UK Customs is under serious threat of losing duty revenue as a mountainous backlog of declarations grows.
At the start of the year, HMRC announced a six-month grace period for importers having to declare on goods imported between 1st January and 1st July, with the first of the delayed batch being due on the 25th of this month.
However, UK Customs looks unlikely to be able to cope with the upcoming deluge of work.
A customs agent, speaking to The Loadstar, said of the situation:: “We’re in a situation where we have maybe millions of declarations due and we have insufficient brokers to get us out of the backlog.
“We have all these importers that have not declared what they’ve imported, and shipments will fall through the system, either because the importer cannot find a broker or they cannot be bothered.
“It leaves HMRC in a quandary; one option is it may further extend the delay or maybe it will find itself missing out on a hell of a lot of income.”
Brokers clearing goods from the EU in the aftermath of Brexit have been required to apply for numerous new certifications, including the Customs Freight Simplified Procedures – the most sought after as it provides swifter clearance of goods.
However, firms have been struggling to attain CFSP approval, with some applications taking almost half a year.
Another issue is faced by brokers processing UK importers’ declarations, whereby taking on EU importers as direct clients can leave them equally liable for any tax due on declared imports, resulting in a situation where a £35 piece of work for a client could leave the broker jointly liable for a £2,300 duty bill.
A source told The Loadstar that: “If customs come and audit us and ask us to prove origin and we cannot, they will ask us to pay it, if not they will go to the importer.
“But, with the importer in the EU they could just say ‘come and get us’. Well, HMRC will not do that, and they don’t have to, because they have us, here in the UK, equally liable and much easier to get a hold of.
“If you’re one of the importers that’s missed a declaration, are customs going to find you? Even if they do, they could block subsequent deliveries, but you could just route them through a different company or change the legal terms. It’s almost been left to the good graces of the importer whether we see that duty paid.”
A report by the University of Sussex has found that around 10% of UK exports have unnecessarily paid tariffs since the start of the year.
The University’s Trade Policy Observatory analysed EU data to find that up to £3.5bn of British exports have paid tariffs which they didn’t need to. One reason given that exporters do not automatically benefit from zero tariffs.
Under Rules of Origin, tariffs apply on goods moving between the UK and EU only if the TCA’s Origin requirements are not met.
This has added work and a constant niggling headache for businesses as evidence of origin needs to be provided to avoid the tariffs, with the importer needing to declare that they hold any proof, and traders needing to understand how to classify their goods to cross-check against specific product rules.
As Prof Michael Gasiorek of the Univesity of Sussex summarised, “tariff-free trade is only tariff-free if firms not only meet the Rules of Origin criteria but also can deal with the necessary bureaucracy and paperwork”. Businesses have since told the BBC that they’ve paid millions in tariffs due to complex arrangements for claiming zero tariffs, complications over re-exporting goods and also an expectation that some fees could be recovered in the future.
It’s estimated that UK exports into the EU have dropped 15% compared to last year, whilst imports have fallen 32%.
If your business has faced tariffs and is struggling to get to grips with Rules of Origin, download our free guide and workbook here.
The government is to launch a post-Brexit tariff suspension scheme designed to help local manufacturing firms be more competitive by lowering the cost of importing raw materials that are rarely available locally.
Launching next month (June 2021), UK companies can apply for their duties on imports to be temporarily reduced – or even removed.
A similar scheme is available within the EU, however, applications from companies for tariff suspensions had to be assessed by the entire bloc. Following the UK’s departure from the European Union, the UK government can set its own tariff regime.
Minister for trade policy, Greg Hands, commented on the new scheme: “Now we have left the EU we can use suspensions to give UK firms the maximum possible benefit.”
“This suspensions scheme will be accessible to importers across the country, and those that are granted will benefit entire sectors.
“They will lower costs and help our superb producers pack even more of a punch when they compete on the global stage.”
You can apply from 1st June here.
Belgium is working to attract UK businesses into the country by offering easier access to the EU.
The charm offensive has stepped up a gear as it continues to evolve and streamline customs processes and offering the opportunity for strategic partnerships.
Werner Rens, of the Belgian Customs Authority, said at a British Chambers of Commerce event that: “Becoming an authorised economic operator (AEO) in Belgium means you become a VIP, as far as Belgian customs is concerned.
