Exporting businesses in the UK only have weeks remaining to get up to speed with new Rules of Origin procedures if they are to continue tariff-free trade with the EU.
Whilst there are variations, the majority rule to class a product as being of UK origin is that it is made from around 50% British or EU-sourced content, and the tariff-free access this delivers is the same for both UK firms exporting into the EU, and EU businesses exporting into the UK.
Businesses have so far been afforded a grace period to come to terms with the new trading arrangement. But from January 2022, all businesses will have to be able to demonstrate that they are compliant.
If they can’t, whether through lack of preparedness or exported products being less than 50% UK or EU-based, they will face duties. And many businesses are reportedly underprepared and unaware of just how much evidence they’ll have to provide in order to gain tariff-free access.
One trade expert from the Centre of European Reform noted that, if the EU was to step up enforcement in this area, the lack of preparedness from UK businesses could in essence become a way of the EU enforcing tariffs on the vast majority of UK exports.
Whilst larger organisations may have had more manpower to get to grips with the 50 pages outlining how Rules of Origin will work under the new trading arrangement, the fear is that smaller firms for which importing and exporting activity is maybe a smaller part of their operations, internal resource is simply not available to get to grips with the rules or find ways to comply with them. This, in turn, may put many SMEs off exporting altogether.
One study by The Guardian found one in four SMEs have already stopped exports to the EU due to increased costs as it is.
And this is against the backdrop of the ongoing fallout from the pandemic, plus the driver shortages in the UK.
Andrew Howie, managing partner at Grant Thornton LLP in Scotland said of the current situation facing companies: “Businesses have been on a roller-coaster ride of relief at the release from lockdown and the success of the vaccination programme, while constantly being buffeted by inflationary pressures and supply chain problems. In a just-in-time international economy, any issues with logistics can obviously escalate quickly. This winter is likely to test once again the resilience of business plans and contingency measures.
Read more: Complex Rules of Origin add £600m to duty costs
“It’s a very challenging scenario. We have seen examples at docks where container turnaround time is slower due to additional Brexit regulations and container pick up is slower due to a lack of drivers. It really is creating a perfect storm and the combination of the two is exacerbating delays and having substantial knock-on effects further down the supply chain.
“There is also the potential for things to get worse for businesses before they get better. Many businesses may not be aware that they are currently benefitting from a range of phased Brexit implementations measures, including grace periods around rules of origin. With this set to change from 2022, when further border measures come into force, businesses need to ensure that they are prepared and ready, to avoid a shock and even further disruption.”
Get up to speed with our free guide and workbook
The Rules of Origin in the new trade agreement between the UK and EU are complicated and vary for many products. Working out the origin of your products can be complicated and confusing with several competing rules.
We’ve created a free and comprehensive guide and workbook for UK businesses with a step-by-step process on how to work out the origin of your products.
The EU has released its plan to help fix the ongoing issues surrounding UK and NI trade in the wake of Brexit.
Whilst Northern Ireland has been kept within the EU’s single market to avoid a hard border with the Republic of Ireland, checks and controls have been in place for goods arriving from Great Britain.
The new plan proposed by the EU would remove around 80% of checks and cut paperwork in half.
The BBC reports that the EU is proposing:
- Most food products will not need to be physically checked when arriving into Northern Ireland from Great Britain.
- A cut to the required administration for Northern Ireland importers.
- Expanded trusted trader arrangements meaning more products and companies are exempt from customs tariffs.
- Change to current laws to ensure no disruption to moving medicines across the Irish Sea.
- Improved engagement with stakeholders in Northern Ireland including politicians and business groups.
The Northern Ireland Protocol was only introduced at the start of 2021, designed predominantly to prevent checks and the creation of a virtual border on the island of Ireland. But this has, in turn, created a trade barrier with Great Britain.
Read more: ‘Worker shortage down to Government’s lack of Brexit business planning’
However, businesses on both sides have warned of ongoing issues, whilst there have also been serious concerns that the current set-up undermines the Good Friday Agreement.
If your business continues to struggle with the changing business environment, especially trading with the EU, then we can help. Download our free post-Brexit planning checklist and see the 10 steps your business needs to take today.
