Businesses are set to be hit by significant disruption by ongoing chaos and confusion at Brexit borders according to Stuart Gregory, Managing Director of Colchester-based Wallis Shipping.
The shipping, logistics and transportation industry is currently in the middle of an importing and exporting crisis due to the new customs and tax rules for trading with the EU, which came into force on 1 January 2021.
Stuart Gregory, Managing Director of one of East Anglia’s busiest freight forwarding, transport and logistics companies and board member of the Suffolk Chamber of Commerce said: “Brexit is bringing chaos and disruption to the transport industry, exporters, importers and small businesses, and is impacting consumers as well.
It seems problems have been swept under the Covid carpet, and they are not getting the attention in the press or from the Government that they deserve. Everyone is working flat out to get through the mess.
“The key question to consider is whether these issues are the teething problems cited by the Government or something more structural, potentially damaging long-term trade with the EU and necessitating complete supply chain re-engineering.
“I can say with complete confidence that regardless of whether we are dealing with short or long-term problems, there will be a considerable burden of additional administration and costs on logistics companies and our customers.”
Instead of businesses having to use multiple touch points between shipping lines, packing firms, customs, and hauliers, companies like Wallis Shipping act as a single line of logistics.
Wallis, which specialises in international road freight, ocean freight and airfreight for all types of industries, has transported tens of thousands of tons of cargo all over the world, including far-to-reach, inaccessible locations. But Brexit is one of the biggest challenges they have faced since being established in 1987.
Mr Gregory continued: “In all my years in this industry, I have never seen anything like it. The new regulations and processes have been published with not enough consultation with the people likely to be impacted by the change in trade arrangements, leading to confusion within the transport industry, frustrated clients and loss of business for the East of England. More guidance is required – and required urgently.”
Mr Gregory has over 35 years’ experience in the logistics industry and assists UK companies on how to export and import. He also meets regularly with the Suffolk Chamber of Commerce, BIFA and the Bank of England to share industry advice.
Wallis Shipping, which is based in Colchester, Essex also has freight forwarding hubs in Rugby and Slough. Jenna Morgan, Commercial Director for Wallis Shipping added: “The East of England is going to be one of the worst areas hit as we contain most of the UK’s main ports; Felixstowe, Lowestoft, Harwich and DP World London Gateway, as well as major UK airports including London Heathrow and Stansted. Something needs to be done to support importers and exporters in our region otherwise trade flows will slow down.”
Some of the main issues currently being seen by Wallis Shipping include:
- UK exporters are being caught up in the Brexit red tape and non tariff barriers related to the new ‘rules of origin’
- There is a 50,000 shortfall of qualified import customs agents to deal with the new regulations
- There is a shortage of agents to deal with a surge in transit documents (T1 forms) that are now being requested to move goods between the UK and the EU
- There is a severe shortage of available haulage companies to meet the needs of both importers and exporters because they are declining to enter the UK due to the shortage of agents to deal with these transit documents
- EU buyers of UK goods are often unaware of the requirements of the UK-EU trade deal and there is confusion over interpretation of documentary requirements and selling terms (Incoterms) and deciding who pays for what part of the transport.
- Understanding of Incoterms and VAT and duty obligations is presenting challenges on many shipments
- Businesses dealing with the importing and exporting of food products and Products of Animal Origin (POAO) now require vet health certificates (EHC’s). There is also a shortage of vets to undertake these certificates.
Mrs Morgan continued: “We have processes that we have put in place to ensure we can handle the extra requirements that are affecting our current customers, but we were not expecting to receive the hundreds of new customer enquiries. To add to all of this, the troubles and escalating shipping costs from China – prices of containers have quadrupled in a year – it is the most difficult time the UK transport industry and logistics supply chains have ever faced.
“Our hopes are that the UK government set up a forum for constructive dialogue with all stakeholders involved in UK-EU trade, so that they fully understand the current issues faced by manufacturers, importers, freight forwarders, logistics firms, customs agents, Chambers of Commerce and trade bodies. Secondly, the UK government needs to urgently review training and support for customs processes. Until these two issues are ironed out, there will be continuing difficulties.”
An in-depth look at the specific Brexit issues on imports and exports as experienced by Wallis Shipping:
- Transit documents: known as a T1 is now requested for exports to the EU. The documents ensure free movement of non EU goods, without the need to pay duty and VAT as the cargo transits borders on the way to it’s final destination. There is a shortage of agents either with or willing to use the guarantees needed to raise these documents. A fair percentage of EU-based hauliers were not aware these documents were required and have no counterpart in the UK to assist them. This is causing chaos and resulting in trucks being held at the EU ports. Consequently a number of European operators are declining to enter the UK and this has resulted in a severe shortage of available haulage to meet the needs of both importers and exporters. HMRC don’t appear to have adequate resources available to assist with the deluge of enquiries
- Imports/ import quotas: there is a shortfall of an estimated 40,000-50,000 custom agents. It costs £1000s per annum to have the authorisations from HMRC to operate at all UK ports and extensive training for someone to learn the required skills for custom entries. There is a limit to how much you charge to make a customs entry which sometimes can take hours to complete, based on the different commodity codes. There is a finite number of agents operating at the moment and the ones that are in place aren’t taking on any new clients. They are working 18 hour days,7 days a week.
Despite the fact that full UK border controls are only being introduced in July, there have been considerable delays due to problems with incorrect paperwork and IT systems issues and UK -EU trade running at around 40% of last year’s levels, with current COVID restrictions supressing demand.
In general, imports of EU origin are duty free; however there are quotas on certain materials after which tariffs apply. This has not been widely highlighted in the UK Government’s advice on the trade deal. Tariff confusion has also resulted in delays in the import customs entry and impact on customers’ manufacturing processes..
- Rules of origin: We have a free trade deal with the EU for the export of goods of UK origin and in return the UK import of goods of EU origin. However the rules are complex and some goods of non-UK origin or only part-UK origin may require payment of duty on import into the EU. The rules of origin provisions are a minefield and much of detailed guidance on Brexit on the government website has been too late, misleading and difficult to understand. Some exporters and EU suppliers have not adapted their IT systems to accommodate new origin statements and requirements for tariff codes, which has resulted in delays to customs clearance and additional costs.
- Exports/imports of food and animal products: The issues around foodstuffs or animal products is causing significant headaches for exporters and importers as they now require new import licences, TRACES registration and health certificates from a vet (an EHC) – there is a shortfall of vets to produce these, plus new costs (approx. £180 per cert) for this whole process.
- Incoterms / selling terms There is considerable lack of understanding of Incoterms (the selling terms that determine who pays what in transport costs) on both sides of the channel and varied interpretations of the new processes required. Many EU importers are unaware of their responsibilities for possible duty and VAT on shipments from their UK suppliers. Read our resources page on understanding Incoterms.
- Not forgetting the Northern Ireland border issues and the exponential paperwork which is now required to cross the Irish Sea – causing supplier issues and shortages for consumers which has been widely reported about in the news. With Northern Ireland remaining part of the single market and treated as part of the EU for food law purposes, this has meant there are therefore enhanced import checks.
To check your invoices will now be acceptable for Exports to EU view our Commercial Invoice checklist here.
For more information read our full Brexit advice blog with FAQ’s here.