The Guest Blog with Andrew Hood and Cliodhna McDonough
Whilst we still wait to see if there will be a 'deal or no deal' all businesses based in or trading with the UK are grappling with the regulatory changes and the practical consequences of the new UK-EU trading relationship that will take effect from 1st January 2021. We take a look at the likely impact and some practical things to consider when preparing your supply chains.
Regulatory Impact
The medical devices industry is particularly affected by Brexit, with uncertainty over key elements of medical device legislation; the roles and responsibilities of manufacturers, authorised representatives and notified bodies; data privacy issues; clinical investigations and the setting up of corporate structures, particularly in Northern Ireland.
Presently, medical devices in the UK are regulated under Directive 90/385/EEC (on active implantable medical devices – EU AIMDD), Directive 93/42/EEC (on medical devices – EU MDD) and Directive 98/79/EC (on in vitro diagnostic medical devices – EU IVDD), which are given effect through the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002). These regulations "in the form in which they exist on 1st January 2021" as amended by The Medical Devices (Amendment etc.) (EU Exit) Regulations 2019 (UK MDR 2019) will continue to apply in the UK after 1st January 2021 as EU rules and regulations will no longer be applicable. The UK MDR 2019 will also transpose all the key elements contained in the EU MDR and EU IVDR, which will be brought into force in line with the transitional timetable being followed by the EU for the full application of those two Regulations.
The MHRA has published detailed guidance on how the agency will take on the responsibilities for the UK medical devices market that are currently undertaken through the EU system from 1st January 2021.
The MHRA guidance is divided into sections on the different rules that will apply in Great Britain (England, Wales and Scotland), Northern Ireland and the EU. For Northern Ireland, different rules will apply to those in Great Britain after the transition period as EU rules will continue to apply in Northern Ireland.
The UK Government will guarantee unfettered access for Northern Ireland’s businesses to the whole of the UK market, without the need for additional approvals before placing goods on the market in the rest of the UK. In Northern Ireland, EU conformity markings will continue to be used to show goods meet EU rules after 1st January 2021. For most manufactured goods, this is the CE marking, but there are some other markings for specific products. If a company is using a UK body to carry out mandatory third-party conformity assessment it will also need to apply a UKNI marking. Companies will be able to place qualifying Northern Ireland goods on the market in Great Britain based on the conformity markings used in Northern Ireland.
Customs & Supply Chain Impact
Whilst the regulatory requirements are often the focus of most businesses in the sector preparing for Brexit, we have also pulled together a short, high-level overview of some of the nuts and bolts of moving goods between the UK and the EU (and highlight some of the additional complexities of moving goods between GB and Northern Ireland) that all companies will need to get to grips with in 2021. Here's our top five things to consider:
Customs Declarations & Procedures: ensuring you are fully prepared on the paperwork can help in mitigating the impact on the flow of goods (and cashflow) after the end of the transition period. In particular:
- Ensure you have trained in-house staff or a customs agent ready to submit safety/security and import and export declarations;
- Have the details necessary to complete the declarations e.g. EORI number (a GB EORI for imports into GB, an EU EORI for imports into the EU), VAT registration, tariff codes and valuations of all products;
- Consider whether to use a customs special procedures;
- Understand the VAT accounting rules that will apply (and be prepared to take advantage of postponed VAT accounting where available);
- Determine whether export licences will be required for your goods, in particular the possibility that dual-use controls could apply to certain equipment (or blueprints) crossing borders.
Logistics/Potential border delays: Brexit may also impact your logistics model and you should make plans to manage potential disruption at the ports. You should:
- Ensure all documentation has been completed in advance and is properly presented to minimise transit disruption;
- Check whether your contracts include penalties for late delivery;
- Consider mitigation options e.g. increasing inventory, shipping routes avoiding RoRo.
Potential Tariffs: these can have a significant impact on the price of goods flowing between the UK and the EU.
- In case of No Deal with the EU, check what tariffs would be applicable to imports from EU into UK (the new UK Global Tariff) and from UK into EU (EU Common Tariff). While the average tariff is about 3%, for some products it is far higher (e.g. agri-foods 40%+, automotive 10%): consider the potential implications for customers and suppliers.
- In case of a Deal, anticipate the likely Rules of Origin requirements to be able to qualify for preferential tariffs. Generally, about half the value of a product must originate in the UK or the EU to benefit from preferential tariffs, or it must have a different tariff classification heading than its components. Ask your suppliers for proof of where they source their content and provide similar details to your customers. If these exchanges reveal that the Rules of Origin requirements may not be met, consider alternative sourcing options.
Trade with non-EU countries: the end of the transition period means the UK no longer benefits from the Free Trade Agreements negotiated by the EU. Check the latest UK Free Trade Agreements with non-EU countries to see what tariffs would become applicable to trade with those countries.
Incoterms, Contracts and Economic Operators: the end of the transition period means that your role in a supply chain may change and the obligations on you and your business may also change. If you have not already done so, you should:
- Be clear who in the supply chain has responsibility for fulfilling customs requirements, including payment of Import VAT and any duties;
- Be clear on any potential changes of status for you, your customer or your supplier. In particular, who will be the ‘importer’ i.e. the economic operator established in the UK who places an imported product on the UK market? The change in status can create some onerous responsibilities around labelling, conformity assessment checks, retention of records etc.
Northern Ireland is particularly complex with different rules and practical requirements applied between goods moving from GB to NI; NI to GB; and NI to the EU. With some elements still to be clarified you should seek guidance on the latest regulatory position and how to mitigate any risks if trade in NI is a significant part of your business.
Andrew Hood (Partner, Head of Brexit Taskforce) and Cliodhna McDonough (Director, Life Sciences Regulation) at Fieldfisher LLP, a European law firm.