The United Kingdom finally left the European Union on 31 December 2020, nearly four years following the original vote to leave. The UK is no longer part of the EU Single Market or the EU Customs Union. Rather, the UK has concluded a Trade and Cooperation Agreement with the EU, consisting of a Free Trade Agreement creating preferential measures of trade in goods and services.
Because of Brexit, there will be significant changes for UK importers and exporters. There are already reports of delays and falling UK to EU exports since the withdrawal. The way business is conducted, the necessary documentation and the steps that must be taken for customs clearance have all been disrupted, so it’s important you’re across the new requirements to ensure a successful shipment.
Below, we provide an overview of the new UK-EU Agreement, and some of the changes you should be aware of when organising a shipment to and from the UK.
What is the EU-UK Trade and Cooperation Agreement?
The deal struck between the UK and the EU is a complex set of measures consisting of new governance arrangements, a security partnership and a free trade agreement.
The free trade agreement is the most important document for importers and exporters to understand, as it provides a range of benefits – most critically, it allows for zero tariffs and zero quotas on all goods complying with the applicable rules of origin.
Other benefits include continued air, road, rail and maritime connectivity and a new model for energy trading, which promotes fair competition.
So, what’s changed?
New rules of origin
You will only benefit from free market access if your goods satisfy the new requirements for the rules of origin.
Namely, if your goods do not originate in the UK or EU, you will still need to pay tariffs.
This includes the new ‘UK Global Tariff’, which will replace the Common External Tariff.
So, you’ll need to carefully assess the origin or your goods, including their Regional Value Content (RVC) – this basically means that UK or EU-sourced materials and processes must represent a certain proportion of the final value of your goods.
This is major change from the pre-Brexit way of doing business within the EU, which simply allowed for the free flow of goods.
It may have a significant impact on your goods, especially if a large proportion of the content of your products are sourced from other countries. It may even require you to change suppliers altogether. The rules outline new origin procedures and requirements specific to certain products, which are intertwined within a product’s HS Code (read about that in our HS Code blog).
Now that the UK has left the European single market and customs union, businesses must prepare for new customs realities at the UK-EU border for the first time in decades.Her Majesty’s Revenue & Customs, 2020
EU Trade Agreements no longer apply
When the UK left the EU, it also left behind the trade deals that the EU have or are working on with multiple other countries. The EU had trade agreements with a range of nations such as China, New Zealand, Mexico, Australia, Japan, Canada and Vietnam. The UK is no longer a beneficiary of these agreements.
The UK is currently negotiating its own free trade agreements, including with Australia, and signed the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) with Japan on 23 October 2020.
To get across this changed legal landscape, you’ll need to stay on top of any “rolled-over agreements” and any new free trade agreements the UK strikes with other countries. Each agreement will likely contain its own rules of origin calculation methods, so be sure your team is prepared.
You can read more about free trade agreements in our blog.
You will now need to file customs declarations when importing or exporting any goods to and from the EU.
There is also the requirement to complete an “exit summary declaration” (EXS) when moving goods outside of the UK, and an “entry summary declaration” (ENS) when moving goods into the UK. These are required for safety and security purposes.
There are specific time limits ahead of import and export when this declaration needs to be lodged.
Note, however, that there is temporary waiver until 31 March 2021 for safety and security requirements on certain exports. There is also a waiver until 30 June 2021 for certain imports.
You will now need a special licence to import or export certain goods to and from the UK.
When exporting goods to the EU, you will need an export licence for goods such as waste, certain hazardous chemicals, ozone-depleting substances, mercury, drug precursors, genetically-modified organisms, cultural goods, rough diamonds and more.
Depending on the type of commodity, you may also need a permit to import certain goods to the UK.
You will also need to comply with additional formalities if you are importing or exporting excise goods (such as alcohol or tobacco) to and from departure.
How can your UK business adapt?
Other than the changed regulatory requirements, Brexit will likely have significant logistical impacts on your goods, including extra costs and delays as everybody adjusts to the new regime.
Some strategies you can implement to adapt to the new landscape may include:
- Auditing your supply chain – Revenue & Customs predicted that 400 million new Customs Declarations will now be required each year. Don’t be held up because the parties in your supply chain aren’t prepared. Get in touch with them and make sure everybody is aware of the requirements.
- Prepare for delays at the border – Things will go wrong, and shipments will get delayed as business still work to understand the processes in a post-Brexit trading environment. The important thing to do in the meantime is stockpile your goods and perhaps obtain some more space. Make sure you have the cash flow to meet these requirements.
- Consider if air freight is more appropriate – Since Brexit, it’s been reported that air freight charter volumes have skyrocketed relative to ocean freight volumes. This is because the risk of shipping goods across the English Channel to the UK as a result of the new customs procedures have led to further air charter enquiries. You can read more about the benefits of air freight versus sea freight in our blog.
- Open a base in an EU State – Many UK importers and exporters are going to the EU to reduce the expenses and burdens that have now come with Brexit. If your goods are manufactured in the EU already, consider opening a base in the EU so you don’t have to send any goods to the UK unless it’s to send them to market.
- Expand your horizons – Look at markets outside of the EU – do not make it your sole customer base.
What if I run an Australian Business and export from/to the UK?
Whilst the changes between the EU and UK trade above may sound complicated, the good news is, this will have minimal impact on Australian businesses. Whilst we are seeing some delays with UK exports and imports due to congestion and the ports, this is much in line with the global situation as a consequence of COVID19. We are currently encouraged by the potential for a UK/ Australia free trade agreement to allow for improved trade between our two countries and more opportunities for our clients.
Final tip – hire a professional freight forwarder
Brexit has meant UK imports and exporTs to and from the EU, are accompanied by much more documentation and regulation..
So that you can focus on running your business, let a professional freight forwarder do the work and help minimise the costs in your supply chain.
At International Cargo Express, we work with an experienced and professional UK partner who can support with all your trade between the UK and EU. If you are in this market and need a recommendation, we will be more than happy to put you in touch. Simply enquire today.