SAP and Brexit: What you need to consider now

What happens now that the agreement has been reached?

It's about time: The EU and the United Kingdom have reached an agreement after all. On December 29, 2020, the 27 member states of the European Union gave their commitment to the provisional treaty. The agreement brings to an end a long period of uncertainty and disagreement. The parties have avoided a hard Brexit ("no-deal scenario") at the last minute after all. One might have thought the whole thing was a sequel to the novel "The Neverending Story" by Michael Ende. The United Kingdom's exit from the European Union kept the EU busy for more than three years - and an end to the process was not in sight for a long time. However, with his clear election victory in mid-December 2019, British Prime Minister Boris Johnson then ensured clear conditions - at least as far as the execution of the exit was concerned. On January 31, 2020, the United Kingdom officially left the European Union. However, negotiations with the EU continued: In a transitional phase until at least the end of 2020, the EU negotiated with the UK what future relations should look like. Accordingly, little changed for companies until then - the UK remained in the EU single market and part of the customs union until the end of 2020. A provisional partnership treaty - a 1,200-page document - has now been in force since January 1. The treaty regulates the EU's relations with the United Kingdom and has yet to be finally ratified by the European Parliament. The partnership treaty ("The EU-UK Trade and Cooperation Agreement") creates the framework for fair competition - from trade issues to labor law standards, from energy policy to research and development. Specifically, the European Union and the United Kingdom agreed on three agreements: a trade and cooperation agreement, a civil nuclear energy agreement and an information security agreement. Legally, the United Kingdom is now a "third country." It is therefore no longer part of the Single Market and the Customs Union. This means, for example, that customs regulations now apply that previously did not.

Customs duties and controls

With the entry into force of the provisional contract, companies must now comply with new regulations.

• All imports or exports must be cleared. Controls are carried out and new formalities must be observed.
  
• Companies must register with the customs authorities and apply for a British EORI number (Economic Operators' Registration and Identification Number). Without such a number, goods can no longer be exported to or imported from Great Britain.
• In addition, import or export controls occur because certain goods ("dual-use goods") are subject to a licensing requirement.

These requirements apply, for example, to all companies with relations to Great Britain that export goods to the United Kingdom (excluding Northern Ireland), maintain a branch on the British Isle or import primary products for their own production from Great Britain into the European Union.

These companies should therefore - if they have not already done so - deal with the consequences of Brexit as soon as possible. They need to take a close look at their IT and SAP systems and make the necessary adjustments as quickly as possible now.

Changes in SAP

Companies that use SAP have to make a large number of changes and adjustments in SAP. Basically, the following systems are affected: SAP ECC, SAP GTS, SAP CRM, SAP S/4HANA and SAP C/4HANA.

SAP has been preparing customers for the changes for some time now and is delivering corresponding information, updates and patches. Companies should keep themselves informed about these innovations on an ongoing basis.

Specifically, the changes to be made in SAP systems concern both system configuration (country configuration, tax determination, etc.), changes to master data (vendors, customers, etc.) and changes to reporting (INTRASTAT messages).

Changes and requirements in detail are for example:

• Companies must change the country definition in SAP Customizing or the general settings: They must deactivate the "Member of the EU" indicator.
• Master data fields (for customers or vendors) or configuration data (for company code settings) must be updated.
• Products with a country-specific approval need attention if they have been mapped in SAP - the approvals expire.
• Adjustments are also required in the area of tax determination - starting with the verification of tax codes for EU companies in the context of the UK tax procedure TAXGB to the updating of tax-relevant master data (VAT identification numbers) or with a view to certain customs requirements.
• Tax reporting is also changing, for example with regard to INTRASTAT reports. These reports are the basis for trade statistics in the European Union - and have become redundant with the withdrawal.

The SAP toolbox for foreign trade

Solutions to help companies better manage the impact of Brexit. SAP GTS offers functions for customs clearance, for controlling export, import, and embargo requirements, and for calculating costs due to customs duties on previously duty-free goods.SAP GTS, for example, enables efficient and centralized recording of all relevant data - from tax numbers to country-specific data.The application also helps companies avoid penalties for violations of compliance regulations. In addition, the entire customs clearance process can be accelerated, made more efficient and legally secured. SAP GTS is available as an on-premise or cloud solution.