (European Travel Information and Authorisation System) document. You'll be able to apply online (much like the US ESTA system) and it's likely to cost €7 every three years.