Re-negotiate Your International Trade Contracts
Whether there is a soft or hard deal, all Irish companies trading with or via the UK will be dealing with a ‘third country’.
Full customs declarations will be required for all imports and exports shipped between Ireland and the UK and a customs transit declaration will be required for goods shipped via the UK ‘landbridge’. The need for these declarations will not change and registration with the Revenue Commissioners is a must.
Customs tarriffs will be dictated by how the UK leaves the EU:
- If the UK negotiates a soft-deal with a transition period before its full departure, they will operate as an EU member.
- If the UK does not reach a negotiated settlement, there will be a hard Brexit and World Trade Organisation (WTO) tarriffs will automatically apply, immediately upon the UK departure from the EU – that is, overnight.
Preparation for both these scenarios is also a must, but the final outcomes can only be known when the UK finally leaves.
To prepare now, you really need to consider the potential margin losses and timelines for this to impact on your cashflow for both scenarios. At the same time, you need to look for alternative suppliers, customers and possible shipping and distribution routes. This level of preparation applies to your current international trade contracts.
If you trade with or via the UK you now urgently need to review all your international trade contracts, particularly where there is a UK component either directly or through your supply chain.
You need to identify these components and assess the effect that Brexit could have on them.
When your assessment is complete, you need to consider how you could best re-negotiate your trade deals.
Trade contracts are legally binding documents and any changes to them will require legal input. However, before you engage legally, you need to understand how any possible impact could affect your business. Things to consider could be some or all of the following, bearing in mind this is NOT an exhaustive list, but an indication of what you need to consider:
- Could Brexit impact on your ability to pay your suppliers, resulting in you being in default?
- Could Brexit make it physically or commercially impossible for you or your counterparts to fulfil your contract?
- Since Brexit was first announced, if you entered into any contracts over the last 2-3 years, have you a specific ‘Brexit clause’ included, which would trigger some change in your obligations and rights, and those of your counterpart into something entirely different – and what could those implications be:
- Increase in costs,
- Currency and interest rate fluctuations,
- Are any of your employees UK citizens or do any of your Irish and EU employees work in your sister companies in the UK – will their freedom of movement be impacted,
- Material changes in GDPR,
- Changes in licencing, sector specific standards, delivery times,
- If it is not possible to re-negotiate, how would you terminate the contract?
Time is truly of the essence now and you need to take a very practical review of your international trade contracts which may be impacted by Brexit.
Reviewing your contracts is the first step and the second step, in parallel with discussing them with your legal adviser, is to consider the negotiation skills and competencies of your key negotiators.
Sharpen Your Negotiating Skills
I can help you and your negotiating team, whether they are all involved in international or Irish negotiations, significantly improve and sharpen your negotiation skills.
International trade negotiations are complex processes, involving several players who may each represent different interests. You and your negotiating colleagues and employees must know how to influence such negotiations, nationally and internationally, in order to best position yourselves to offset the impact of Brexit on your business and/or to benefit from the evolving global trading environment.
Negotiation is about creativity and collaboration, not compromise. It is about Win:Win for all parties – there must be no losers.
Whether you are the business owner, procurement manager, a buyer, sales and development manager, retailer, manufacturer, working in logistics, a supplier, a customer / distributor, a manager or member of a co-operative body or business agency – win:win negotiations are critical to managing your business successfully and effectively.
Are you likely facing into heated discussions and hard bargaining or would you prefer to work with your counterparts in a more creative, positive and productive way?
To help you achieve effective and collaborative negotiations, and re-negotiations, let me take you and your team through some of the critical and essential steps in negotiating.