Bleak outlook for small businesses due to new Brexit customs rules

2021 saw the first series of Brexit trade regulations come into force for the UK’s exports to the EU. These regulations were part of the Trade and Cooperation Agreement (TCA) between the UK and EU following the agreement of a “hard deal” Brexit.

The 2021 regulations meant that those exporting to the EU from the UK were subject to a country of origin and country of dispatch check, all of which should be uploaded to the HMRC database. Importers in the UK were able to delay the declaration of any EU-imported goods by up to 6 months.

The 1st of January 2022 saw these regulations implemented in both directions of trade, as well as additional measures put into place. The newer measures include the removal of the 6-month period of declaration grace for importers, new tariffs at ports and new ruthless goods checks at the point of import in conjunction with the country of origin and country of dispatch regulations.

This final rule is a point of concern for businesses as a proportion of some UK imports from the EU are produced in multiple places, with the country of origin and dispatch often varying from shipment to shipment of the same stock, causing confusion and delay. The country of origin check will forensically check if an item is from the country of origin as stated in the paperwork, with even the slightest error leading to variable and often hefty fines. This will impact food and perishables the most as these cold chain products have a window in which they are at their optimum quality.

The removal of the 6-month period of declaration grace for importers means that companies can no longer delay making import customs declarations for EU goods and will instead have to make declarations and pay relevant tariffs at the point of import. The Chief Executive of the Cold Chain Federation has said that the first few days of post-Brexit checks of EU goods have been “quiet” though there have been first-hand accounts of a backlog of trucks at ports, all of whom either have the correct forms in the wrong order or they have been incorrectly completed.

The 1st of July 2022 will see more checks brought in regarding sanitary and phytosanitary products. Physical examinations will have to be undertaken by specialists in those fields rather than port officials thereby requiring more staff at entry points. However, import registration for these goods must take place before 1st July.

The Goods Vehicle Movement Service (GVMS) is part of the governmental system that allows shippers and hauliers to upload the data and information of their shipment onto the database to allow quick passage as customs officials will know everything is completed and correct. However, companies have already seen problems with this system, with some noting the registration of the trailer rather than the truck itself. Calais in particular is seeing backlogs of trucks waiting to fill out their forms correctly.

One source in the technology sector, however, told The Loadstar that while such products offered promise, they were reliant on government systems being ready. “Even now, software suppliers are still in discussion with HMRC on what the customs system does and does not do and are having to contend with a lot of conflicting information,” the source said. “A lot of those in the supply chain are also still uncertain over what their responsibilities are; take GVMS, is it the driver’s responsibility or the haulier’s – and what constitutes a haulier?”

Logistics UK’s General Manager, Alex Veitch, commented that companies have begun to struggle with the handling of country of origin rules, stating that “Working out what percentage of goods are made in what country is a total nightmare,” echoing companies fears before the regulations had been implemented.

Smaller businesses are also likely to face strife with the new rules. Whilst major players such as DHL, DB Schenker and Maersk are less impacted by delayed shipments due to the size of their respective companies, smaller players will be impacted in a far greater way due to the increased overheads that will accompany the new regulations. Small businesses have already been disproportionately impacted by the pandemic and increasing operating costs due to Brexit red tape may spell the end for many of these smaller companies.

A poll done by CityAM found that in 2020, before the first round of regulations, 19% of small business owners in the UK had either considered closing their businesses or did not think their businesses would survive the new rules. In November 2021 the same poll was taken, this time 43% of small businesses owners did not think their business would survive a year, with 65% stating that the decision to leave the EU has made their businesses more difficult to run. Roan Lavery, Chief Executive Officer of FreeAgent, states that “the onus rests on the government to support these businesses, which make a significant contribution to the wider economy,” suggesting that what the smaller businesses require is a helping hand through the red tape of the updated regulations.

The new customs regulations have led to higher costs and transport delays, painting a bleak outlook for smaller businesses in particular, with turnover and confidence remaining low. Additionally, there is now a series of question marks regarding whether or not EU-based businesses will want to trade with the UK as the bureaucratic mire is an unattractive part of any deal.


Source: Transport Intelligence, January 18, 2022

Author: Alex Bullard