Complex regulations surrounding Rules of Origin following Brexit has seen British businesses pay an additional £600m in customs duties in H1 this year.
The UK’s trade agreement with the UK, which was geared towards removing tariffs for all goods, has actually seen costs related to export and import activity increase for a swathe of industries.
Rules of Origin, which the UK government states are ‘some of the most important provisions that your business needs to understand and meet under the UK’s deal with the EU’, are still being adapted to by UK forms, with many saying they weren’t given enough time to fully understand the new regulations and trading conditions.
Fergus McReynolds at Make UK commented that: “We didn’t actually see the black and white of the text until Christmas Eve, and that didn’t give companies a lot of time to understand the implications.”
One of the most notable examples of how Rules of Origin are impacting UK firms is Marks & Spencer’s ever-popular Percy Pigs. Although they are manufactured in Germany and then imported into the UK (a pathway which wouldn’t induce a charge under the primary trade agreement between the EU and the UK), the re-exporting of the product from the UK into Northern Ireland is now a step in the supply chain which is subject to import taxes with the tariff exemption falling away.
Read more: ‘Disastrous drop’ in UK food and drink exports into the EU
Michelle Dale from accountancy firm Hacker Young noted that: “UK businesses weren’t given enough time or help to prepare for the cost of Brexit or the masses of paperwork.
“The result is that the cost of tariffs and extra paperwork is now causing serious difficulties for many businesses who are already struggling to stay profitable in the face of mounting pandemic-induced costs.”
Download our free Rules of Origin guide
If your business, like so many others, is still working to adapt to the new trading environment with the EU, we can help.
Our free Rules of Origin guide and workbook has everything you need to work out what customs duties may be due on your products, with a step-by-step process through the rules in the TCA and a template for you to complete to calculator their origin.
Exports of food and drink from the UK into the EU are in freefall.
That’s according to new figures released this month by the Food and Drink Federation, showing that exports to the EU have fallen by over 27% in H1 2021 compared to the same period two years ago. Overall, lost revenue totals around £2 billion.
Exports to Spain, Italy and Germany have fallen by almost half.
However, some export categories are still seeing growth. Whisky, soft drinks and salmon exports have all increased. And whilst the drop in export activity into the EU has been stark, the total loss of export revenue has been buffered by an increase in non-EU sales of 13%. The share of UK exports moving outside the EU has now risen from 40% to 47% as a result.
Dominic Goudie, head of international trade at the FDF, commented that: “The return to growth in exports to non-EU markets is welcome news, but it doesn’t make up for the disastrous loss of £2bn in sales to the EU.
“At the same time, we are seeing labour shortages across the UK’s farm-to-fork food and drink supply chain, resulting in empty spaces on UK shop shelves, disruptions to deliveries and decreased production. Unless steps are taken to address these issues, the ability of businesses to fulfil vital export orders will be impacted.”
Read more: Post-Brexit trade imbalance as exports from Ireland to GB soar
John Whitehead of the Food and Drink Exporters Association said that there are a number of factors at play, including challenges in the supply chain and the inability to meet customers in person due to the pandemic.
“There is growing evidence that the complexity of trading with the EU has led to businesses moving operations into Europe and of importers looking for alternative suppliers, contributing to the ongoing decline in both UK exports and UK jobs.”
The huge shortage of HGV drivers in the UK is pushing up pay as hauliers start introducing retention charges on bills.
Tensions are said to be rising within the industry with the low numbers of available, trained drivers playing ‘musical chairs’ – something hauliers are looking to head off by adding ‘driver retention surcharges’ of around £65 per load to customer bills to directly boost employee pay.
One provider, speaking to Loadstar, said that the extra charges were on top of a 20% pay increase to his drivers. Smaller firms are warning that they’re being priced out of the market, whilst others have forewarned that the busy Christmas period could see huge disruption.
“Despite this increase, every haulier we deal with told us that from September there would be surcharges of between £50-65 per load,” the forwarder said.
“I cannot bear to think what December and peak season build-up will be like for container haulage when it is already this bad. Our hauliers told us this was a purely non-profit move, the money going directly to drivers to stop them taking more lucrative offers from larger firms.”
