Brexit is back on the agenda with tariffs set to change from 1 January 2021. So what exactly is the current state of play for importers and exporters?
There has been a flurry of information from the government in the last couple of weeks culminating in new UK Brexit position papers. The latest relevant guidance is here: Moving your goods to the EU or Common Transit countries.
To help our customers with their forward planning here is a summary of exactly where we are with Brexit, and what may happen between now and the end of the year.
No extension means new tariffs from 1 January 2021
The government has confirmed that it will not accept the EU’s offer to extend the transition period by up to two years. WTO tariffs will therefore apply to all imports into the UK from 1 January both for EU and non-EU goods.
Currently non-EU goods with a few exceptions are subject to WTO tariffs. But, under WTO rules, a country can adopt its own tariff for imports as long as the rates are more favourable than the standard WTO tariff. The UK government has now done this and tariffs have either been scrapped altogether or reduced on an extensive range of commodities.
These new tariffs will also apply to imports from the EU from 1 January unless there is a free trade deal. At the moment all EU imports into the UK are duty-free but under the new tariffs duty will be payable on about 40% of EU imports and the remaining 60% will be duty-free. Had the government decided to stick with WTO rules only 20% of EU imports would be duty free.
Further information: Government announces UK Global Tariff (21/5/20)
‘Light touch’ for importers until 1 July 2021
For all EU imports from 1 January an import entry will be required. However, the government has decided to apply a ‘light touch’ for six months. This means an importer will have until 30 June to submit entries for the period 1 January to 30 June and any duties, VAT, etc, will not become payable until the entry submission date.
This ‘light touch’ approach will be known as Customs Freight Simplified Procedure Entry in Declarants Records (CFSP EIDR). From 1 July all entries for EU imports will have to be done at the time of importation.
Exports to the EU – full entry without a free trade deal
For exports to the EU, the European Union has ruled that after 1 January a full export entry will be required including a transit document backed by a guarantee. It remains to be seen if anything other than a full entry will be required if the ongoing free trade negotiations are successful.
There is a lot of pessimism about the possibility of a free trade deal with the EU. Indeed there is a cynical view that as our export/import economic activity with the EU may only be 50% of the norm by the end of 2020, the impact of ‘falling off the cliff’ will be so much less.
This may not be the case, however. Both the UK and EU economies have been severely affected by the pandemic and the last thing most politicians now want is to add the effects of a no-deal Brexit.
Furthermore, on the UK side, it is now clear that the customs handling replacement for CHIEF – the CDS (Customs Declaration Service) – will not be ready on 1 January. HMRC is estimating that post-Brexit there could be as many as an extra three million entries a year, which may be beyond the capacity of CHIEF.
Previously the government had said that there would be no further negotiations with the EU after the end of June but a whole raft of meetings has now been set up for July.
Brexit free trade deal – sticking points
There are three major obstacles to a free trade deal.
1. EU fishing quotas in UK territorial waters
Both sides say they want a deal but negotiations over fishing rights are full of historical, geographical and political snags. Here the compromise would seem to be for the UK to grant access to EU fishing boats, perhaps 75% of their existing catch quotas, in order to secure a deal. It was our decision to leave the EU and if we want a free trade deal, why should the EU allow us to decimate the French, Belgian and Dutch fishing industry?
2. ‘Level playing field’ issue
The EU wants us to apply its trading quality standards to all of our non-EU trade – known as the ‘level playing field’ issue – to ensure fair competition and protect standards. But while the EU wants to avoid being undercut, the UK equally wants independence, creating friction as neither side is giving way.
3. The Irish border
This is probably the most intractable issue. The Prime Minister said last year there would be no extra administrative burdens imposed on goods moving to/from Northern Ireland. But, as things stand, export and import entries will be required from 1 January if both sides are to respect the Good Friday Agreement (which prohibits any type of hard border).
How IFL is preparing for Brexit
We will continue to give updates on Brexit as they become available.
International Forwarding (IFL) can provide assistance on all post-Brexit customs requirements, both import and export, and help smooth some of the supply chain challenges by managing your warehouse logistics.
We are upgrading our software which, together with further staff training, will ensure the company has the resources to meet the demand.
Furthermore the Authorised Economic Operator (AEO) accreditation of the company by HM Customs & Excise is a mark of the professional competence of International Forwarding in the field of customs activities.
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