“When doing closed border trade with the EU, Belgian customs offers the opportunity to displace the customs office, meaning that the business does not bring goods to customs for physical checks because the warehouse can become authorised as an ‘approved place’.
“And as an ‘approved place’, your warehouse is recognised as a customs office.
“In Belgium, we really believe in the extended gateway principle, which means moving the border posts away from the main ports in an effort to alleviate congestion and keep the supply chains flowing.”
Some UK sectors have been left reeling by the effects of Brexit for real, with the dairy industry amongst the biggest losers with milk and cream exports, in particular, dropping 96% year-on-year.
But tools such as becoming an authorised economic operator, as well as understanding and getting to grips with customs declarations, incoterms and rules of origin can help firms to adapt to a new trading environment.
UK milk and cream exports into the EU have plummeted since the start of the year, providing the dairy industry with one of the gloomiest Brexit outcomes so far.
Milk and cream exports, worth £24 million in February last year, dropped a staggering 96% to just £900,000 this year. Cheese exports have also fallen 65% on a year-on-year basis, albeit an improvement on an 85% drop in January.
Whilst trade body Dairy UK suggest that normal patterns of trade are starting to resume, they’ve warned that changes to trade are significant enough to make exporting unviable in a number of cases.
Dominic Goudie, head of international trade at the Food and Drink Federation, commented that: “Exports to our biggest market, Ireland, have also dropped more than two thirds. UK businesses continue to struggle with inconsistent and incorrect demands at EU borders, and small businesses have been hardest hit.
“It is essential that the EU-UK partnership council and its trade specialised committees are convened to urgently address problems.”
The Department for International Trade has launched a new grant scheme designed to support UK firms to expand internationally.
Called the Internationalisation Fund, grants of between £1,000 and £9,000 will be made available to eligible firms covering a wide range of international business activities, from export consultancy to digital marketing.
Businesses will need to cover between 40-50% of the costs themselves with the grant covering the rest and can be applied to activities including:
- Market research
- IP advice
- Translation services
- International social media/SEO
- Trade fairs (where no TAP funding is available)
- Independent market visits
- Consultancy and other international commercial services
The eligibility criteria are:
- The company must be based in England
- The company must be a small or medium-sized enterprise (SME) with up to 250 employees
- No more than 25% of the business is owned by an enterprise that is not an SME
- Annual turnover does not exceed €50 million or annual balance sheet does not exceed €43 million
Funding to support expert consultancy from Go Exporting
The new grant scheme can be applied to services offered by Go Exporting, including our export consultancy services and international digital marketing campaigns.
The UK has failed to reach a post-Brexit agreement with Norway over the rights for UK vessels to access Norway’s sub-Arctic waters.
With the UK leaving the European Common Fisheries Policy at the start of the year and now dealing directly with Norway, an agreement couldn’t be reached after the UK government’s ‘fair offer’ was rejected.
Norway’s waters, known for cod catches worth some £32m in 2018, had been fair game for UK fleets for decades.
However, as Norway is itself not an EU member state, the trade agreement with the EU didn’t cover a continuation of these rights. And, despite last year both agreeing to a system of cooperation post-Brexit, a deal couldn’t be reached despite weeks of talks.
Jane Sandell, chief executive of UK Fisheries, said that the talks had failed to even maintain the current rights that have been in place for decades.
She said: “In consequence, there will be no British-caught Arctic cod sold through chippies for our national dish.
“It will all be imported from the Norwegians, who will continue to sell their fish products to the UK tariff-free, while we are excluded from these waters. Quite simply, this is a disgrace and a national embarrassment.”
A spokesperson from the Department for Environment, Food and Rural Affairs said that agreements would only be reached if they were in the interest of the UK fishing industry.
They said that: “We put forward a fair offer on access to UK waters and the exchange of fishing quotas, but we have concluded that our positions remain too far apart to reach an agreement this year,” they added.
“Norway is a key partner and we will continue to work with them over the course of the year.”
The European Parliament will this week vote on the post-Brexit trade agreement between the UK and EU and are expected to back the trade and cooperation agreement.
This final step in the trade deal’s approval is likely to be confirmed this Tuesday (27th April), close to its own end of April deadline to conclude the new relationship with the UK. Failure to vote through the deal could have left Britain and the European Union trading with tariffs and quotas.
