Brexit means that for the first time in 4 decades, the UK will have to renegotiate its trade and economic relationship with its leading trading partner. Approximately half of all imports and exports are done with Europe currently is this will be a change that has a massive import on UK Businesses involved in international trade.
As it stands EU members can sell their goods freely anywhere within the EU without having to pay additional import taxes and duties. In addition to the benefits of tariff-free movement, there is also an integration or harmonization of freight regulation and documentary requirements, meaning that there is no barrier to trade and effectively you can distribute goods freely and without customs delays or port authority delays.
The problem for business is not just the prospect of tariffs in a new customs system, but the disruption to the free flow of goods caused by Brexit. Imports from outside of the EU are subjected to a much greater degree of checks and entry declarations. You have to submit electronic customs declarations to customs, present paperwork to relevant trade and port health bodies and oversee payment of import tax and duties. There are complex and intricate rules for different products in terms of composition, proof of origin, licensing and effectively the goods to and from Europe would be unable to move anywhere as quickly and efficiently as they are currently.
The UK government needs to invest heavily and widely and employ a highly significant number of customs officers, civil servants, and Health officials to help smooth the transition process and guide UK business into the new regime. The scope of European legislation is very wide encompasses regulatory requirements and controls for every product and from every area of the world. It is a massive undertaking for us to rewrite all of this that will take huge developments in our port systems and infrastructure.
At present our border force services and customs teams are limited and widely restricted with many companies involved in trade already concerned that the systems in places are not adequate for existing imports from outside of the EU so if proper investment and overhaul is not made it is likely that there could be significant delays and problems particularly in the early stages of trade outside the Union.
It maybe stands to reason that the UK and the EU will likely develop some bilateral agreements, or the UK can become a member of the European Economic Area (EEA) and/or the European Free Trade Association (EFTA). They then would be joining it’s four already existing non-EU members which are Norway, Liechtenstein, Switzerland and Iceland. Whilst this arrangement may provide some leniency for taxes associated with imports, the transportation process when importing will be changing nonetheless. An import license may be needed to import certain goods into the UK, in addition to declaring your imports to customs and paying for customs clearance. You will need a commercial invoice that outlines the commodity codes of the items you are importing for your business as well, essentially, you can expect that post Brexit your imports will be more expensive.
As we know the UK government has committed itself to leaving the single market and the customs union which means it is a case for us to negotiate the best deal we can for British Businesses. There is a lot of talk amongst UK businesses that leaving The customs union and single market would just mean that we would automatically revert to WTO rules but the WTO is a framework for trade and as such, this still is not a straightforward or simple process. It is likely that the tariff rates would likely mirror the most favoured nation rates meaning that if a free trade deal is not agreed that the full duty rate would be paid similar to that for existing third
There has been very little guidance for UK businesses and even within the shipping industry there is a lot of speculation and at this stage, it is not clear what tariffs would be in place and for how long until a free trade deal if any could be reached.
As it stands the duty rates for imports outside the EU differ greatly depending on the product and where it originates and it is pretty complex so it is likely that we would try and mirror the existing tariff to ease disruption. The tariff is pretty extensive and differs widely depending on the nature of the commodity.
Also if we submit a new schedule encompassing tariffs this would still need to be signed off by the other WTO members.
So there is a lot of uncertainty regarding tariffs and just how smooth shipments could be coordinated through Europe and it is likely that in the short term at least that products will become more expensive and the movement would take longer due to a much greater degree of checks and requirements for completion of customs entry formalities.
Brexit affects nearly every business, especially shipping imports and export. It is not all bad news though and a lot of commentators believe that moving forward we will be able to negotiate our own trade agreements outside of Europe and it will allow more flexibility and sovereignty. It is also widely suggested that it may lead to more UK manufacturing again following the trend over the last few decades of focusing more on services and importing more and more goods from overseas.
Approved Economic Operators
Once we leave the EU the goods to and from Europe will require customs entries to be made and it is important that UK businesses have a Customs representative who can make customs declarations accurately and without delays. If UK businesses appoint an Approved Economic Operator (AEO) they will be able to benefit from quicker clearances and fewer hold-ups at the port but still many freight forwarders and customs brokers lack the necessary status to assist with more seamless movement of cargo. There has been an increase in application to HMRC but still, the UK is lacking in this import accreditation.
Uk Businesses should check that their repressive is approved and that they have the necessary capabilities to complete customs and port health requirements.
Exports to Europe from the UK Will be affected
- One of the main components of the Eurozone was to have free trade between member states. Even though it has declined over the years, states in the EU consist of up to 45% of British exports, and removing itself from those free trade agreements would impose a tax on all goods exported to EU countries.
While Britain was part of the Eurozone goods coming from the UK to any European country were considered as domestic shipping and not subject to paperwork and guidelines that shipments from non-Eurozone countries are. Leaving the Eurozone will create more complications, slower delivery times, and higher costs for shipping.
Imports to the UK from Europe Vs. The Rest of the World
- Similar to exporting goods, the import of goods and how they are shipped to the UK will likely change post-Brexit as well. It stands to reason that the free trade agreements currently in effect will be cancelled, then consumers in the UK will have to pay tariffs on goods from the Eurozone, which hasn’t happened before. This is likely to drive UK consumers to look to other countries outside of Europe. Consequently, shipping from these other countries to the UK will increase as EU trade decreases. One source of goods that is bound to gain from Brexit is Asia. If the current free trade agreements with the EU are cancelled, the less expensive goods from countries like China and India are likely to seem more appealing to consumers. It’s probable to say that there will be many more goods shipped from Asia to the UK in the coming years.
Increased Domestic Shipping
- So much uncertainty has arisen as a result of Brexit, in addition to the value of the pound falling. It’s likely that we will see increased domestic activity from consumers within the UK because of this. For the shipping industry, this will probably mean domestic shipping such as parcel and package services and freight will increase in the short term.
If you own a business that imports or exports products outside of the UK it makes sense to start preparing for the possibility of Brexit. There will be less downtime and potential loss for your business if you start implementing positive steps for change in advance. Find a freight forwarder who is AEO approved who will be able to provide a faster clearance service if border checks and customs requirements are reintroduced and make an impact assessment on the sourcing and sale of goods if Duty and Import Vat became payable in the absence of a free trade agreement.
At the moment there is much economic, political and trade uncertainty and still, it is unclear as to the exact nature of what arrangements will be following the departure of the UK from European Union.