The government has this month urged UL firms to train and hire British drivers to fill what’s estimated to be 100,000 vacancies in the sector, driven by a combination of EU workers returning back to mainland Europe following Brexit, and a lengthy delay in driver training brought on by the pandemic.
Read more: Post-Brexit trade imbalance as exports from Ireland to GB soar
They are also considering bringing forward a review of its Shortage of Occupation list to tackle the issue by assessing which jobs the UK will be more lenient in allowing overseas workers to apply for visas for.
Morrison’s CEO David Potts noted to the BBC that: “Maybe look at a list of people who come into the country to work, maybe add the drivers to that list for a while, see how we get on with that, because we need to break the back of the issue in order to keep what is a great supply chain working in Britain.”
Exports from Ireland into Great Britain have soared in the first half of 2021 whilst GB exports across the Irish Sea have fallen.
According to the Irish Central Statistics Office, exports to Great Britain (excluding NI) have risen 20% in the first six months of the year, rising by over €1 billion to €6.7bn.
This means activity from Ireland into GB has overtaken activity flowing in the other direction, with GB exports falling by 32% to €5.3 billion.
Food, live animals and manufactured goods have been hardest hit.
Why has the balance shifted?
In a word – Brexit.
The UK’s departure from the European Union and the single market has hit British exporters harder than their Irish counterparts due to border checks on shipments to the EU. However, for Irish and EU exporters into Britain, a more phased approach of checks has been implemented with the UK government opting for a 12-month transition period.
Read more: UK signs new trade agreements, closes in on NZ deal
As a result, all food and plant exports into the EU from UK firms have been subject to sanitary and phytosanitary checks since the start of the year, whereas Irish businesses have not been subject to the same levels of red tape.
If your business is still working to adapt to the post-Brexit trading environment, we can help. See our free Brexit Knowledge Bank and expert downloads and resources here.
Has your business deferred Customs Declarations since the start of last year?
If so, you have 175 days from the date of import to submit the full declaration. That time is nearly up. You or your customs agent must file with HMRC within that deadline.
Do you or they have the capacity to cope with the volume of entries required? Do you need additional support?
Go Exporting is pleased to offer our Customs Agency service to take up the excess. Don’t be caught out. We can help.
Contact us today for a no-obligation discussion on your requirements and how we can ease your Customs Declarations headaches!
Last month we teamed up with the British Library to deliver a webinar on exporting and importing following Brexit.
We’ve split the two-hour session into specific chunks to help you get to the information you need.
The webinar covered a full range of topics, including:
- What’s changed with Brexit
- What the implications are
- How to address the challenges
- Rules of Origin
- Key issues facing exporters post-Brexit
- How to trade internationally post-Brexit
This final session covers how businesses can expand horizons to trade internationally and create growth in the post-Brexit era, including barriers to trade, exploring new opportunities and taking positive action.
Need more support?
We’ve put together a range of free guides and workbooks to help businesses navigate the choppy Brexit waters.
Last month we teamed up with the British Library to deliver a webinar on exporting and importing following Brexit.
We’ve split the two-hour session into specific chunks to help you get to the information you need.
The webinar covered a full range of topics, including:
- What’s changed with Brexit
- What the implications are
- How to address the challenges
- Rules of Origin
- Key issues facing exporters post-Brexit
- How to trade internationally post-Brexit
This session covers the key issues facing exporters in the wake of Brexit, including customs declarations, issues maintaining seamless deliveries into the EU, Origin and triangulation.
Need more support?
We’ve put together a range of free guides and workbooks to help businesses navigate the choppy Brexit waters.
Last month we teamed up with the British Library to deliver a webinar on exporting and importing following Brexit.
We’ve split the two-hour session into specific chunks to help you get to the information you need.
The webinar covered a full range of topics, including:
- What’s changed with Brexit
- What the implications are
- How to address the challenges
- Rules of Origin
- Key issues facing exporters post-Brexit
- How to trade internationally post-Brexit
This session covers Rules of Origin and the implications of the UK-EU TCA, including what it says, bilateral cumulation, whether or not sufficient transformation has taken place and how to prove origin.
Need more support?
We’ve put together a range of free guides and workbooks to help businesses navigate the choppy Brexit waters.