This final step had been under some threat over the last few months as relations between the British government and EU lawmakers frayed over Covid vaccine supplies and the unilateral suspension of elements of the Northern Ireland protocol.
However, the EU’s foreign affairs and trade committees voted overwhelmingly in favour of the agreement last week, allowing for its expected ratification tomorrow.
Ratification should bring to a relative conclusion almost five years of political and business turmoil, starting with the referendum result in June 2016.
Key steps along the way, as provided by the Institute of Export & Internation Trade, shows the extent of the fallout from that day to this:
23 June 2016 – UK votes to leave the EU
29 March 2017 – Prime Minister Theresa May triggers Article 50 to begin two year countdown to leaving
14 March – UK government seeks permission from the EU to extend Article 50 and agree a later Brexit date
20 March –PM Theresa May writes to European Council President Donald Tusk, asking to extend Article 50 until 30 June 2019
2 April – PM announced she will seek a further extension to the Article 50 process
10 April – UK and EU27 agree to extend Article 50 until 31 October 2019
24 May – Theresa May resigns as PM
24 July – Boris Johnson becomes Prime Minister after winning Conservative leadership contest
19 October – Johnson’s new Brexit deal is beaten in the Commons
28 October – EU Ambassadors agreed a further Brexit extension to 31 January 2020
12 December – Johnson wins UK General Election and says he will ‘get Brexit done’ by 31 January 2020
23 January – the European Union (Withdrawal Agreement) Act 2020 receives Royal Assent
11pm, 31 January – the UK formally leaves the EU and enters a transition period
30 December – EU–UK Trade and Cooperation Agreement (TCA) is signed, with UK parliament ratifying it that day
11pm, 31 December – Transition period ends and the UK leaves the EU single market and customs union
3 March – UK unilaterally extends grace period for supermarket agri-food from Great Britain to Northern Ireland from April 1 to October 1
EU says UK grace period extension breaches international law
9 March – UK exporters urge Lord Frost to cool trade tensions with Brussels
15 March – European Commission sends UK a formal notice of legal action for breach of its obligations under the NI Protocol
14 April – EU parliament again refuses to set date for ratifying Brexit trade deal amid concerns over UK conduct
27 April – European Parliament due to ratify TCA deal
Trade between the UK and the EU recovered in February after a big drop at the start of the year.
Following the end of the transition period and the start of ‘Brexit for real’ for companies on both sides of the Channel, exporting activity had slumped 42%.
But data from the ONS found that exports jumped almost 47% in February, but are still below last year’s activity.
February’s rebound was predominantly fueled by export increases of machinery, transport equipment and chemicals – particularly cards and pharma products. Interestingly, growth in exports from the UK to the EU was stronger than EU into the UK.
An ONS spokesperson said of the data that: “Exports to the EU recovered significantly from their January fall, though still remain below 2020 levels. However, imports from the EU are yet to significantly rebound, with a number of issues hampering trade.”
The rebound against January’s slump is still difficult to truly analyse to see how export markets are responding to Brexit. Many companies avoided sending goods across the border at the start of the year to avoid expected Brexit disruption, especially across machinery, parts and pharmaceutical products that were stockpiled towards the end of 2020.
The ongoing pandemic also continues to skew and disrupt demand.
UK steel exports into the EU have dropped significantly since Brexit, with volume in Q1 2021 down a third on previous years.
Trade body UK Steel shared the figures with the Mirror, showing how shipments from the UK into the EU fell from an average of 630,000 tonnes to just 420,000 tonnes in the first three months of the year.
The data suggests a Brexit-related slump in demand with British steel exporters using less than 60% of their quotas in the first quarter.
Director-general of UK Steel, Gareth Stace, said that: “This is a challenging time for the UK steel sector as it does its utmost to adapt to challenging new trading conditions and recover from the impacts of Covid-19.
“This first quarter of export data demonstrates quite how challenging market conditions are for the sector at this time and the new barriers now in place between us and our largest export market.
“We are confident that some of these export difficulties will lessen as time goes on, but unfortunately many will be a permanent feature of our new trading relationship with the EU.”
Read more: How to export post-Brexit (webinar)
The British steel industry has been fighting for survival for years, but a changed relationship with the EU and the pandemic is likely making the situation more challenging. Liberty Steel is the latest to face challenges, with 3,000 jobs and 11 UK plants at risk following the well-publicised collapse of Greensill Capital.